Even if Lehman Brothers were saved last September, another financial institution would have failed and set off the same global economic crisis that has plagued international markets for the last year, the European Central Bank President told CNBC.
“Lehman was a trigger, but you could have had another trigger. Lehman could have been saved then AIG wouldn’t have been saved, and then you would have exactly the same thing,” said the banks president Jean-Claude Trichet. “Even if Lehman and AIG would have been saved then it would be a new entity that would have problems."
Lehman’s allowed failure has been a point of controversy since its collapse, with those in opposition to its demise arguing that it was unfair Lehman was not saved, while the government bailed out other financial institutions like AIG .
The government intervention with Bear Stearns in March of 2008 spurred a critical public opinion of government interventions with private companies, which strongly influenced the decision not to intervene with Lehman, Trichet said.
"After Bear Stearns, which was well done in my opinion, there had been a number of criticism which was coming from varying sensitivities, as far as I could see,” said Trichet.
Still though, a financial awakening was in order, Trichet said.
"It seems to me that we have to fully recognize that we were living in a universe in global finance that was highly unstable,” said Trichet.
Since the fall of 2008, the global markets have tiptoed away from the brink of collapse. But danger still looms and regulatory reform is necessary to ensure history does not repeat itself, cautions Trichet.
“It would be absolutely stupid to say now ‘business as usual, markets are functioning’ and so forth. They are functioning today because we are bound to take in the public sphere extraordinary decision,” said Trichet. “We are not authorized to do that again. I would say it would be very, very abnormal. We have to get things fixed.”
More From CNBC.com: