I'm no conspiracy theorist, but circumstantial evidence builds a fascinating case which suggests that during the past few weeks we have seen a massive manipulation of monetary policy to support US bank stocks.
There are several parties who, motivated by self-protection, would be interested in executing such manipulation. Primarily these are the banking executives and regulators who, should the banks collapse, would be revealed as having insufficient competence to secure banks' viability.
Managers would lose their jobs, not to mention any money invested in their employer (which is often substantial thanks to generous stock option packages), and would face trouble with future employment.
The best example of poor management on Wall Street was seen in the Board of Lehman Brothers. Out of 11 directors in 2006, five were aged over 75 years, including an ex-Broadway producer and an 82-year-old former actress. Hardly the right personnel to manage one of the world's great risk machines!
Then there's the regulators. Despite all the puff about tighter bank regulation, the truth is banks are already heavily regulated. Central banks fix the price of the core commodity (money), and regulators receive continuous reports of banks' financial status. Failure of any bank raises questions regarding regulators' competence.
The Federal Reserve regulates US banks and has a massive conflict of interest, as it has also 'pumped money' into the credit markets to give ailing banks enough funds to limp along. Like a desperate gambler, it can get in too deep and, intimidated by potential losses from collapse, convince itself the bank is too big to fail.
Other conflicts arise from the revolving door that moves senior officials between banks and regulators and establishes a spiderweb of connections. No doubt they find it hard to separate favours to old mates from sensible support for troubled institutions.
A third important group of stakeholders is US politicians facing re-election. Even if the risk of collapse was low, few of these politicians could take the chance of standing up against even the most outrageous claims of the bankers and regulators.
So there is motive aplenty for the manipulation of monetary policy. But where is the opportunity?
The global credit system is so complex and opaque that it deflects scrutiny from all but a few of the most determined analysts. Journalists have been required to explain the financial meltdown to readers, but have no idea of what is happening.
Step in economists and talking heads from the investment banks — the institutions with most to lose. Their blindingly simple strategy was to feed the media a consistent line, that financial Armageddon is nigh without taxpayer rescue. It was a tiny step for politicians to go from recognising that only the 'experts' understand what is happening to blindly accepting their policy recommendations.
Where, then, is the evidence for all this? In fact, much of the manipulation has been played out in plain view, which, of course, is the best place to hide a secret.
As President Bush and his top officials delivered calming assurances, parallels were immediately drawn with Iraq, Hurricane Katrina and other policy disasters on Bush's watch.
The bailout was to be led by Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke, who had stood idle as the crisis unfolded. If they did not see disaster looming, where had they gained the foresight to fix it now? When track record is everything, how could they retain any shred of credibility?
Was the bailout well-founded? Surely not. The impressive roll call of critics includes major investors George Soros and Carl Icahn, more than 100 US academic economists who wrote to Congress, and Nobel economics laureate Joseph Stiglitz.
We can never know what would have happened without the bailout. Nor the consequences of a better executed strategy.
In relation to the latter, recall the mixed signals sent by Bush, Paulson and Bernanke within less than a fortnight in September as they took over Fannie Mae and Freddie Mac, but midwived the sale of Merrill Lynch to Bank of America and allowed Lehman Brothers to file for bankruptcy; then, just two days later, bailed out insurance giant American International Group, and on 19 September unveiled a rescue plan for the remaining banks.
Policy makers either did not understand what was happening or believed that markets could somehow be trusted to use the money as a hand up, not a handout. No wonder equity markets whipsawed, too.
I hope this scenario is wrong. Not just because of the waste and the encouragement that it gives to shysters, but because it feeds the scepticism that too many people feel for government, and because it may hurt the borrowing capability of creditworthy businesses and households, and destroy value for all investors.
A broader reason to hope this scenario is wrong is the possibility that it is a canary for political management of other complex global issues such as climate change, pandemics and terrorism.
The final stage of the 2007-8 sub-prime crisis was played out in public, with its main events covering a short, intense period. It is well-documented. We can easily spot the vested interests, panicked ceding of policy formulation to murky experts, potentially vast waste of monies, and general inefficiency in the process. Why should we imagine that policy is better conceived behind closed doors?
Dr Les Coleman lectures in finance at the University of Melbourne.