Last week marked the anniversary not only of the terrorist attacks of 9/11, but another anniversary many would prefer to forget. In fact, there are times when it seems like that's just what has happened, in parts of the Washington to Wall Street axis.

We're talking about the fifth anniversary of the financial crisis that began with the collapse of the equities firm Lehman Brothers, one of the older and up until September 2008, respectable Wall Street firms. Then came all the bad news about sub-prime mortgages, derivatives, securities backed by dodgy assets, over-leveraged banks, housing bubbles and credit default swaps. A whole new language unknown to most outside the world of high finance and Wall Street suddenly became commonplace.

The signs, of course were there long before then. The fall of Bear Stearns, another trading firm, earlier that year, sent a clear signal that the heady brew of easy money and paper assets backed by nothing more than faith and trust that there was some beef somewhere in the sandwich should have had federal regulators looking more closely at other firms like Lehman. By bailing out Bear Stearns, but then letting Lehman go bust, the feds helped confound the market and brought the frothy mess to a boiling point. It came perilously close to bringing down the entire financial system. Only taxpayer bail outs to firms "too big to fail" - like Citibank, like General Motors - kept the entire thing from completely imploding into a full blown Depression along the lines of the 1930s.


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Much has been learned since then, of course, and a steady, if halting and very lengthy recovery has followed. There has been much speculation in the past week about whether it could all happen again, and whether the proper safeguards been built in to prevent that, or at least give an earlier warning and a clearer signal. The answers are clearly yes to the first and probably no to the second.

Clearly, too many banks remain too big - too big to manage as well as to fail. They also seem to have lost sight of the fact that their primary business is to provide credit and lending to Main Street businesses out in the "real world economy," as a cogent article published in Time Magazine this week made clear. Their job isn't supposed to be running an international casino that makes bets on the value of paper assets but have limited effect on creating real world jobs and real world economic development.

There may never be a perfectly happy medium to be found that allows banks and other lending institutions to exercise a responsible level of risk management that doesn't get too aggressive and loosey-goosey on the one hand or be so conservative as to squeeze economic growth on the other. The Dodd-Frank Act, designed to limit the exposure of the broader economy to the "too big to fail" banks, has met withering resistance from them. That's a signal that the legislation, even though critical parts of it remain unfinalized, is probably on the right track. No bank, no business, should be too big to fail. Failure is part of capitalism and the business cycle. Failure is often a precursor to later success. But when weak links in the system fail, they shouldn't threaten to bring down the rest of the economy, as the crisis of 2008 nearly did.

The other key is that overused word "transparency." Big globalized banks shouldn't be able to hide risky assets or make them so opaque that even their own risk managers don't know the extent of their exposure to the downside possibilities. Amazingly, that was precisely the case too often five years ago at this time.

This is a good time to reflect on some of these "lessons" which have yet to be fully absorbed and if the big banks and securities trading firms have their way, may never be fully implemented. That would be fine, perhaps, if there was a clear understanding on their part that "too big to fail" isn't good enough the next time around to prompt more taxpayer financed bailouts. But what is the choice when it's a question of bailing out a major bank or financial institution whose collapse would trigger a run on the entire financial system or not?

It isn't a choice at all. If you think 7-8 percent unemployment is bad, try something more like three times that.

Meanwhile, as we review where we've been and where we're going, it's fascinating that the other pillar of the nation's financial system - Washington D.C. - is once again poised to send shivers through the economy over its inability to forge a consensus on spending and debt ceiling limits. We still have a couple of weeks to go before this escalates into what we resignedly assume will be another 11th hour standoff until the adults in the room assert themselves enough, but really - this is stupid.

No one can argue that the government needs to learn to live within its means as well as possible, but holding the nation's credit rating hostage isn't the way to do it. And while there may be those who hate Obamacare and will stop at nothing to derail it, including, if need be, dinging the nation's credit rating and the broader economy, do we really need another meaningless, only-for-symbolic-value vote on the Affordable Care Act? Amazingly, that is what the Tea Party faction in Congress wants as a price of an agreement on the debt ceiling.

Memo to same: A wise man once said - know when to hold 'em, and when to fold 'em. It's folding time.