Lehman has raised capital, improved its liquidity position, reduced leverage and gained access to the Federal Reserve’s primary dealer credit facility in the three months since Bear Stearns imploded. It is hard to see it going the way of its defunct rival. Not least, with the Fed dealer facility open, there is simply not the same incentive for counterparties to stop trading with the firm as they did with Bear. Yet Lehman is still being battered by events as investors speculate what horrors lie on the balance sheet and worry about its future earnings power. The fact that Lehman, like other Wall Street firms, is something of a black box from the outside only helps to sap confidence. At one point on Wednesday its shares had fallen 23 per cent in three days. The onus is clearly on Lehman to bolster its financial position to the point where the destabilising uncertainty is removed. That might well involve a capital injection from a third party – whether an investment management company or a foreign bank. But a sale of the firm should not be ruled out.

The fact that the Fed facility could, theoretically, be closed to investment banks in September, as originally envisaged, should focus minds at Lehman. Even if the Fed wants to return to the old rules as soon as possible, it is not going to do so if a bank such as Lehman is still under pressure. In the event that turmoil continues over the summer, the Fed might yet put pressure on Lehman and other investment banks to find a more permanent solution to their funding risks ahead of September.