A Kentucky census worker found naked, bound with duct tape and hanging from a tree with “fed” scrawled on his chest killed himself but staged his death to make it look like a homicide, authorities said Tuesday.

Bill Sparkman, 51, was found Sept. 12 near a cemetery in a heavily wooded area of southeastern Kentucky. A man who found the body in the Daniel Boone National Forest has said Sparkman also was gagged and had an identification badge taped to his neck.

Authorities said Sparkman alone manipulated the scene to conceal a suicide. Police said he had talked with others about ending his life, though authorities did not say specifically who in a news release.

Sparkman had recently taken out two life insurance policies that would not pay out for suicide, authorities said. If Sparkman had been killed on the job, his family also would have been be eligible for up to $10,000 in death gratuity payments from the government.

“Compensation practices at some banking organizations have led to misaligned incentives and excessive risk-taking, contributing to bank losses and financial instability,” Fed Chairman Ben Bernanke said in a statement announcing the moves. “The Federal Reserve is working to ensure that compensation packages appropriately tie rewards to longer-term performance and do not create undue risk for the firm or the financial system.”

A separate explanation provided by the Fed goes even further to justify the proposal, saying, in effect, that Wall Street executives can’t be trusted to limit risk-taking on their own.

Recent events have highlighted that inappropriate compensation practices can contribute to safety and soundness problems at banking organizations and to financial instability. Traditionally, banking organizations and supervisors relied on strong risk management, internal controls and corporate governance to help constrain risk-taking. However, the financial crisis has illustrated that the incentives created by poorly designed and implemented incentive compensation arrangements can be powerful enough to overcome risk controls.

The Fed’s plan is to monitor the pay structures of the nation’s banks in order to discourage excessive risk-taking by executives as well as lower-ranking employees, such as traders. The reviews will apply differently to the nation’s 28 largest institutions versus the smaller community banks, with the larger banks subject to more intensive scrutiny.

Federal Reserve Governor Daniel K. Tarullo said the proposal “is but one part of a broad program … to strengthen supervision of banks and bank holding companies in the wake of the financial crisis.”

It was the second wave of bad news to hit Wall Street in 24 hours. On Wednesday, the Obama administration announced plans to slash pay for the top 25 executives at the seven companies that received “exceptional” funding under the Wall Street bailout bill. The average compensation for those 175 executives will be halved, according to U.S. pay czar, Kenneth Feinberg.

Still, neither the administration’s nor the Fed’s limits would cap compensation at these firms, as proposed by some members of Congress earlier in the year. That means that executives at even those institutions propped up with billions of taxpayer dollars could still be in line for multi-million dollar pay packages. The Fed explains why it didn’t include caps:

[O]ne size does not fit all firms or employees. Best practices for balancing risk and rewards in incentive compensation programs continue to develop and are likely to evolve significantly in the coming years….

Further experience may reveal specific compensation practices that may appropriately be required or prohibited.

We will subject them to a complete audit. I’ve been working with Ron Paul, who’s the main sponsor of that bill. He agrees we don’t want to have the audit appear as if it is influencing monetary policy, as that would be inflationary, and Ron agrees on that. We also think that one of the things the audit will show you is what the audit buys and sells.

Paul’s bill has 282 co-sponsors, including every member of the GOP in the House.

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Treasury Secretary Timothy Geithner (WDCpix)

As the Wall Street bailout nears its first anniversary, the controversy over giving public money to private banks has become public knowledge. But an equally risky aspect of the financial rescue has flown largely under the radar: the government’s reliance on private contractors – many with potentially significant conflicts of interest – to help revive the stalled economy.

The Treasury Department knows that the law firms and investment managers hired to aid its salvage effort could be influenced by their ties to bailed-out banks; in fact, the department released a rule in January aiming to mitigate the problem.

That rule, however, has raised questions from watchdogs by asking contractors to identify and police their own conflicts of interest. And a careful review of bailout hiring agreements reveals an inconsistent set of rules applied to the types of private deals that contractors can make while serving as agents of the U.S. government.

Illustration by: Matt Mahurin

“It’s just a wonderfully closed circle,” Simon Johnson, former chief economist at the International Monetary Fund and leading critic of the bailout, said in a recent interview.

