Jan 1, 2009 12:00 PM

, By Michael E. Lewitt

By Michael E. Lewitt

Back in the summer,¹ I warned that the financial markets were headed for serious problems. But even my worst fears pale in comparison to what actually happened: nothing less than a near-death experience for western finance.

The markets survived the collapse of Bear Stearns & Co., Inc., in February of 2008. But, the aftershock created a series of tsunamis that overwhelmed the world markets; institutional failure after institutional failure flooded the system. In September 2008 alone, we saw the markets struggling to absorb the government conservatorship of Fannie Mae and Freddie Mac; the largest bank failure in U.S. history, Washington Mutual; the assisted takeover of an even larger failed institution, Wachovia Bank; the $600 billion bankruptcy of Lehman Brothers Holdings Inc.; the government bailout of insurance giant American International Group, Inc. (AIG); and the unveiling of the highly controversial and profoundly flawed $700 billion federal bailout plan of the U.S. financial system (which did not become law until October of 2008).