Countrywide May Face Bankruptcy

Up until now, many of the names being tossed around as filing bankruptcy over the sub-prime mortgage crisis were not very well known.

That has changed rather abruptly as an analyst from Merrill Lynch suspects the biggest U.S. mortgage lender, Countrywide Financial Corp., may be facing "effective insolvency".

That's heavy.

Countrywide is HUGE!

Yes, at this point this whole thing is putting me in mind of the Dot-Com bubble detonation of the late 1990's.

Of course the Dot-Com bubble itself was similar to the Dutch Tulip Bulb crisis of several centuries ago.

Basically what happens in an open market is that occasionally certain items get "hot", prices get way overinflated and then, quite suddenly, prices of those items plunge precipitously.

Only problem is with these mortgages there were a great many other things that were backed up by those mortgages - primarily business investments.

All this leads to what's called a "liquidity crisis" - basically people start getting hesitant to lend money and the next thing you know you have a deadly sprial on your hands that can cripple an entire economy.

The Federal Reserve is generally late to the game in trying to get such a situation under control. Only an even the magnitude of 9/11 seems to cause them to get their act into gear and do one of the few things that might help at all - lower interest rates.

Yep ... we may all be in deep, deep trouble ...