“They’ll sell you on this line that there’s a scarcity of talent,” so contractors must be plucked from Wall Street and remain part of its culture, Johnson continued. “It’s the same argument they’re using to explain why they’re appointing a Goldman Sachs lobbyist as [Treasury Secretary Tim] Geithner’s chief of staff. That’s part of how the club thinks.”

Can these contractors guide the bailout with the public interest in mind while simultaneously courting bailout-related business for themselves? It’s tough to say, but imposing greater transparency requirements is crucial, according to more than a dozen financial and legal experts interviewed for this story.

Right now, even as more of these lawyers and financiers are helping with the financial rescue, less is being disclosed about their handling of taxpayer-owned assets. Investment managers are setting values for securities that their companies may also hold privately, while law firms are approving government aid for companies they still represent in certain cases – but the public remains almost completely in the dark.

The Investment Managers

Consider the case of AllianceBernstein. Like many investment management firms, Alliance did not have a good 2008. Assets dropped by more than 40 percent, net income fell by one-third and the company was forced into its first layoffs in 35 years.

Yet things were looking up by late April, thanks to the Treasury. Alliance was one of three firms the department chose to monitor the assets and debt of banks receiving bailout. Its contract involves Alliance in highly sensitive issues, from executive pay limits to the execution of government stock warrants.

“We expect this to be an attractive proposition from a profitability point of view,” CEO Peter Kraus told analysts as he announced the news.

But Alliance executives also told analysts that the firm plans to apply for the Treasury’s Public-Private Investment Program, which could allow the firm to leverage its look at banks’ balance sheets into profits down the road.

If Alliance joins the PPIP, the company could partner with private investors to purchase the same types of mortgage-backed securities that it’s also handling for the government – thus earning a double windfall when the market value of those mortgage-backed securities increases.

Neil Barofsky, the special inspector general for the Troubled Assets Relief Program warned of this potential conflict in his most recent report to Congress: “transactions in these frozen markets will have a significant impact on how any particular asset is priced in the market. As a result, the increase in the price of such an asset will greatly benefit anyone who owns or manages the same asset, including the [public-private program] manager who is making the investment decisions…”

Under the Treasury’s conflict-of-interest rule, Alliance and its fellow contractors (FSI Group and Piedmont Investment Advisors) are only required to step aside from managing assets owned by a bailed-out bank if that bank’s assets provided more than 5 percent of the firm’s most recent annual revenue.

The contracts signed by Alliance, FSI and Piedmont, posted on the Treasury’s website, acknowledge six potential conflicts of interest and suggest how each can be worked around. Yet Treasury did not reveal which banks’ assets were given to which contractor, or even whether the investment managers are doing anything with the securities they’re being paid to watch.

An Alliance spokesman declined to comment when asked how the firm is working out any conflict-of-interest risks it may face.

“The whole idiocy of this,” Chris Whalen, co-founder of the banking risk-management firm Institutional Risk Analytics, said during a recent conversation, “is that the administration would even have these firms pretending to manage this stuff, giving them subsidized deals.”

Alliance is now poised to value assets once held by Merrill Lynch – the same company that paid Alliance CEO Kraus a $25-million bonus for three months of work. Kraus’ bonus, distributed just before Merrill was sold to Bank of America, was part of a $3.6 billion pot that is now under investigation by the New York attorney general and the Securities and Exchange Commission.

A Treasury spokesman did not respond to several requests for comment on conflicts of interest, but did point to its January regulation as evidence of the government’s action on the issue and awareness of possible problems.

The Law Firms

The risk of conflicts of interest is not limited to asset managers sitting on toxic mortgage-backed assets. Simpson Thacher & Bartlett, the prominent New York law firm chosen in October to be the chief legal adviser to the TARP, has a long history of shepherding mergers and acquisitions in the banking industry, particularly during the housing bubble’s halcyon days.

Before the bailout began, Simpson Thacher had advised Washington Mutual on avoiding insolvency and the board of AIG on winning help from the Federal Reserve. Come the crash, however, the law firm was put in charge of setting terms for the government’s investment in major banks – on the opposite side of the table from the banks it once helped make mighty.

Simpson Thacher’s original contract, signed in October, did not mention the need to work around or waive conflicts. When the law firm agreed to expand its bailout work in February, however, that pact stated that Treasury “HAS NOT WAIVED any potential conflicts of interest” – giving the government room to make case-by-case decisions if problems arose.

