Well, you know that the economy sucks when lawyers are being laid off, in this case at Cadwalader, Wickersham* & Taft because the 70% decline in the commercial real estate market had created redundant personnel.
When you consider the fact that Citi will likely write-down its CDOs to the tune of $8 billion, following Merrill Lynch’s $5.7 B writedown of its CDOs, it’s not surprising nothing is moving.
Citi currently values its CDOs at 53¢ on the dollar, but Merrill sold at somewhere between 22¢ and 5.5¢ on the dollar (see this post), so this will be ugly for them, and for a lot of other financial institutions.
Some people are predicting writedowns of over $100 billion for Fannie Mae and Freddy Mac, but it could be worse if there is a rush to the exits.
I think that it’s also pretty likely that the credit crunch had a lot to do with Mervyns, department stores filing for bankruptcy, reorganization, not liquidation, as the straw that breaks the Camel’s back is typically the withdrawal of credit.
Additionally, the efforts by government institutions continue with Federal Reserve extending its loan program to Wall Street banks, “Cash for Trash,” from mid-September to January 30 and the SEC has extended its naked short-selling ban until August 17.
*Interestingly enough, I probably would not have even noticed the story, but for the fact that the name Wikersham was there. he first political story that I have any recollection about was about that ship, and the problems that developed as a result of cabotage related issues with the Jones Act, which required it to stop in Canada between American ports,
I actually rode on the ship when my family was leaving Alaska.