Big questions will forever hang over the spectacular demise of Lehman Brothers Holdings Inc. The collapse of America's fourth-largest investment bank easily ranks as the single largest bankruptcy in history and one filled with staggering superlatives. Assets at the time of filing on Sept. 15 were $639 billion. Liabilities were $613 billion, or nearly 20 times the previous bankruptcy record set by WorldCom Inc. Lehman owed $150 billion in bond debt alone, more than the entire Russian debt default a decade earlier. Credit default swaps underlying Lehman's debt reached up to $400 billion.

Within hours of the Chapter 11 filing, however, just about everyone and their French cousin began to second-guess the Bush administration's public pronouncement that it let Lehman fail. All hell broke loose that day. Merrill Lynch & Co. said it would sell itself to Bank of America Corp. The markets cratered. The government announced it would step in to save insurance giant American International Group Inc. The markets cratered some more.

In the days that followed, the world's financial engine seized up. European and Asian central banks had to launch mammoth rescue efforts.

Through all this, economists, bankers and politicians of various pinstripes and persuasions lined up to hammer U.S. Treasury Secretary Hank Paulson for his unwillingness to save Lehman through some sort of government support for a private buyer. That action -- or, more properly, inaction -- directly precipitated the biggest economic meltdown since the Great Depression, or so conventional wisdom now holds. Had the government bailed out Lehman, the thinking goes, the engine might still be sputtering and we'd be much better off. It was the economic equivalent of game-changing fan interference or a critical blown call.

So this is the bankruptcy that was, but shouldn't have been. Or should it?

Rewind six months.

Bear Stearns Cos. was weak and getting weaker. The markets had all but written off the investment bank after two of its hedge funds failed and margin calls on risky securities tied up more and more capital. In March, rumors of Bear Stearns' impending demise beat stronger and stronger. The Federal Reserve agreed to scoop up about $30 billion worth of Bear Stearns' junky mortgage-backed securities as the Fed brokered a kind of deathbed marriage of Bear Stearns to J.P. Morgan Chase & Co.

After the merger, markets quieted somewhat, especially since the Fed, as part of the Bear Stearns bailout, had opened its discount window to investment banks. But smart money said a major bank failure was inevitable.

Why? To begin with, there were plenty of candidates. What's more, Lehman was always at the top of the list, known to have a huge exposure in mortgage-backed securities.

Equally as important, Paulson and the administration he represents were so bound to deregulation and lack of government interference that they had to draw the line somewhere. It wasn't a moral hazard issue as much as an almost quasi-religious belief in the Milton Friedman school of economics, in the majestic efficiency of the markets and in what Paulson called "market discipline." "For market discipline to be effective, it is imperative that market participants not have the expectation that lending from the Fed, or any other government support, is readily available," Paulson proclaimed in a London speech July 2. "For market discipline to constrain risk effectively, financial institutions must be allowed to fail."

Compounding this was a kind of institutional hubris. Investment banks raked in billions of dollars in good times. Investment bank executives became Wall Street's anointed deities. The gods believed the hype.

Lehman CEO Richard Fuld has become an easy target for the wrath of everyone from Capitol Hill to Wall Street. (Face it. He often looks evil.) Not to pile it on, but had Fuld made the same hard-nosed decision about shoring up the balance sheet and selling his firm that he did about trading bonds, Lehman might have escaped. Depending on your vantage point, Fuld either dithered or blustered his way through the spring and summer. In the weeks before Lehman's bankruptcy, Fuld rejected an offer from Korea Development Bank of $26 a share for a 25% stake.

So this was no overnight collapse. However, it was well into September by the time Paulson began to pressure Fuld to sell the firm. Even then, Fuld resisted an outright sale, Paulson told The Washington Post. By then, Lehman was close to flat-lining. Customers pulled their funds. Counterparties refused to do business with the firm.

Paulson in recent weeks has been pleading with those who chronicle instant history (read: journalists) to go easy on his legacy. In a series of interviews with The Washington Post in November, the former Goldman, Sachs & Co. CEO and chairman swears he wanted to save Lehman. In the last hours before the bankruptcy filing, and contrary to public statements at the time, Paulson now says he was willing to backstop a sale with government support but was circumscribed by an inability to provide funds. The best of intents met reality and lost.

Even if the Treasury secretary really was thwarted in his Lehman revival efforts, a more critical question remains: What would Paulson have saved?

Lehman had become a toxic waste dump for hundreds of billions of dollars of almost worthless securities, many, but not all, tied to subprime and other risky mortgages. (In October, credit default swaps underlying Lehman bonds sold for a mere 8.625 cents on the dollar.) Its reckless pursuit of mortgage-backed securities and other collateralized debt obligations created an edifice of profit on a foundation of sludge.

As the bankruptcy court moved quickly to salvage something from the estate, creditors were shocked to learn just how little residual value Lehman had: its New York headquarters, its private wealth management subsidiary, Neuberger Berman LLC, an energy partnership and bits and pieces of other hedge, private equity and money management funds, plus some overseas units. Total proceeds won't reach $5 billion.

In the weeks since the bankruptcy, the world discovered that Lehman wasn't the only financial Superfund site, or even the biggest.

Treasury and the Fed have since poured hundreds of billions of dollars into AIG and Citigroup Inc. to guarantee securities. Other governments had to do the same with their banks.

The amount of the contaminated paper is mind-boggling: trillions and trillions of dollars' worth. Washington still hasn't figured out what to do with it all.

So perhaps it's wishful thinking to suggest credit markets wouldn't have frozen and the stock markets wouldn't have gone into freefall when institutions of this size were close to failure. If Lehman hadn't triggered the Great Financial Meltdown of '08, it's likely something else would have.

That seems especially true since Paulson and, to a lesser extent, Fed chief Ben Bernanke have lurched from crisis to crisis, never giving the markets a clear idea of what policy would be, pushing first one solution and then another.

In 1914, Serbian nationalist Gavrilo Princip assassinated Archduke Franz Ferdinand in Sarajevo. Almost a century later, historians still argue whether that event necessarily caused World War I or was merely the catalyst.

Had Princip missed, could Europe have avoided a long bloodbath?

Historians now argue that war was inevitable. Franz Ferdinand's survival may have delayed, not prevented, it.

Paulson is probably less popular these days than was Princip, who at least had the Serbs on his side. In the weeks since the Lehman failure, the Treasury secretary has managed to provoke both Democrats and Republicans. The Lehman bankruptcy, meanwhile, promises to be around a downtown Manhattan courtroom long enough to outlast this recession and probably the next one. Economic historians will debate the bankruptcy much longer.