Thank you. That matches how I understood the situation, to a level of detail far beyond the understanding I actually had.
However the OP accidentally made a good point. Yes Lehman did go into bankruptcy. But the markets are so interconnected that the collateral damage almost brought the system down. It’s kind of like some guy sitting in a dam with a load of explosives. If he was in the middle of a field somewhere, he could blow himself up with not much damage to anyone else. In the dam, we better rescue him or the town downstream will be screwed.
Letting Lehman fail is widely considered to have been a big mistake, no matter how satisfying it is for their CEO to have lost a bundle.
This was not in the SEC allegations because Goldman is allowed to be both a broker and dealer. However, this featured prominently both in the Angelides hearings this past January and in Congress this past week – that Goldman was not only betting against certain mortgage-tied securities, but also was selling some of these same securities to its clients. My use of “The complaint” did not refer to the SEC allegations. My boo-boo.