The exceptional increase in the deficit has in large part reflected the effects of the weak economy on tax revenues and spending, along with the necessary policy actions taken to ease the recession and steady financial markets.
Despite the best efforts of all involved, a solution could not be crafted, nor could an acquisition by another company be arranged. With no other option available, Lehman declared bankruptcy. The Federal Reserve fully understood that the failure of Lehman would shake the financial system and the economy.