Is this an alarmist view of current markets and events?

I think the analysis is quite alarmist. I'm not disputing the facts, but I question about if it's results are that terrible.

Yes, banks did some pretty irresponsible stuff, and they are going to pay for it in the form of several lowering of profits and yes, losses. Some may even go out of business and get taken over by stronger banks in conjunction with a deal by the FDIC.

It will also make the banks gun shy for a while, so they tighten up their lending standards. That's what the commercial paper thing is about. A bank doesn't want to be caught with it's pants down holding another banks short term commercial paper if it should go out of biz right then and there. So the banks aren't lending to each other as they normally did.

Essentially, we wait and see while banks keep reporting the bad news, until it appears it's mostly over. Until then, there will be turmoil.

I disagree with the analysts ultimate recommendation. The dollar has already done it's declining in my view. There may be a little more ahead, but I think in the next 6 months you'll see it gaining value. Now is not the time to invest in foreign currencies and things like gold.

I think now is the time when you either park it for 6 months in a CD, or if you want a bit more risk/reward, you invest it in good companies who will weather any recession and come out well.

I think the other two answers are pretty good, but they fail to take into account the outside influences on our economy by people such as George Soros.

The article is pretty alarmist and I think it does show the fragility but, I think our banking system could rebound from it and it wouldn't be as big of a deal as the author is making it.

But...with a large outside force that is trying to devalue the dollar....paying off politicians and doing a lot of political manuvering, I'm not so sure.

I think perhaps some reading on how Soros broke the bank of England, and also really hurt other countries economies around the world, particularly Malaysia, and then compare to what is happening here, is something additional to look at.

I think that it is not only alarmist, it is downright misleading, and it shows a complete lack of understanding of what is going on. They are making a big deal of a $10 billion loss in derivatives. Well, hey, it is only $10 billion. Compared to the $950 billion in losses he quotes later, its a drop in the bucket. Most banks and brokers come close to balancing their derivatives books...in other words, $1,000 of gross value might be $500 long and $500 short, which exactly offset. That leaves the bank with no exposure, as the short positon offsets the long position. The $8 trillion drop is a drop in gross values, which really doesn't mean much, but that didn't stop him from bolding it. I guess he was more interested in a number to get your attention than giving an honest picture of what was going on. The $947 billion is one of many estimates, and the highest one I've seen (not surprisingly, given everything else he quoted...he is probably taking the highest number out there). The 1/3 number includes only public companies losses, as those are the only ones known that. We pretty much know at this point that the banks are going to acknowledge losses slowly and recapitalize. They've gotten this far without major failures...they will probably make it the rest of the way as well. Bear Stearns has its problems, but it is healthy enough that Morgan Stanley is willing to buy it out. The government is potentially on the hook for $30 billion, but again...small numbers in the scheme of things, and they probably will take a significantly smaller loss than that, as not all the debts they guaranteed will be bad. He talks about declines at a $682 billion "annual rate" and a $337 billion "annual rate" in open paper...which overstates the actual declines by a factor of four...the actual declines (dividing by four) are about $250 billion. But he is quoting only one of 25 or so categories of debt reported...and not surprisingly, the most negative category by far. It was one of the few sectors where lending fell. If you look at the total across all classes (on the same table), it rose at an annual rate of $2.3 trillion in Q3 and $1.3 trillion in Q4, for a actual total increase of $900 billion. So the drop in the one category seems to be a shift in lending from one category to another rather than an indication that lending is dropping.

The author seems more intent on proving himself right than making an objective assessment of what is going on.