Ten years ago, Jim Wilkinson, then US treasury chief of staff, sent a distressed e-mail to a fellow official. "I just can’t stomach us bailing out Lehman … will be horrible in the press." Two days later, his boss Hank Paulson warned others on a conference call: "I can’t be Mr Bailout." A few hours before Paulson spoke, the Financial Times published a rather jaunty column by me, advising the treasury secretary to take the weekend off to pursue his hobby of birdwatching. The government should resist the pressure to save Lehman Brothers, as it had Bear Stearns and Fannie Mae and Freddie Mac, the mortgage institutions, I wrote. It had "talked tough about moral hazard?… but been a soft touch." Within days, Paulson took my advice (and that of others) and allowed Lehman to collapse, triggering the worst postwar financial crisis and unleashing economic and social damage that still endures. It is rarely that an article backfires so rapidly and spectacularly, and I have had a decade to reflec...

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