Lehman and the other purveyors (or is it victims?) of financial kryptonite

It seems to me that Lehman has been working pretty aggressively to save Dick Fuld's job, otherwise they would have taken anything they could get from the Korea Development Bank.

But are the assets of these institutions worth a lot less? Or is it that they simply can't be priced? Or that their price at this time doesn't reflect their price at maturity? Granted, to a financial institution these are pretty much the same (they have to carry the current price on their books), but they don't necessarily reflect reality. In other words, the trading price isn't always the underlying value.

I think the assets are in fact worth a lot less than people thought they were a year ago. Obviously at some point the mark-to-market prices (and even the mark-to-model prices) will overshoot to the downside. But a lot of people on Wall Street (Steve Schwarzman springs to mind) were saying early this year that the price downturn had already overshot. I think they were full of it.

After Freddie and Fannie, now another giant Lehman in the fall.

Lehman Brothers is going, perhaps would be gone in the not so distant future. It is virtually irredeemable, and moving fast on the verge of collapse. Is this not scary? Does it not send a chill down the spine of global financial institutions?

A number of long standing and well established banks have gradually "fallen" one after another, not unlike dominos. Sheer instant bailing out is not a tangible or sustainable solution, for it could only worsen the precarious economic situation by hiding its decadence.

The world should be ready (albeit most unwillingly) for yet another bashing of financial storm, except this time the enormous scale and drastic impact could be beyond anybody's imagination.
(Tan Boon Tee)

Justin,

Next question. It seems to me that our use of the slow leak technique is NOT working.

I hate to say it, but it appears that the government would be far better off to just establish a SUPERFUND of sorts to bail out institutions which are either a) too big to fail, b) too interconnected to fail or c) failure would bring about damage to the concept of US currency being backed by less than "Full Faith and Credit."

Since it seems like we are playing a game of Texas Hold'em with the short stack, is there any real danger in going for a long punt (essentially just putting up ante and folding) till we receive a better hand?

Thanks for the recognition on the questions, but again, my curiousity is driven by my concern for my holdings in US Savings bonds, my 401K, and my stock market holdings. I'm not getting killed, but systemic danger is some pretty scary stuff (even when you're in your early 30s).