What next: fear is frightening

The deleveraging infection that is ravaging the world’s financial system claimed another big victim on Sunday – Lehman Brothers. Merrill Lynch was next in line, but it avoided the worst by finding shelter in the relatively healthy Bank of America. That escape hardly means the infection has been routed. To start with, Lehman is out but not gone. The firm’s positions have to be unwound under pressure. The firm’s failure leaves a host of credit default swaps to be cashed in. The authorities and the...