French minister: Paulson made 'mistake' on Lehman

U.S. Treasury Secretary Henry Paulson made a mistake by letting investment bank Lehman Brothers fail, France's finance minister said Wednesday.

Christine Lagarde told French radio that allowing the failure of a major bank like Lehman was like letting a "domino" fall — running the risk that the entire interlocking financial system could collapse.

"What was dramatic, in a way, was Henry Paulson's decision to drop Lehman Brothers," Lagarde told RTL radio. "The bank must have had bad management and bad decisions were taken."

But she said a "much stronger signal" would have been to support the bank as a piece of the financial system — if not the bankers themselves.

"From my viewpoint for the equilibrium of the world financial system, it was a veritable mistake," Lagarde said.She hasn't ruled out efforts to create an EU-wide guarantee fund for ailing banks now swooning in the worldwide financial crisis, but said those are not yet warranted.

Lagarde also said the top priority should be to restore confidence between banks. She reiterated that EU governments will not let major financial institutions in the 27-nation bloc go bankrupt