Seemingly with every passing moment, the gap between the reality of Lehman Brothers’s financial situation and the fears surrounding it widen. And the wider the gap, the more irrational the financial markets get — or the better will be the deal the eventual buyer of the investment bank will score.

Lehman’s market quandary centers on its commercial and residential real estate holdings. Part of the unknown equation about Lehman is how much are its assets worth? How many more writedowns or losses will Lehman be forced to take as a result of its value-ambiguous portfolio?

At the end of August, Lehman held $17.2 billion of residential mortgage assets, down from $32.1 billion in November 2007, and $24 billion of commercial mortgage paper, $14.9 billion less than it held last November.

Let’s first address valuation. In a conference call this morning, Tanya Azarchs, managing director of financial institutions ratings at Standard & Poor’s, said the market was coming to a firm valuation. The price on syndicated loans: $0.90 for each dollar of face value. Subprime securities: $0.22 on the dollar. Triple-A, Alt-A mortgage securities: $0.50 on the dollar. These are hard numbers. Azarchs said “prices have stabilized,” and she is among the first market participants to say so.

Furthermore, the enterprise value of Lehman is getting crushed, and we are not convinced it should be. The commercial mortgage portfolio is the avenue of particular focus for us. One of Wall Street’s leading financial services traders told us that the Lehman commercial book is performing well and that the investment bank “has taken conservative marks on everything.” “Whoever buys it will be looking really smart in two years,” he added.

We see his point. About 5% of Lehman’s commercial book is not performing currently, a manageable number. And even if you think commercial defaults are going to go nuclear, Lehman said Tuesday that it would spin off all its commercial real estate assets into an entity called REI Global. So let’s recap: Lehman cuts its exposure to residential mortgages; pricing is settling, so investors can finally call the bottom on valuation; and Lehman is ditching its commercial real estate assets, which are performing well anyway. To us, this seems like hysteria is getting the best of investors.

But hysteria matters in investing, unlike in, say, medicine. Investor fear becomes investor reality, especially when it comes to financial institutions. In the case of Lehman, it almost seems as though the die was cast long ago when it bought a shlocky subprime mortgage company called BNC Mortgage in July 2000. Eventually, bad decisions take their ounce of blood.

Victoria Fierson contributed to this blog.