Yet the law firm’s contract, however, appears to allow an inherent conflict of interest: The Treasury cleared Simpson Thacher to continue representing private clients participating in “other programs in support of the [bailout]” – non-TARP initiatives such as the PPIP or the Term Asset-Backed Securities Loan Facility.

In fact, Simpson Thacher senior partner Lee Meyerson, whose pivotal role in the TARP made him American Lawyer’s No. 4 “Dealmaker of the Year,” continued to advise private-equity clients on how to snap up failing banks while he worked on the bailout. When Florida’s BankUnited collapsed last month, costing the government $4.9 billion, three private equity firms represented by Meyerson swooped in to take over the property.

Simpson Thacher did not respond to repeated requests for comment about the language in its Treasury contract and on its internal mechanisms to prevent conflicts of interest.

“These firms are making up the rules [of the bailout] and advising private clients about the rules,” Yale Law School professor Jonathan Macey, a banking specialist and author, said in a recent interview.

“The problem is, No. 1, this means we lose the appearance of fairness,” he continued. “And, No. 2, there’s a very strong inclination for the people making up the rules to be sympathetic to their own clients as opposed to other people’s clients when they’re writing the rules.”

Davis Polk & Wardwell, another law firm turned Treasury contractor, was so closely involved in drafting Geithner’s proposal for “resolution authority” to wind down non-bank institutions that when members of Congress received the Obama administration’s draft proposal on the topic, it still bore Davis Polk’s computer signature. Ironically, Davis Polk turned down a chance to apply for Simpson Thacher’s first bailout contract – citing the risk of conflicts of interest.

At the Federal Reserve

The Treasury is not the only bailout administrator that has come to lean on contractors.

BlackRock, which manages a $1.3 trillion asset portfolio that ranks largest in the world, was hired for three no-bid deals in October by now-Treasury Secretary Geithner, then president of the Federal Reserve Bank of New York.

Geithner assigned BlackRock to supervise toxic assets once held by Bear Stearns, as well as those held by AIG – deals worth at least $71.3 million over three years. Yet BlackRock, like Alliance, plans to participate in the Treasury’s PPIP, again offering the firm the possibility of benefits based on its knowledge of AIG and Bear’s exposure.

Lawmakers in both parties have raised concerns about BlackRock’s conflicts, as The New York Times reported earlier this month. But Charles Hallac, a founding partner of BlackRock and the head of its risk-advisory arm, BlackRock Solutions, said such concerns are unfounded.

No BlackRock analyst managing the AIG and Bear holdings will take part in the PPIP, or “any kind of program where they’re using government funds to make money for clients, Hallac explained in a telephone interview.

BlackRock was selected because of its expertise in separating its investment business from its risk-advisory business, Hallac added. “We didn’t want to show this to anybody who was going to try to make money in the markets with this information. So we created a separate team within BlackRock Solutions to just manage the Fed portfolio.”

However, he said some employees in line to work on the PPIP have helped with a separate Fed program that involves buying up mortgage-backed securities.

The financial world often uses the anachronistic phrase “Chinese wall” – a phrase that came into wide use after the 1929 stock market crash – to describe an investment firm’s internal efforts to isolate compromising information.

To a certain extent, then, the debate over conflicts of interest at BlackRock and other firms depends on whether you believe Chinese walls can survive in the age of BlackBerries and blogs.

“Let’s be honest, it’s bullshit. They don’t exist,” Barry Ritholtz, the CEO of the independent research firm Fusion IQ and the creator of the Big Picture financial blog, said in an interview. “They’re a theoretical, abstract legal construct that looks and sounds good when you’re developing legal constructs.”

One hedge fund manager, who requested anonymity in order to speak candidly, said he is more concerned bailout contractors’ access to Geithner and Federal Reserve Chairman Ben Bernanke.

“The public-private cooperation that’s going on – not just in the PPIP – ought to be very unsettling to people,” the hedge-fund manager said. “These guys are on the phone with Geithner, Bernanke, with everybody who matters and is setting policy in Washington. And at the same time, they’re trading their own books.”

While bias among these government contractors is undeniably problematic, some experts asserted that it is also unavoidable. As this argument goes, if the government ruled out firms that did significant business with a bailed-out bank, there would be no one left to hire.

“Because Treasury doesn’t have the in-house expertise, it’s inevitable that they would have to contract out,” said Campbell Harvey, a professor of international business at Duke University. “It’s also inevitable that there will be conflicts of interest. If you’re qualified, then almost by definition, there’s a conflict of interest.”

