Lehman's Got a Reluctant Safety Net in Uncle Sam

Bob Medlin, senior managing director at FTI Consulting, says regulators will likely decide whether -- and how -- to assist banks on a case-by-case basis, depending on the bank's situation and market conditions. That makes it tough to determine whether the feds will step in to heal the wounds of a Washington Mutual(WM Quote) or National City(NCC Quote) the same way they would Bear or Lehman.

Indeed, the Office for Thrift Supervision allowed IndyMac Bancorp(IMB Quote) to fail. The regulator on Friday stepped in to seize IndyMac's assets in the second-biggest failure in the agency's history.

"They appear to be examining each situation each situation one at a time," says Medlin. "I don't think they're necessarily looking to bail out each situation that comes along."

Or, as Hintz puts it, "Small banks out in Kentucky and Tennessee don't have much of an impact on the debt capital markets."

In cases of major commercial banks, deposits are insured by the Federal Deposit Insurance Corp., but shareholders are not yet any more protected than those of Bear Stearns -- whose stock ended up at just a fraction of its value a few months before its sale to JPMorgan Chase (JPM Quote) for $10 a share -- or IndyMac. It remains unclear what shareholders will get out of that deal.

Richard Bove, an analyst with Ladenburg Thalmann, places a heap of blame on the regulators themselves, who he says created the "recent era of regulation-lite" and are now making up for lost time as the markets entered the current turmoil. He says the government will "create as much money as is necessary to stop the runs on the system," although some bank failures will be inevitable.