One of the issues with Lehman Brothers, Bear Stearns, and other major institutions when they fail was that institutions didn't know which other institutions that were trading with Lehman Brothers had just lost a lot of money because Lehman failed. That made everybody suspect and that made everybody pull back.
The point would be that if the trading in a given market is done through a central counterparty, the only thing that matters is whether that central counterparty fails. The institution can fail, and that's bad news for them, but in terms of the repo market, which is my example, because the central counterparty is still there nobody has lost any money, including the central counterparty, because it's on a collateralized basis. Now, somebody has to oversee the counterparty and make sure that this is robust. But it is doable. It's done in other markets and it should be applied.
The big question mark, which is the subject of active discussion--more relevant outside of Canada than in Canada--is what happens in the credit derivative market, which by some estimates is tens of trillions of dollars in size and is entirely dependent on bilateral relationships.