The Fed chairman says that he always thought a failure of Lehman Brothers would severely damage the U.S. economy, but that the firm’s failure and bankruptcy proved inevitable.

WASHINGTON (MarketWatch) — The need to end the concept of too-big-to fail banks is the single most important lesson from the recent financial crisis, Federal Reserve Board Chairman Ben Bernanke said Thursday. Regulators now have the tools to address this issue, he said. In 30-pages of prepared remarks before the Financial Crisis Inquiry Commission, Bernanke acknowleged that the Fed could have done more prior to the crisis about capital standards and said the Fed was slow to address abuses in subprime lending. Bernanke said Fed monetary policy did not cause the housing bubble. “The evidence is more consistent with a view that the run-up in house prices primarily represented a feedback loop between optimism regarding house prices and developments in the mortgage markets,” Bernanke said. The high rate of foreign investment in the U.S. also played a role in housing boom, he said. (Corrects spelling in headline.)

When are investors going to stop getting suckered by Ben Bernanke?