US Treasury Secretary Henry Paulson drew a line in the sand. Lehman Brothers, in spite of its auspicious near-160-year history and revenues of US$59 billion, would not be bailed out. The market is king. The move sent Merrill Lynch, fabled as 'the thundering herd' with a bull as its mascot, stampeding for cover into the arms of Bank of America.
Merely a week later, the financial storm washed away the government's resolve and it rushed to spend another US$85 billion rescuing AIG (American International Group), a US$1 trillion 'national treasure' insurance firm decreed too big to fail.
The tragedy is that the government of George W. Bush has been asleep. It should have seen this coming, not merely weeks ago when mortgage companies Fannie Mae and Freddie Mac, and Bear Sterns were bailed out, but years ago.
If it had been awake, it could have saved the US taxpayer a bill that is heading towards US$1 trillion in handouts, guarantees and loans.
The bigger tragedy is that this is merely the tip of the melting iceberg of fiscal global warming that is dissolving the US economic and financial empire. Sadly, evidence of creative thinking anywhere that would help contribute to making a new world is in desperately short supply, especially in Asia.
Some pundits take comfort from the fact that the fall on Wall Street has - so far - been less than the 1929 crash. But the fallout continues. Rumours gather about new banks in danger. Interbank lending rates are still high in spite of government infusions of liquidity, meaning that banks are scared to lend to each other. If banks don't trust each other, why should anyone trust the system?
There are two aspects to the current crisis. One is the financial froth that clever investment bankers and their lawyer sidekicks created for themselves so they could enjoy champagne and multimillion-dollar bonuses.
Essentially, from being servants of corporate clients, raising money and underwriting stocks and bonds, the i-bankers became super-speculators leveraging borrowed money and exercising their agile brains to create ever more exotic financial instruments. The day of reckoning was bound to come. A mansion of cards, however ornate and high, is still just a pack of cards.
The current crisis points a glaring finger at the failure of the US patchwork regulatory system. The fact that solid, safe, AIG was dealing in exotica to the tune of US$60 billion speaks volumes about the madness. As an insurance company, AIG was not regulated by the US Federal Reserve or any national agency, but by New York state.
Common-sense cures have been suggested, including more-comprehensive and better regulation, with tighter limits on leverage and even on salaries and bonuses. But it is harder to change a culture where speculation, rather than production, is rewarded.
But America's - and the world's - crisis goes beyond financial speculation and into the real world of production and consumption, and saving habits. The clever i-banking youngsters not only leveraged borrowed money to create their exotic products, they used the highly leveraged real bricks and mortar of millions of Americans' homes as they helped spin the new version of the American dream - that you could have everything you want without paying for it with real money, and blood, sweat and tears.
The Asian Development Bank says that the implications of the US financial fallout on Asia will be limited. What nonsense: just to take AIG, its fallout is writ large all over the world, from the shirts of Manchester United (AIG sponsored) to the queues of Chinese in Singapore rushing to withdraw their money because the safe haven was unsafe. Watch the stock markets: they show a global system.
For years, Asia's leaders have been complicit with the US in a dirty bargain - to let Americans fritter away their money and run down their productive industry while Asia took over the manufacturing jobs to create the TVs, toys and others goods Americans can't live without, and got trillions of dollars in return.
Asia is now sitting on US$4 trillion to US$5 trillion in reserves. What to do with it? Productive US dollar investment opportunities are limited, especially because American politicians will squeal if foreigners dare to take stakes in key sectors of the economy.
One of the great sadnesses of the US election campaign is that America lives in denial. John McCain confuses being a brave war captive - which he was - with being fit to take the ultimate decisions of war and peace. He described the economy as sound and, to him, America is God's own country. Barack Obama has tried to present a more realistic picture but, the moment he does so, Republicans yell the supreme obscenity against him: 'un-American'.
But Asia refuses to step up to the plate. Japan's politicians still mourn the victims their forefathers created who lie in the Yasukuni Shrine. China is afraid that leadership will crimp its own opportunities. South Korea has only nationalist eyes.
Leadership and the vision of how to take advantage of the US demise and avoid potential pitfalls will probably come from one of the smaller players. It should be a natural opportunity for someone from a great international city like Hong Kong - it's too bad that Donald Tsang Yam-kuen's only vision is how to ingratiate himself with Beijing.
Or perhaps there's an opportunity for a pan-Asian body like the Asian Development Bank - too bad it's run by politically and economically shortsighted Japanese. Or for someone like Anwar Ibrahim, who was head of the World Bank's development committee - too bad that he is still fighting for his political life.
Kevin Rafferty is a political commentator