First a disclaimer. If you act on anything I write below, you are a goose. These are, as the title suggests, notes on the shockwave rippling through the global financial system. Not advice. Not investment tips. Go see your broker at Lehman Brothers or Merrill Lynch for that.
The Federal Reserve and U.S. Treasury Department have refused to step in and save Lehmann. They refused to buy them out (like they did with Freddie and Fannie) or provide cheap financing or guarantees for potential suitors (like they did with Bear Sterns). Namely, they turned to the big banks and said, "Enough work on our part. Your turn." Contrary to what you might read in the AFR tomorrow morning, this is a good thing. And it is a good thing because we are seeing moral hazard rush out of the financial system. This is going to cause some short term pain as everyone adjusts, but long term, this is a good thing.