It should have been saved.

Occasionally in sports—say, with the New York Knicks' hapless former coach Isiah Thomas—a media and fan frenzy gets whipped up to the point at which a player or a coach simply has to be abandoned. No matter how many years he's been with the team or how much future potential he has, ejection becomes inevitable under what amounts to a kind of blood lust.

Something similar seems to have happened with Lehman Bros. Holding Inc. (LEH) Toward the end of last week, when both Barclays and Bank of America were walking away as possible buyers, everyone seemed to turn against Lehman—at least, against the idea of the government helping the company survive.
"Just say no" to a bailout, argued Jesse Eisinger on Portfolio.com, insisting that the "market needs a firm lesson." Capitalism means that investors have to know they can fail, argued Tom Petruno in the Los Angeles Times.

It's easy to see the appeal of these arguments. Partly, it's a desire not to throw "good" Federal money after "bad" Federal money (the bailouts of Bear Stearns and, depending on the writer, Fannie Mae (FNM) and Freddie Mac (FRE)). Reports that the reeling insurance firm AIG is also asking for government help only underscore this point. And, of course, there is a strong case to be made that Lehman's troubles were the product of lousy management decisions by CEO Richard Fuld and his team (some would include the board, too), who deserve to be punished.

But lost in all the cries for Lehman—until last week the fourth-largest U.S. securities firm—to go under is a full grasp of the risks and damages that a Lehman bankruptcy could create. We're writing this before U.S. markets open on Monday, but already the dollar is dropping and U.S. stock futures are sharply down. It is not unreasonable to think that tens of billions of dollars of capital will be wiped out across the globe on Monday as a result of Lehman's collapse; it is, after all, the first large Wall Street firm to go bankrupt in nearly two decades.

That was the reasoning behind the government's action to save Bear Stearns from bankruptcy back in March: to prop up confidence in the market and to protect against potential damage to those who'd done deals with Bear. Fed Chief Ben Bernanke told Congress that the government had to bail out Bear Stearns: "Given the exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain." The Lehman case is not so dissimilar. At the risk of oversimplifying things: Both Lehman and Bear were dogged by short sellers, the complications of toxic mortgages, and unconfident clients. Yet the Fed treated Bear and Lehman very differently.

Two things make the difference: Lehman Bros., it stands to reason, isn't as important to the economy as Bear was. And neither did Lehman have a suitor as willing to buy it as JP Morgan (JPM) was to buy Bear.