Via Naked Capitalism, we get this mind-boggling article from the Telegraph:

A senior official at one of the Scandinavian central banks told The Daily Telegraph that Fed strategists had stepped up contacts to learn how Norway, Sweden and Finland managed their traumatic crisis from 1991 to 1993, which brought the region’s economy to its knees.

It is understood that Fed vice-chairman Don Kohn remains very concerned by the depth of the US crisis and is eyeing the Nordic approach for contingency options.

…

Norway ensured that shareholders of insolvent lenders received nothing and the senior management was entirely purged. Two of the country’s top four banks - Christiania Bank and Fokus - were seized by force majeure.

“We were determined not to get caught in the game we’ve seen with Bear Stearns where shareholders make money out of the rescue,” said one Norwegian adviser.

“The law was amended so that we could take 100% control of any bank where its equity had fallen below zero. Shareholders were left with nothing. It was very controversial,” he said.

Yes, that’s right, the n-word: the Fed is thinking about nationalizing certain failing banks. If Martin Wolf didn’t shake you awake, this news ought to. We’re talking about America here, where nationalized anything is anathema. If the Fed has contingency plans for doing just that, we know we’re in deep shit. Like in way past our waists.

What’s that? You’re not worried about what’s been going on with the economy? Surely you religiously read Martin Wolf? You know, the guy at the Financial Times, probably one of the best economic analysts writing for any publication today. Perhaps you’ve read his most recent, widely circulated column on the possible death of Anglo-Saxon-style finance?

Well if you haven’t, and you don’t really feel like working through a well structured argument, surf on over to Radio Free Europe and check out this wide-ranging interview with the man. It’s hard to excerpt any one part to give you a proper sense of scale to the problems facing us today. It’s staggering.

And as you read it, remember, Martin Wolf is hardly one of those bearish chicken little types. If he’s rattled to this severe an extent, we should all be very concerned.

Why’d the Fed rescue Bear? Felix Salmon has the answers:

Simple: Counterparty risk. Bear Stearns is a major broker-dealer; billions of dollars of obligations flow through it every day. If suddenly that flow was halted, and Bear defaulted on its obligations, there would be a huge risk to the entire financial system. As Herb Greenberg puts it, “if the hedge funds and rich folk get caught here, without a net, you imagine possible domino effect throughout the brokerage and banking industries as people start pulling out cash and heading for safer pastures, such as trust companies.” And the Fed simply can’t risk the entire banking industry imploding like that.

From the whole article, it sounds like Bear is cooked no matter what. The intervention is just to prevent creditors from being brutally de-pantsed. Stockholders are getting savaged.

Larry Summers is scared, and so should we be all:

Three months ago it was reasonable to expect that the subprime credit crisis would be a financially significant event but not one that would threaten the overall pattern of economic growth. This is still a possible outcome but no longer the preponderant probability. Even if necessary changes in policy are implemented, the odds now favour a US recession that slows growth significantly on a global basis. Without stronger policy responses than have been observed to date, moreover, there is the risk that the adverse impacts will be felt for the rest of this decade and beyond.

Laymen can only take a giant like Summers at his word when looking at the statistics. You know he’s done his homework.

Undergirding Summers’ newfound pessimism is mega-bear Nouriel Roubini, who’s been sounding the alarm since my final year at SAIS (2005). In a particularly frightening rambling essay, he says the coming recession could bring the S&P500 down as much as 28%.

It’s times like these that I’m glad to be poor and without equity.