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Could a Debt Default Trigger a Lehman-like Stock Market Ripple?

As the Dems and GOP continue to bicker about the debt ceiling, investors are growing ever more apprehensive about what could happen in the event of default.

And we're hearing the biggest worry is that the situation could blossom into another Lehman Brothers.

According to Lawrence McDonald of DC Tripwire, what's really spooking the Street right now is the fear that the ripple from a debt default could be much wider and far reaching than anyone imagined.

"(Market pros are worried about) the dislocation that we could have because of the unknown... when Lehman failed – what shook up the markets most was not knowing who Lehman might take down,” he says in a live interview on CNBC's Fast Money.

Now, we know what you're thinking - can McDonald back-up what he's saying or is he an alarmist without any real expertise?

In fact, McDonald's has the chops; he's done all kinds of research - he's currently in conversations with sell side shops and hedge funds about the debt issue and he's also the author of of “A Colossal Failure Of Common Sense… The Inside Story Of the Collapse of Lehman Brothers”.

He's definitely done due diligence. Now, the question becomes how likely is this worst case scenario?

McDonald worries that it's more likely that may investors realize.

"Remember when we had the TARP vote, the first vote didn't pass and we lost about 800 points in the Dow," he says. "I think Washington is playing that same game of chicken. The same thing may be happening all over again."

What do you think? We want to know!

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Trader disclosure: On July 26th 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Nathan is short (AAPL) puts; Nathan owns (BAC) calls; Nathan owns S&P 500 puts; Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Finerman's Firm And Finerman Own (AAPL); Finerman's Firm owns (BAC) leaps and Finerman Owns (BAC); Finerman's Firm owns (JPM) leaps and Finerman Owns (JPM); Finerman’s Firm And Finerman own (CMI) puts; Finerman’s Firm owns (CLX); Finerman's Firm Is Short (IWM); Finerman's Firm Is Short (MDY); Finerman's Firm Is Short (SPY); Finerman's Firm Is Long S&P 500 Puts; Finerman's Firm Is Long Russell 2000 Puts; Karabell owns (AAPL); Karabell owns (GOOG); Karabell owns (GS); Terranova owns (VRTS); Terranova owns (IBM); Terranova owns (FCX) ; Terranova owns (CVI); Terranova owns (XOM); Terranova owns (DIS); Terranova owns (WFM); Terranova owns (LULU); Terranova owns (TM); Terranova owns (JWN); Terranova owns (MCD); Terranova owns (PEP); Terranova owns (MA); Terranova owns (BX); Terranova owns (GS); Terranova owns (DAR); Terranova owns (CAT); Terranova owns (AAPL); Terranova owns (F)

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