Christine Lagarde warned Hank Paulson to bail out Lehman Brothers

Telegraph.com.UK – Sources close to Mrs Lagarde said that she had called the US Treasury Secretary – a close personal friend – well before the ailing bank’s collapse imploring him to act, but he chose not to.

Lehman Brothers’ demise sparked the biggest shake-up on Wall Street in decades and sent shock waves around the world that triggered a massive bailout plan in Britain and Europe.

Mrs Lagarde – attributed with playing a key role in brokering a bailout deal among G7 finance ministers in Washington last weekend – dubbed Mr Paulson’s decision to let the bank go under "horrendous" as it triggered panic in markets and banks to the brink of a 1929-style financial meltdown.

In an interview with the Daily Telegraph, she warned that the world’s hedge funds could be the next institutions to be hit by the financial turmoil.

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