366 reasons to worry

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Those trying to make sense of today’s 366-point sell-off on Wall Street would do well to read Lou Barnes’ take today.

In short, he writes that the credit crunch is every bit as bad as it was two months ago, and perhaps worse because of this: The ugly, stinking, potentially disastrous investment vehicles that caused all the worry in the first place are still sitting there, just as ugly and smelly as ever. Nobody has even poked them or turned them over to see what is under them. How bad is it? Worse than any of the big players have yet acknowledged:

‘Reported losses at financial institutions, at first thought to be overstated (‘kitchen sink’ write-offs) are not. More will come. The institutional embarrassment is a greater impediment to new credit than the numbers: The losses are formal confessions by management and directors of personal incompetence. That’ll make you risk-averse.’

Yes, you say, but what about that $80-billion fund the big banks put together this week? Won’t that help? An unfunny joke, says Barnes: ‘The best black comedy: Citi led a parade of giant banks to the Treasury, trying for official blessing to keep $400 billion in off-balance-sheet trash from being forced back on (where it belongs) or into disorderly liquidation (Eeeeek! Might find out what it’s really worth!). Why Secretary Paulson let them in the building is beyond me. He loaned them a conference room and bought sandwiches (day-old, I hope), and the bankers left without even a lipstick-on-a-pig deal among themselves.’

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Photo Credit: AP