Of course, we’ve got to get through the mess at hand first. And it looks like we’ve got a way to go yet on that point. CB Online editor Samson Okalow suggests keeping an eye on upcoming settlement dates on credit default swaps on Lehman Brothers debt, an excellent idea.

These swaps are basically default insurance, and there is a major chunk of change to be paid out on the $125 billion in Lehman debt that went down with that good ship (up to 90 cents on the dollar apprently).

That’s a mighty bit of cash set to shift from institution to institution on October 23rd, a major settlement date for these contracts.

But let’s take a moment to learn a lesson here. As we are all now well aware, the credit derivatives market developed over the last decade as an opaque, non-transparent, over-the-counter market, where no one has a clue who is counter-party to who on what terms and why.

Warren Buffett has long warned of the danger of this, as have many others. But as Buffett put it on the Charlie Rose show last night, the economy is a patient in cardiac arrest prostrate on the floor of the hospital. And part of the reason the we’re now tempting economic brain damage was the collective decision to let this derivatives market develop in such an opaque manner.

A good idea floating around in these days of “regulatory rethink” is that credit derivatives should be traded on an exchange and in a more transparent manner so that we know where the landmines are. It’s a basic idea, and had we implemented this earlier we might not be in the dismal state we’re in.  So let’s not pass up the chance to learn a lesson here: A key idea going forward is that a little transparency is a good thing. It avoids credit market heart attacks such as the one now threatening to take down western finance.

 Someone asked me what I thought was going on, and my short answer was: “I don’t know.”

Is this the end of the investment banking model? Is this a vote of nonconfidence in the global financial system? Possibly.

But against that one has to weigh the reality that Wall Street–and Bay Street and the City, along with the media who cover them–tend to believe that the economic world begins and ends at their borders. What effect the collapse of Lehman and sale of Merrill, big though they are, will have on the real economy remains to be seen.

Two interesting observations did emerge last night around the table. One is that hard times in the financial services capitals will have a ripple effect on real estate–rich people (brokers, bankers, traders) thrown out of work in New York will push prices down there and across the U.S. Same in England and Canada, one supposes–aggravating an already crumbling housing market in the States and overseas, maybe here too.

Another observation: the purchase of parts of Lehman by Barclays and the sale of Merrill to Bank of America repeats, in some ways, the kind of consolidation that occurred here in Canada more than a decade ago. Now, as banks bought out brokerage firms here, it led to much grumbling among die-hard Bay Street cowboys about working for a (boring, bureaucratic) bank.

One wonders how the honchoes at Lehman and Merrill are going to like it….

An article recently proposed clawing back the bonuses that imprudent Wall Street executives awarded themselves during the era of frenzied growth. After all, it would be one step toward addressing the moral-hazard problem. And it would seem rather unfair to expect taxpayers to foot a multibillion-dollar bill for cleaning up the mess while the executives got to keep the spoils from creating it. It seems only fitting that a first stop in collecting funds should be at the doorsteps of those who helped perpetuate it – the amounts can be rather significant as Lehman’s example illustrates.

I was thinking the return of the bonuses could be compelled through legislation — but creditors might beat the government to it, at least in the case of Lehman. Adam Levitin, an associate professor of law at Harvard University, notes that the bonuses might be recoverable as fraudulent transfers if a creditor succeeds in demonstrating the firm was already insolvent in 2007.

However, the actual amount recoverable would be less than $5.7 billion. A substantial portion of that figure represents stock grants that vest over time (and those vesting after Sept. 15 are now worthless).