Agreed, and -
Apparently the thinking was, that Lehman should file to protect the markets on opening on Monday. I am certain without a doubt that the German Finance Minister insisting that the "Lehman issue be resolved" by Monday was not that you force it into BK. That was unforgivable. According to Sean Butler, Head of IR, they were told that the Fed Window would be restricted to them and there would be no backstop....essentially, good luck in trying to find a buyer. On Lehman's part, there was no transparency as to what they held in bad loans and how exposed they actually were. Some reports suggest that as much as 30% to 40% of their mortgage related loans were in trouble. Evidenced by the quarterly filings, it was probably 10-15%, regardless, no one wants to realise 15 to 30 billion dollars in losses over the next 2 to 3 years. Few institutions can stomach such a loss.
Yet, Lehman did not have to fail. Ultimately Fuld is to blame, yet if a parent takes in their sick child to the hospital for malnutrition, the doctor would not punish the child for the parents neglect! And that is precisely what Paulson did! He punished Lehman for Fuld's incompetence!
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