Crash

As of the close of marked today the DOW is down more than 500 points (4.4%) and down below 11,000.

This is of course on news that the fourth largest investment bank, Lehman Brothers just asploded, and Merrill Lynch sold itself to Bank of America. The sale of Merrill was the financial equivalent of becoming bubba's prison boyfriend. At least that way the beatings stop and you know who's going to screw you.

Goldman Sachs and Morgan Stanley should probably be feeling a bit nervous right now. They are the only two IB/Brokerage houses that are still independent.

In other news, big mortgage debt holders AIG and Washington Mutual were hammered. If you bank at WaMu, um, make sure your account is under the 100,000 FDIC insurance cap eh? Actually, same is true for Wachovia.

What we're seeing here is all that bad debt coming to the surface. This is the same problem again, just with different players. All these CDOs/SIVs/MBSs are different ways to package the same shitty loans. Everyone made these products, sold these products, and bought these products because everyone (by this I mean all the banks and especially the bankers themselves) made lots of short term money in salary, bonuses (for people) or fees (for the banks). Once the proverbial feces-fan interaction started, the first reaction has been to try and prop up some, let others fall, but still pretend that the stuff in their vault is different. But it isn't. Eventually they're all going to come due.

Picture courtesy of the Library of Congress via Flickr.

[Note: had to change the picture, noticed it was all rights reserved.]