William Seidman, former chairman of the Resolution Trust Corporation (RTC), which led the recovery effort after the 1990s savings-and-loan crisis, offered a sharp contrast to Treasury’s current opaque bailout contracts.

Seidman said he racked up large auditing bills to ensure that his contractors were complying with conflict-of-interest rules. “Occasionally we had transactions that we didn’t make public for some sort of public-policy reason, but … most we had to report to Congress,” he said in an interview shortly before his death on May 13.

“It was expensive,” Seidman added, “but the program had so much potential for fraud or conflict that we thought it was essential.”

Elana Schor is the Washington correspondent for Streetsblog, a news Website focusing on sustainable transportation and infrastructure. She has formerly covered Congress for The Hill and The Guardian.

Federal Reserve Chairman Ben Bernanke (WDCpix)

Amid the clamor over the crisis on Wall Street, the U.S. Treasury’s $700 billion Troubled Asset Rescue Program, or “TARP,” bill and the evolving collapse of the global banking system, little attention has been paid to the extraordinary credit extensions at the Federal Reserve. But these are now without parallel in Fed history, including during the Great Depression.

In the last three weeks, Federal Reserve Chairman Ben S. Bernanke, with the help of Treasury Sec. Henry Paulson Jr., has increased the Fed’s credit extensions by $650 billion — roughly the same amount as the TARP. Taken together with the Fannie Mae/Freddie Mac bailouts, new Fed credits in just the last month or so now amount to some $1.6 trillion. Here’s how they did it.

Illustration by: Matt Mahurin

The Fed, to begin with, is a bank. Like other banks, it makes loans and investments, which are its “assets.” It finances them by taking deposits, mostly from its member banks, and raising capital, its “liabilities.” In the normal case, almost all its assets are loans to the government, or Treasury bills, notes and bonds; while its primary liabilities are its own debt certificates.

You’ve seen the Fed’s debt certificates; they’re green and carry the legend “Federal Reserve Note.” In other words, money. The Fed’s role in the economy is to stabilize the money supply so it is neither too plentiful, which can generate inflation, nor too scarce. It does so largely by manipulating the rate of interest that banks charge each other for overnight loans, the “Fed Funds” rate. If the Fed issues more currency to buy Treasuries from its member banks, banks become more liquid and the Fed Funds rate should fall; and vice-versa.

Bernanke is a serious academic who devoted much of his career to extensive studies of the failure of central banks during the Great Depression. He is the lead author of a 2004 Federal Reserve working paper, exploring the Fed’s policy alternatives “At the Zero Bound” — or the point where the usual tools of interest-rate policy cease to have any effect on the real economy.

In the paper, Bernanke poses a common policy conundrum. It sometimes happens that pushing down Fed Funds rates has no effect on medium- or long-term rates — or can even make them rise, if markets are worried that too much liquidity could cause inflation.

In such a case, Bernanke suggests, the Fed could use its balance sheet in a more targeted way. “If the Federal Reserve were willing to purchase an unlimited amount of a particular asset, say, a Treasury security, at a fixed price,” Bernanke wrote, “there is little doubt that it could establish that asset’s price.” But the Princeton economics professor also warned that the Fed should be “cautious” about such a strategy, since its results could be “quite uncertain.”

Starting in late 2007, and continuing ever more aggressively through 2008, Bernanke, as chairman, started precisely such an experiment in using the Fed’s purchasing power to target asset prices. But instead of targeting specific maturities of Treasuries, he targeted the illiquid assets weighing down bank balance sheets. In effect, could the Fed establish the price of the complex subprime mortgage-backed debt instruments, known as “CDOs’:and similar paper that has been destroying bank balance sheets?

The first attempt, in December, 2007, was appropriately cautious — it was relatively small and short-term; open only to Federal Reserve system member banks, and circumspect on acceptable securities. But step-by-step, he expanded the eligible borrowers from member banks to broker-dealers, then to AIG, an insurance company, and, most recently, directly to major corporations, mostly on an unsecured basis. At the same time, Bernanke greatly increased the volume and the range of targeted securities he would lend against, to include “investment-grade” (translation: “anything not junk”) CDOs.

The Fed’s weekly balance sheet has evolved into a fever-chart of Bernanke’s interventions. Start with the balance sheet of a year ago, in October, 2007. Total Fed assets were $890 billion, of which $780 billion comprised Treasuries, with the balance scattered among gold certificates, physical plant and other miscellany — or roughly the size it had been for several years.

