By now you've heard that Lehman Brothers, the company that emerged from the depression of the 1840s, that accepted cotton as cash from America's farmers, who financed the building of our railroads and survived the Great Depression, could not survive this itty bitty "credit crunch." Try as they might, the chiefs at Lehman could not raise enough capital to save an American Institution.

But wait a minute, didn't Lehman's chief financial officer Christopher O'Meara tell us no more than a year ago that, "(their) liquidity position is stronger than ever"?

If I had a dime for every time I heard that.

Just last Feb 12th IndyMac declared they "...remain well capitalized." Then on June 26th Sen. Charles Schumer announced that IndyMac "poses significant risks to its borrowers and depositors" which led to a 1930s style, old-fashioned bank run. Two weeks later the FDIC had placed IndyMac into conservatorship.

Then on July 11th, Fannie Mae said it had "ample liquidity" and is capitalized well above minimum required levels. On September 7th, Secretary of the Treasury Hank Paulson announced that Fannie Mae and Freddie Mac were placed into conservatorship.

As I write this, S&P futures are down 3.75%, Dow futures are down 3.00% and Nasdaq futures are down 2.90%. Asian markets (Japan's and China's are closed due to holidays) are down between 3% and 6%. Tomorrow is looking like it could turn out to be the ugliest day since February 27th, 2007.

And there is breaking news: Bank of America has announced they have purchased a 50% stake in Merrill Lynch for $44 Billion, or $29/share. Not bad for shareholders. MER closed Friday just short of $17/share. It looks like their decision a month ago to write off their subprime mortgage exposure has paid off but it really is too bad that along with a 158 year-old financial institution failing, a 94 year-old financial institution was bought out in the same day. (Make no mistake - this is a buy-out no matter what color lip stick you put on it.) Dow component AIG, which saw its share price fall 31% on Friday alone, is said to be announcing a major restructuring.

Last Thursday, September 11th, Washington Mutual said, "it remains 'well capitalized' and its retail deposit balances have remained relatively stable." Wait a minute, this sounds like a repeat of a bad movie. WaMu is underperforming every stock on the S&P 500 except Lehman. Remember, Washington Mutual is 7.5 times as large as the biggest bank that has ever failed in the US. (1)

Many people believe that even if their bank fails, their funds are safe because the FDIC insures them. But what the folks don't know is that the FDIC has $52 Billion to protect $4.2 Trillion in deposits. You are insured only if there is not a banking crisis. But wait! The FDIC can just sell Treasuries, right? To whom?

Those who are worried about this stupid election should realize there are more important things to be concerned about. The next President is not going to be able to do a single thing to stop the carnage. Even if Obama wins and the Democrats win a supermajority in the Senate, there will still be nothing they can possibly do to prevent a complete meltdown in the financial markets. I'm sure you've noticed that I couldn't help involving myself in the discussion of the forthcoming election, but the most important thing to me is the solvency of this country and I feel about as helpless as I've ever felt in my life.

Here is an interesting read - there is bashing for everyone and it puts things into perspective.

(1) September 2008 issue, Elliot Wave Theorist, Robert Prechter