Was Lehman failure really 'best and only outcome?'

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In one sense, the Sept. 15, 2008, bankruptcy of Lehman Brothers was the day the music died for the go-go subprime housing industry.

In another sense, though, it was the best thing that could have happened to a banking sector run amok after the Federal Reserve in the 1990s abdicated its bank surveillance function to other regulators, analyst Chris Whalen argues in a post on Breitbart.

Whalen's view would be considered apostasy among the legions who believe that bailing out Lehman would have mitigated the financial crisis fallout.

The intervening time span, though, has provided evidence that the trillions dedicated to saving zombie Wall Street institutions have prolonged an economic recovery that has been the worst since the Great Depression.

(Read more: Crisis price tag $14 trillion, maybe more)

Why? Because regulators such as former New York Fed Chairman Gerald Corrigan—Whalen also includes former Fed Chairman Paul Volcker—helped promulgate the unsustainable "too big to fail" system without considering its implications.

According to Whalen:

The abdication of responsibility by federal regulators like Corrigan for the increasingly risky behavior of the large banks and dealers is the untold story of the Lehman debacle. Keep in mind that Lehman owned a federally insured depository, Lehman Brothers FSB, which was supposedly regulated by the Federal Deposit Insurance Corp once the Fed ended dealer surveillance. The SEC was likewise supposed to be the regulator of Lehman's dealer operations but was ill-equipped to act as a prudential regulator.

Regulators could have detected as early as 2005 that Lehman was unstable, as it was reporting outsized 50 percent equity returns that should have flagged it had "to be doing something wrong."

(Read more: Lehman Brothers 5 years on: Was it a mistake?)

Said Whalen:

So when you think about the lessons from the collapse of Lehman Brothers, don't forget that the actions and omission of key regulators aided and abetted this calamity. Not only did officials like Corrigan, Greenspan, and many others look the other way while Lehman was creating the circumstances for its own demise, but they did nothing to head off the crisis even when confronted by clear warning signs.

The end result, he said is a system that remains far from optimal:

The moral of the story of Lehman Brothers is that no amount of regulation can prevent acts of wanton stupidity, fraud, and greed in a free society. Expecting regulators to proactively prevent a financial crisis is at best wishful thinking. In the end, the failure and bankruptcy of Lehman Brothers was the best and only outcome for ending this latest nightmare on Wall Street.

_ By CNBC's Jeff Cox. Follow him @JeffCoxCNBCcom on Twitter.