The financial media and Wall Street insiders have already dubbed it “Black Sunday”, and with good reason.

After a full weekend of emergency meetings meeting between Federal Reserve, US Treasury, and financial industry big shots the fourth largest investment bank in America, the 158 year old Lehman , was left to its own devices. The US government finally drew that line in the sand. No bailout for Lehman. This morning Lehman filed for chapter 11 bankruptcy.

Wall Street has at last been put on notice. Those hoping the Fed would provide bailouts for the likes of Washington Mutual (WM) and American International Group (AIG) will be sorely disappointed by the US governments reluctance to step in. Actually, with Fannie Mae and Freddie Mac being placed in a “conservership” only a week ago the Fed and Treasury must have run out of running room. Throwing countless billions of dollars that you don’t really have at companies that have been terribly mismanaged is not a winning combination.

Wall Street is finding out a little late in the game that making big bets using leverage of 30:1 to 40:1 is a risky business. The fact that this was not obvious in the first place speaks loads of the concept of American exception-ism. What hubris and what nonsense. These big swinging dicks of Wall Street actually thought that they could successfully manage such leverage due to new super duper American devised management systems. After all Americans can do anything, even the impossible.

But you do have to hand it to the Wall Street gang. What salesmen. The Wall Street army lead by their fearless and not so smart after all leaders managed to sell almost the entire world junk investments presented as AAA opportunities. Greed and how to use it to advantage is a powerful tool that Wall Street understands very well.

It never occurred to any of the Wall Street marvels and willing participants that investments can go down as well as up. Especially investments backed by real estate. Unfortunately, your investments don’t have to decline by much at 30:1 leverage to wipe you out. Now the Wall Street firms that have played this dangerous game are leading the entire economy into a dark and dangerous place. The return of common sense will likely keep the US and much of the world mired in a long and difficult recession, even a depression, for many years to come.

The aversion of risk will be the new game in town and that will probably mean at least a generation of financial executives and common Americans alike who as a result of a complete financial meltdown will be adverse to taking any kind of risk. The resulting credit implosion will reshape America. Standards of living will fall and tempers and aggressive acts will rise.

Not only has the Fed and Treasury Department put Wall Street on notice that bailouts can not be counted on but all of America is on notice as well. The American dream of the past twenty years of getting rich with little or no effort has turned into a nightmare. The government has placed everyone on notice that one had best learn in a hurry to take care of themselves.

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