The basic question that emerges from Lehman´s collapse is an old one. Should investment banks be run by bankers or traders? For most of the life of Wall Street, bankers ran Investment banks. Over the last decade, most of the CEOs have been traders.
Lehman Brothers almost went bust in the early 80s because of bad trades. Fighting for its soul then were bankers, led by its CEO Pete Petersen and his protégé,Steven Schwarzman. On the other side were Lewis Glucksman, the head of trading and his protégé, Richard Fuld. Glucksman was the author of these terrible trades and the Board wanted to fire him, but Petersen kept him, the trades recovered, as did Lehman. After the recovery, a stronger Glucksman got Petersen fired. Schwarzman, the banker, in revenge got Lehman sold off to American Express in 1984, diminishing the victory of traders. The traders fumed for ten years, then American Express spun off Lehman with Fuld as its CEO.
So it is a 14 year old firm, which has had just one CEO for its entire life. It might as well have been called Glucksman & Fuld, but simply opted to retain a 158 year old name.
Memories run long in Wall Street. Petersen, still around at 82 to relish this revenge, was never going to bid for Lehman, nor were any other bankers who wanted Blackstone´s business. The banks with traders as their CEOs knew too much about the assets in Lehman´s balance sheet to buy the bank. The only reason to rescue Lehman is that a fire-sale of its assets may provide new marks for assets other banks held in their own balance sheets, and another series of writedowns would ensue.
From what happened, GS, MS, BAC, C etc have bad stuff on their balance sheet, just not the same kind as Lehman. So, it could fail, with profit to everyone else.