As Evergrande missed its bond coupon yesterday and came very close to the precipice of default, the media was full of contrasts and analogies to the Lehman Brothers crisis of 2008. It occurred to me, and this is where my math magic served me so well. in twenty years of investing in hedge funds, which Lehman deposited almost exactly thirteen years ago. Thirteen years! I couldn’t help but wonder: do today’s traders have any idea what the Lehman benchmark really is?

Let me enlighten you, young reader, at the risk of aging myself but with the reward perhaps of taking you as a Twitter subscriber. Because I was there in 2008, sweating as a portfolio manager, and I lived to tell the story in my book, Damsel in distress, as following.

We found ourselves in a sticky situation of underestimating and undervaluing the risk, and we were content to carry on our business until it was no longer possible to ignore it. I remember the exact day that happened to me. It was Sunday, September 14, 2008. Canyon senior executives had been invited to a beautiful party for the daughter of one of the partners. The event took place on a sprawling beachfront property in Malibu owned by Oracle’s Larry Ellison

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, which has since turned it into an upscale business development anchored by a Nobu restaurant (let me abuse my authoring power here to complain about never being able to get a reservation). It was a perfect day and they had set up, as they do, several dance floors and bars, artists, dancers, white leather furniture, ice sculptures and a splendid buffet. Hundreds of guests in disguise with their spouses and children were determined to have a good time. Except the news never stops. Financial stories come before and after market hours, including Sundays. No matter what day or time, a market for something is open somewhere: Asia, Europe, currency exchange, futures. Before the party was over, a menacing headline hit the screens of our Blackberries: Lehman Brothers to File Messy Bankruptcy Monday Morning. Bankruptcy is usually a well-planned process that a business can — no, is. expected at —Survive by optimizing its assets and reducing its debt under the protection of the court. “Disorderly” bankruptcy is rare and extreme; it’s financial chaos. George Soros later described it in rigorous medical terms. “Letting Lehman fail,” he said, caused “a cardiac arrest in the financial system.” I wondered if the party organizers had planned defibrillators. I marveled to see the ice sculpture melt and disintegrate under the hot afternoon sun. That was exactly what the market would do on Monday. Lehman was the liquidity provider for many funds and countless companies, a vital part of the Wall Street maze in which all the players were hopelessly intertwined. Like all hedge funds, we used Lehman as a counterparty or business partner. We weren’t just sitting on pending trades where we sold them stocks, bonds, and loans, but also outstanding contracts, credit and interest rate swaps, warehousing lines, etc. So when Lehman’s stock began to fall from $ 65 per share at the start of 2008 to $ 12 in July, and rumors of possible insolvency were validated by even a summary cash flow analysis, he became clear that left on her own, Lehman would collapse. We didn’t have to wait and find out if a white knight would come to the rescue, everyone was on deck. A colleague redirected our things throughout July and August, diligently untangling the strings that connected us to Lehman, so that when they dropped off we had virtually no exposure. But he pointed out that given the speed at which one investment bank after another could melt into bankruptcy – first Bear Stearns, then Lehman, then Morgan Stanley

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, Merrill Lynch and Goldman Sachs

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– he would run out of possible rewards before Christmas. Yet in early September, with Lehman’s shares still hovering around $ 10 a share, market participants strongly expected the government to step in and stage a hasty merger between Lehman and a healthier financial institution, with an orderly fulfillment of its obligations to follow. I recalled Long-Term Capital in 1998, the hedge fund that was forced into a sale by the Fed to avoid a frantic tangle of billions of borrowing and lending intertwined around the world. This time it was different. Put simply, government officials and Wall Street bankers have run out of time or goodwill. The mere fact that Lehman could fail – was allowed to fail – meant that all bank could go bankrupt. There was no longer a safe haven in investment banks or commercial banks. The panic spread throughout the financial market, even among institutions and investments without any interconnection with Lehman. The cornerstone of our financial system is that banks lend generously and cheaply to each other and to financial players around the world. When the ability to move capital suddenly and completely dried up, a liquidity crisis of such magnitude and depth ensued that it brought the economy to a complete standstill. No more money flowing through the veins of the world’s financial system – an economic heart attack.

It seems to me that the Chinese government has both the will and the time to avoid financial chaos. The will, because real estate and tangential industries represent up to 30% of the country’s GDP. The weather, not only because of the Garcia Marquez quality of the Evergrande column, but also because of the broad authority of the government. Already, it appears the Chinese housing regulator has taken control of the company’s bank accounts and is directing its revenue.

The question, then, is to what extent the stopping of Evergrande’s payments will cause a tightening of liquidity among its creditors? Naturally, many American and European banks were quick to reassure investors that, in their store, Evergrande never was. Large, that is. But would anyone expect highly exposed players to come out publicly? The size and mix of this pool is critical and will only be revealed when needed. Because for financial players, a big default can become a game of Jenga. Thirteen years ago, after Lehman’s piece was taken away, it all fell apart.