It's also worth pointing out that when all the institutions that had Lehman Brother CDS exposure got together to settle it, after canceling out the huge notational figure dropped to only $5.2 billion in real money changing hands.
We're comparing confident "The Sky Is Falling!" predictions, which among other things led to real legislation such as the Volker proposal or whatever, which was discussed in a recent HN thread, with the actual reality of how derivatives as used by people with a clue haven't resulted in the end of the world.
With this sort of thing, you can test propositions, but only anecdotally. We don't have multiple Earths/economies where we can set one aside as a control and play with the rules in the others.
In another comparison, which you'll find repeated in less dramatic form elsewhere (e.g. the sewer mess in a Mississippi? county), the oh so wise political class which so many insist must police this instruments of the devil show they're not exactly fit for the task.
To tie that back together with the Volker proposal, which proposes to forbid banks, companies that own banks, etc. from investing in/using/whatever these and a variety of other "dangerous" instruments somehow made an exception for those sold by Fannie Mae and Freddie Mac....
ADDED: here's one item I found discussing the details of all this: http://www.glgroup.com/News/Lehman-CDS-Settlement-%E2%80%93-...