Break Out The Parachutes

BREAK OUT THE PARACHUTES....This is what the front page of the Wall Street Journal looked like Thursday night. If the Journal had had a web page 80 years ago, I have a feeling that this is what it would have looked like in October 1929. Crikey.

Here's an excerpt from the lead story:

The financial turmoil is taking on a new dimension: Banks that lent money to hedge funds and other big risk-takers are asking for some of it back.

....This is producing a negative cycle that has policy makers deeply worried. When investors rush to dump assets, prices fall and lenders feel compelled to make further demands, or "margin calls," which cause even more selling.

So far, the turbulence touched off last summer hasn't resulted in many big hedge-fund blowups. If that changes, banks and other financial firms could end up holding even more hard-to-sell securities. Already, their troubled investments, especially in securities tied to mortgages, have cost them some $140 billion in write-downs.

...."The fact that this is happening in top-quality agency paper is really worrying," said Tim Bond, a strategist at Barclays Capital in London. "It's marking an extension of this stress into the group of players who only invest in the safest mortgage-backed stuff."

I have a feeling that before long the words "safest" and "mortgage-backed" are going to completely stop appearing together in the same sentence.