Now jump ahead to the balance sheet from last week. The Fed’s assets have swelled to $1.6 trillion, an increase of 80 percent. But only $265 billion are Treasuries actually held at the Fed. The rest are a mélange of god-knows-what instruments vacuumed up from banks and investment banks.

There are $149 billion in dicey securities exchanged for Treasuries in bi-weekly auctions; “Other Loans,” to the tune of $420 billion (all we know is that it includes the credit extension to AIG, which has climbed to about $100 billion); a special $29-billion line for Bear Stearns, and $145 billion in direct lending to companies. There is also $325 billion in “Other Assets” — probably mostly dollars for foreign central banks to help local banks choking on dollar-based CDOs and other poison apples from America.

The total lending expansion, therefore, was about $700 billion, with about $650 billion in just three weeks since Paulson and Bernanke proposed what became TARP to purchase banks’ bad assets, or otherwise provide them with new equity.

In other words, even as academics and Congress agonized over TARP, Bernanke and Paulson had already pumped out roughly that amount of money — without so much as asking for a by-your-leave. Paulson even engineered a special $400-billion Treasury borrowing program -– i.e., increased the federal debt — to supply part of the extra cash needed to support Bernanke’s lending.

Fascinatingly, Bernanke’s fire-hose of liquidity has so far been accompanied by a steady tightening of lending conditions. Some market watchers worry that interbank liquidity is drying up because borrowing at the Fed is so much easier. Only time will tell.

If there’s one lesson from the past few years, it is the formidable nature of the law of unintended consequences. The vast new infusions of dollars will weigh on U.S. international balances for years. It is all in the name of staving off a “recession,” which now looks something like the 1960s specter of nuclear Armageddon.

We may have reached the point where the cure is scarier than the disease.

Charles R. Morris, a lawyer and former banker, is the author of “The Trillion Dollar Meltdown: Easy Money, High Rollers and the Great Credit Crash.” His other books include “The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould and J.P. Morgan Invented the American Supereconomy” and “Money, Greed, and Risk: Why Financial Crises and Crashes Happen.”

These guys will all soon be the personal property of Harry Shearer. (Flickr: Trainman74)

He doesn’t know this yet, but I’m putting in a bid to purchase Bruce McCall.

I like and admire Bruce, but that has nothing to do with my plan. I happen to know that he’s up to his ears with a mortgage on his condo. Since that mortgage has long since been securitized and sold to a Singapore bank that’s about to fail, I can swoop in and get the whole package on the cheap.

Hey, vultures gotta eat, too.

As fine a purchase as that will be, it’s just the opening move of my plan.

I’ll leverage my Bruce property to the hilt, and go on a comedy and humorist buying spree — Joy Behar, Steve Carell, Chris Buckley, Sandra Bernhard, Craig Ferguson. They’ll all fit nicely into my portfolio. Leveraging them will net me Dave, Jay and Conan. Maybe even Matt Groening.

This isn’t about the hang, interesting as that prospect might be. My purpose is to create a corporate humor leviathan. Maybe we’ll call it American International Comedy, or AIC.

Old-school thinkers might surmise that my ultimate goal is to create a kind of monopoly, and raise everybody’s price — what you might call the Mike Ovitz approach. But this is now, and what I’m after is simple: a comedy combine that’s too big to fail.

Illustration by: Matt Mahurin

That’s only the beginning. More leverage brings more talent, and more connections to media leviathans worldwide — how many countries does Ricky Gervais entertain? How many state-owned TV networks have millions tied up in “Simpsons” reruns?

There’s no point in being too big to fail unless you can tiptoe or tapdance right up to, or just over, the edge of the cliff.

We’ll invest everybody’s earnings in perfectly wonderful financial instruments that the humorists themselves will invent. Then, boom! Or, strictly speaking, whatever the opposite of boom is.

Sure, there will be those outliers who think the government has no business bailing out a collection of laughmasters. Do they understand how much property Will Ferrell owns in Mexico? If all those haciendas get dumped on the market at once, ay caramba!

Once the government gives us a multi-billion-dollar bridge loan — cynics will call it a “bridge loan to nowhere,” but let them laugh — the feds will own 80 percent of all of yoksters, and we can relax.

Just like, let’s say, FEMA.

