>When Lehman went bankrupt I applauded the government for finally letting an institution fail. Had I know what they should have known, I would not have allowed Lehman to fail. Lehman was also a big player in the Credit Default Swap market, the failure created shockwaves that led to the panic and exacerbated the credit crunch and accelerated the downfall and eventual bailout of AIG. Had we structured something for Lehman, similar to that of AIG – we may not have had to bailout AIG.
This Wall Street Journal article, though a bit technical gives you the background on the collapse of Lehman and why it had such a profound effect on the markets.