The subprime storm hitting Britain

The Northern Rock run on the bank announced to the world that credit within the banking industry was collapsing. The easy money, high flying days of wrapping up lousy subprime with other equities and selling them amongst themselves came crashing down leaving the banks with billions of the so-called SIVs that saw their market dry up practically overnight. It was all fun and games until someone actually realized that SIVs had about as much value as dotcom stock in 2002, probably even less. The bad news in banking continues.

The embattled UK banking sector is likely to be dealt another blow this week when HSBC reveals more writedowns from its American sub-prime business.

Shares in financial stocks plummeted last week with Barclays shedding around 11 per cent of its value amid frenzied rumours of an imminent £10bn writedown, strongly denied by the group. The other big loser was Royal Bank of Scotland, which lost 16 per cent of its worth in the past five days as fear of greater losses intensified.

Any sensible Congress would step back and take a look at whether or not such massive, intertwined banks are really serving the interest of consumers. I can see how these beasts benefit deal-makers and executive boards who want bigger bonuses though it's never been clear to me why a Bank of America (for example) would even care about an individual bank account for someone in the middle class. It's almost a hassle to the bank to bother with such small amounts and they seem to punish small account owners with high charges. Then again, how else are they going to afford CEO exit packages worth tens of millions of dollars?

So here it is, unraveling right in front of us and no matter how many rate cuts the banks make, Humpty-Dumpty won't be put back together again. The "experts" made a mess and nobody in power anywhere - the US or Europe - did a damned thing to stop it. Will the Democrats bother to revisit the structure of banks and provide oversight? Considering their recent string of inactions, we should expect it but let's not count on it. It might help out the middle class too much and we know appealing to the middle class is such dangerous territory. They only vote and can win or lose an election.