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Normally the NAV of MMFs is kept at one dollar. On September 17, the Reserve Primary Fund was forced to lower its share value to 97 cents because of exposure to Lehman’s commercial paper. No other MMF had broken the buck since 1994, in the aftermath of the bankruptcy of Orange County, California.

“As long as I am alive this firm will never be sold,” Fuld had told the Wall Street Journal in late 2007. “And if it is sold after I die, I will reach back from the grave and prevent it.” Now, one foot in the grave, he frantically began seeking buyers.

In 2000, about four thousand hedge funds managed $500 billion; by 2008, there were ten thousand hedge funds controlling $1.8 trillion. Investors thirsty for yield flooded into these riskier classes of assets.

Wall Street attracts narcissists like ants to honey.

When high demand meets low supply, what happens? The creation of substitutes, often good-looking but not quite the same, like Marilyn Monroe impersonators.

It was a fantastic deal–for Jamie Dimon. The Fed had left Bear no negotiating power. “Buying a house,” Dimon told Congress, “is not the same as buying a house on fire.”

“The impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained,” Bernanke calmly assured congress. “In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”

In the Eleventh District, disciplined banking roots run deep. In 1932, when the Fed started providing loans to bankrupt financial institutions, the Dallas bank warned: “Credit is exactly like morphine. Either credit or morphine used habitually leads inevitably to the gutter.”

But the day after, October 20, 1987, marked a more significant point in Wall Street history. The FOMC slashed the fed funds rate by half a percentage point to just under 7 percent.

Then the mother of all storks delivered the “Greenspan Put” with the release of this one-sentence: “The Federal Reserve, consistent with its responsibilities as the Nation’s central bank, affirmed today its readiness to serve as a source of liquidity to support the economic and financial system.”

As Pavlov was to dogs, the Fed was to market players. They would come to understand and embrace the commitment Greenspan had made by putting a floor under losses. Investors could pile into risk, confident the market now offered a built-in “put” option. (A put is a contract that allows the owner to profit if the price of an underlying security declines.