Naked Capitalism has a wonderful breakdown of yesterday's NYT article on the Lehman brothers collapse. (The collapse of Lehman brothers brought the dromedary to its knees, precipitating the present economic crisis.)

Witness the evisceration of some of the core myths of conservative economic theory.

The God-like CEO, shown to an utter and irresponsible fool:

Fuld [Lehman CEO] (and presumably the underlying business) was desperate as of early July. Sorkin has Fuld arranging for contacts to be made to possible buyers like Bank of America on a Saturday. Huh? He was clearly flailing about, yet not offering a price or deal terms commensurate with his obviously panicked state....

What the hell was Fuld doing trying to negotiate his own deals? This is a mistake CEOs make all the time, and it never ceases to amaze me.

Now why is it a bad idea for a CEO or for most principals to negotiate their own deals? Most people are terrible negotiators. And I have to tell you, most people in M&A are not as good as they think they are. They don’t really negotiate all that much. They structure deals, value them, sell, but a lot of the negotiating takes place through the lawyers (many of the key points are negotiated in the negotiations over reps and warranties and the details of the definitive agreement). Most M&A transactions do not have that much negotiating, relative to all the other stuff that goes on in a deal, for most professionals to get that much practice.

But CEOs on average are FAR less practiced at negotiating, and Fuld is by temperament and experience particularly poorly suited for that role. He comes out of commercial paper (which is a very simple “placement” business; negotiating was never a skill he had to develop), he was known for being hyper aggressive and surrounding himself with yes men; he’d have even less give and take on a daily basis than most top executives.

Laissez-faire management of the economy—in which regulators sit idly, despite obvious and desperate signs that intervention was required—is the kindling of the fire:

If Geithner and his colleagues didn’t get that Fuld was at the end of his rope, they were choosing to ignore an elephant in the room. Now they may have been completely unwilling to consider the petition and this was the easiest way to signal their opposition (taking Fuld through a long list of requirements, some of which presumably would have been pretty painful, was another message).

But this speaks to a question we have raised again and again: why was there no serious assessment of what a Lehman bankruptcy would mean? After Bear went down, everyone knew Lehman was next on the list, with Merrill and UBS also known to be wobbly. Why didn’t the Fed, Treasury, and SEC together demand certain types of information from all big US regulated capital markets players (including JP Morgan and Goldman, perceived to be the healthiest, so as not to be singling out the weaker members of the herd?). This is a massive oversight. Relying on luck, which is what assuming all would be well after the Bear debacle, is no substitute for having a strategy. There was clear urgency in July. Even a month of assessment and evaluation of options (it probably would have taken two weeks to orchestrate the information requests among the agencies) would have been better than nothing.

Yves is sharp. You should read and consider the full post.