The process is complicated by a variety of factors. In any bankruptcy, the sheer number of contracts that must be dealt with can be large. Lehman Brothers, it is understood, had about 2 million contracts open. There are likely to be cases of incomplete documentation and errors that will need to be resolved. Operational risks and problems of logistics abound.

The bankruptcy proceedings inevitably accelerate the need to deal with difficult to value and illiquid assets. Action taken by the trustees and administrators in the best interest of creditors can adversely affect the overall market.

Bankruptcy law is jurisdiction specific and different sets of trustees and administrators will grapple with how to best manage the assets of a specific legal entity for the advantage of its creditors. In the case of Lehman Brothers, there are already disputes about transfers (totaling $8 billion) made between the English entity and the US companies. There may also be differences in approach in dealing with the assets. The US trustee in bankruptcy indicated that "time was of essence" in dealing with the assets. In contrast, the UK administrator anticipated a long, drawn-out affair. All this creates uncertainty about the impact on creditors and the market.

Assets held in a fiduciary capacity can become entangled in the process. Where Lehman Brothers acted as prime broker, hedge funds and other asset managers now face a cumbersome process and potentially lengthy delays in recovering investments held by Lehman. This affected around $45 billion in assets and $20 billion in short positions. The legal owners now are unable to deal with their assets but may face margin calls if the value of the positions deteriorates.

The true owners of these assets also become exposed to risk of losses where their assets (pledged to cover loans) have been re-lent by Lehman to finance itself (a process known as "re-hypothecation"). This spreads the problem to hedge funds and asset mangers with no ostensible exposure to the bankruptcy.

These complex networks and links tie to together all participants in modern financial markets. The chains of risk spread problems from distressed financial institutions to weak institutions ultimately affecting even strong entities, seemingly remote from the problem. Assume Bank A, a sound financial institution, has large hedges with Bank B, another sound financial institution. Where a counterparty to Bank B encounters difficulties, the resulting losses may imperil Bank B that in turn will affect Bank A.

The risk spreads through direct losses, calls on liquidity, the ability to fund or the uncertainty created that ultimately brings the ability to deal with confidence and security in financial instruments to a halt. Contagion resembles nothing so much as a hungry wolf pack that systematically hunts down weakened prey animals within a herd one by one.

Understanding of the detailed connections, whilst unglamorous, is increasingly the key to anticipating the evolution of the crisis and preventing exposure to events. It is also where long-term reform efforts of the financial system should be directed.

John W. Gardner once observed:

"The society which scorns excellence in plumbing as a humble activity and tolerates shoddiness in philosophy because it is an exalted activity will have neither good plumbing nor good philosophy: neither its pipes nor its theories will hold water."

Shoddy monetary philosophies caused the financial crisis. Now inadequate plumbing of the global financial system is exacerbating its risks.