The day Lehman went bankrupt I left the office in London for Waterloo Station and realized that something monumental had happened. The faces of the dozens of people waiting patiently for trains from the center to their homes were revealing. Most of them were, like me, City workers. Panic.

I remember when Freddie Mac and Fannie Mae — both government entities — were bailed out, because it happened shortly before the Lehman collapse. They were the largest originators of subprime mortgages.

Why were subprime mortgages originated by Freddie and Fannie given maximum rating and credit quality? Because they had the government stamp.

What had happened with Lehman? The CEO, Richard Fuld, had been saying for some time that its situation was impeccable, that solvency and liquidity ratios were strong and the viability of the bank was out of the question. He also repeated something we hear too often nowadays, that the shares were simply under the “attack of speculators”. Many of my readers will remember similar excuses in Popular, Monte dei Paschi, Abengoa, Tesla and so many others. This “speculator attack” excuse was used a lot years later during the Eurozone crisis.

Lehman Brothers was not a commercial bank, managing deposits of retail savers, it was an investment bank. Their clients were “competent persons” that is, those that regulators deem with sufficient knowledge of the risk and complexity of the financial products they are offered. It is not possible to contract the services of an investment bank without being a competent person. Lehman was not run by incompetent people. It was managed by people that firmly believed in the system and that analysed risk the way that central banks and governments tell them to. Lehman accumulated high-risk mortgages in its assets because it believed, as so many analysts, commentators and experts said, that these assets had very little risk.

Crises never happen due to accumulation in high-risk assets, but due to the massive accumulation of assets that the entire mainstream deems as “low risk”. Houses never fall, the economy is booming, etc.

Lehman was a prime example of mainstream consensus analysis of risk and economic opportunity. When asset prices fall, buy more.

Lehman did not buy low. It bought in the middle of an already building bubble. More importantly, it did not sell high. It kept riding the gravy train.

Lehman acquired five mortgage lenders in 2003 and 2004, including subprime lenders, when house prices were already soaring. Its acquisitions were lauded by many analysts as genius. As the bubble grew, Lehman’s real estate division led the capital markets unit profits to soar more than 50% between 2004 and 2006. it was the fastest growing division in the entire business. Valuations reflected that “success” sending the multiples at which brokers valued the Lehman stock at all-time highs.