Here's the latest from Our Highly-Placed Professional.

'Harry Hindsight is a lucky geezer - he always gets to pontificate on stuff after it's happened. And here I go, reviewing the collapse of Lehman Brothers using the rear-view mirror.

What gets you most about the Lehman debacle, of course, is the sheer inconsistency of letting the institution fail. Why save AIG, offer TARP protection to God knows how many other major firms, offer up Bear Stearns for cherry-picking by JPMorgan, but just sit back and watch Lehman go belly-up ? 

There are numerous (some conspiracy) theories centered around the fall of Lehman - it was too involved in the mortgage bond market which had caused the housing bubble; it was small enough to be allowed to fail; it was too independent; it had an arrogant CEO, etc. But all of this seems highly spurious in retrospect, as Lehman was no more leveraged than many the other firms that were bailed out. In the end, it probably just came down to bad timing. Remember, it was just before a Presidential election, and the Republican Party was already in too deep. George Bush just couldn't face the potential taxpayer revolt if he agreed to pour more Federal money down another open drain. John McCain would have got even more caned.

But was this political decision the right one ? For me, the answer is a firm 'no', as the minute you let one firm go a la Lehman, the game is effectively over. And that's what the global economy and the financial system have been trying to deal with ever since.

If you put $100s of billions into AIG (which was done in by perhaps the most outrageous and leveraged bets ever taken) why not put a fraction of that into Lehman, if that serves to keep the financial ball rolling ? It just doesn't make sense to me.

Finally, I just love the story from The Guardian about the alleged communications breakdown between the UK authorities and Washington on the potential 11th-hour takeover of Lehman by Barclays. It almost smacks of school room farce when, during all those late night conferences (and pizza deliveries to the Bank of England and all that), no-one bothered to tell their US counterparts that a guarantee was needed for the deal to go forward - at least, not until it was too late. It brings to mind the group of so-called City experts and grandees who were ushered into Number 10 soon after the banking crisis took hold, to be harangued by an angry PM about the need to lend more money at lower interest rates - the only problem was that half of the audience was made up of hedge fund managers who had nothing to do with lending in any case!

So let's be critical. An awful lot of far more highly placed pros than me have royally messed up over the last few years. Yes, we have some stability now, but at what cost? Trillions of government debt and future tax rises for generations to come, that's what for starters'.

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