Jeremy Warner's Outlook: Lehman Brothers gets the Bear Stearns treatment. Now who's next?

Just when you thought it was safe to go back in the water ... The federal bail-out of Fannie Mae and Freddie Mac has been depicted by commentators as the "big one" that would come to mark the crescendo of the banking crisis, with the storm gradually petering out from here on in. This week's collapse in the share price of Lehman Brothers, and the separate run on confidence at Washington Mutual, demonstrates that the hurricane season is far from over.

On Wednesday, Richard Fuld, Lehman's chief executive, came out with what seemed like a reasonably credible plan for survival, albeit one that involved a three-way break-up of the investment bank, with demerger of the commercial property interests and the outright sale of asset management. Yet though the plan seemed at least to buy Mr Fuld some time, crucial questions, such as who was going to buy asset management, what they might pay and how much capital the new property company might require were left unanswered. By Thursday, Wall Street had given the whole construct a resounding thumbs-down. The shredding of the share price resumed with a vengeance, with creditors and clients scrambling to get their money out. This despite the fact that the bank appeared to be adequately capitalised and the liquidity pool more than sufficient to see things through.

In banking, it would appear, confidence is all, and when it goes, you can have all the regulatory paraphernalia you like to ensure that banks can meet their liabilities as they fall due, but they are powerless before the flood. Much as the federal authorities would like to draw a line in the sand and say that from here on in there will be no more bail-outs, it is not clear that they can.

Lehman remains an important provider of liquidity to the markets, and the direct consequences of its collapse would be extreme, possibly creating a domino effect of defaults across the financial system. Yet the worry goes beyond the immediate impact of an insolvency on creditors and counterparties. Rather, it is that if the US allows Lehman to fail, the markets will move on to someone else, perhaps Merrill Lynch or AIG. Numerous others might eventually get sucked into the vortex.

The challenge for the US Treasury and Federal Reserve is to achieve a restructuring of these overstretched organisations without creating the blind panic that would result in wider systemic damage. Bankers have already received so much in the way of bail-outs that it is not entirely clear how the authorities might achieve the orderly wind-down desired without further support from the taxpayer. Potential buyers of Lehman Brothers know this full well and have therefore got the authorities by the short and curlies. Reports last night of a consortium bid for Lehman from Bank of America, JC Flowers and the Chinese sovereign wealth fund say it all.

JC Flowers was one of the parties trying to find a private-sector solution for Northern Rock, but its offer to acquire the beleaguered British mortgage bank came at such a high potential cost to the UK taxpayer in terms of state guarantees that even nationalisation seemed a less humiliating outcome to the government than the American private equiteers.

I'd be amazed if JC Flowers isn't similarly attempting to extract its pound of flesh out of the US Treasury on Lehman's. If the financiers can get the US taxpayer to subsidise their takeover by dangling the threat of what might happen to the economy if they walk away, then they will. The bankers created this crisis. Scandalously, they now intend to capitalise on it. The unacceptable face of capitalism is in full flight.

Amusingly, it was Ken Lewis, chairman of one of the consortium's members, Bank of America, who said at the time of his results that he had had about as much as he could take of investment banking. Now he is coming back for more.

As for Dick Fuld and the rest of the Lehman's workforce, they can only look on in disbelief. The lesson of this financial crisis is that the vulnerable must act decisively and early, however humiliating it might be. With the benefit of hindsight, Mr Fuld should have put Lehman's up for sale three months ago. He might have got only a fraction of what the shares were then trading at, but his bank would today be in a much better place than it is, and shareholders would have salvaged at least something.

The same could be said of Northern Rock. The UK Government would be in a far less difficult position today had it swallowed its pride and given the guarantees demanded by Lloyds TSB as the price for taking the stricken bank over. It's too late now, both for Alistair Darling and for Mr Fuld.