Harry Shearer is the host of the weekly radio show “Le Show,” the co-writer of “This Is Spinal Tap” and a musician and actor. His new album is “Songs of the Bushmen.”

According to prepared remarks, Obama first stressed that a taxpayer-funded solution makes it imperative that the government help middle-class and poor citizens — not just troubled corporations:

We already know that the credit crisis that has emerged from our largest financial institutions is becoming a credit crunch for small business owners, homeowners and students seeking loans in big cities and small towns.

Now that American taxpayers are being called on to share in this new burden, we must take equally swift and serious action to help lift the burdens they face every day…. I ask Sen. McCain, President Bush, Republicans and Democrats to join me in supporting an emergency economic plan for working families –- a plan that would help folks cope with rising gas and food prices, spark job creation through repair of our schools and roads, help states and cities avoid painful budget cuts and tax increases, help homeowners stay in their homes and provide retooling assistance for America’s auto industry.

John McCain and I can continue to argue about our different economic agendas for next year, but we should come together now to work on what this country urgently needs this year.

Obama is essentially reiterating the need for the stimulus plan he already proposed — at $50 billion — which presents another contrast with McCain, who still opposes a stimulus.

Then Obama turned to a new regulatory structure, which he has already discussed several times this week:

[T]his plan must be temporary and coupled with tough new oversight and regulations of our financial institutions, and there must be a clear process to wind down this plan and restore private sector assets into private-sector hands after restoring stability to the system. Taxpayers must share in any upside benefit that such stability brings.

Obama concluded with some straight talk of his own — an indictment of of a Washington-Wall Street alliance that should resonate with many workers and voters disgusted with Congress:

One last point. We did not arrive at this crisis by some accident of history. What led us to this point was years and years of a philosophy in Washington and on Wall Street that viewed even common-sense regulation and oversight as unwise and unnecessary; that shredded consumer protections and loosened the rules of the road. CEOs and executives got reckless. Lobbyists got what they wanted. Politicians in both parties looked the other way until it was too late. And it is the American people who have paid the price. The events of this week have rendered a final verdict on that failed philosophy, and it will end if I am President of the United States.

With all the attack ads and horse-race coverage, it’s easy to start analyzing the financial crisis as another political development that can “help” or “hurt” the candidates. Turn to Obama’s actual words today, though, and you can see his emphasis on how he would try to help the actual people harmed by free market fundamentalism.

The situation is bound to raise thorny policy issues for the next president, who is likely to face further demands for assistance from mortgage lenders, home builders, automakers and other struggling industries. Economic and legal experts say Congress and regulators need a set of standards for how to treat industries and companies with their hands out, especially when the requests come in an atmosphere of crisis.

“The more the government steps in, the more there are people who want the government to step in,” says Peter J. Wallison, a research fellow at the American Enterprise Institute and a former White House and Treasury Dept. official. “Every time you do it, that creates an equitable argument for someone else to get bailed out.”

So who is next? Detroit? The newspaper industry? What do the candidates think? And while we’re on the subject of bailouts, I find it particularly interesting that the nation’s biggest insurance company swings an $85 billion loan, while down-on-their-luck cities got a measly $4 billion in the mortgage rescue bill- – and they had to fight hard to get even that much.

When it comes to government help, it looks like you’re much better off being on Wall Street than on a street with foreclosed houses.

Investment editor John Authers traces many of today’s problems back to the rescue of Long Term Capital Management in 1998 — the weekend when the New York Federal Reserve and the titans of Wall Street got together to save the troubled hedge fund. From that plan came the start of cheaper money from the Fed to keep the markets moving, a trend that continued for a decade.

But the rescue also created the moral hazard problem – the belief that it was fine to take on greater risks than normal, because the government would be there to step in as a last resort.

As Authers explains, shares of the now-failed Lehman Bros. bank rose steadily from 1998, until its recent crisis. Lehman wasn’t alone, as Wall Street engaged in riskier investments, with higher returns. There always was the implicit belief — based on the Long Term Capital Management experience — that a bailout would be a possibility if things went wrong. That belief encouraged firms to take on risks they might otherwise have avoided.

Now, he says, with the government refusing to bail out Lehman, the markets are tanking and the future of other firms is shaky. No one knows what will happen.

But one thing is clear, Authers says, based on the Lehman bankruptcy and the government’s decision to draw a line in the sand — “The decade of moral hazard is over.”