Black Box Report

The government may not want to face more market catastrophes, but if it was only that easy. In a classic bank run scenario, IndyMac could be just the beginning. According to one analyst, as many as 300 banks could fall within the next three years.

While the feds can't save everybody, they know they have to draw a line in the sand when it comes to Fannie and Freddie. But while extending hundreds of billions in credit and propping up the stock hopefully stops the bleeding, nobody thinks it cures the patient. The public is scared, confused and frustrated with a system and a marketplace that seems to be selling different truths by the week, changing rules on the fly and can't get its own act together. The feds had to rescue the twin mortgage giants, but just like everybody else in the financial sector they're infected with the sub-prime virus and really don't know just how bad they've got it.

Here's what I know. They're will be more writedowns, big ones at the biggest firms. More banks will close, and not just the mom and pop variety either. More people will be laid off and expect a lot more foreclosures.

What we don't know is how bad this will all get. If anybody knew mortgages, the thinking went, it was Fannie and Freddie. Now nobody thinks anybody really has a clue. Efforts to stabilize the market haven't worked and in an ominous sign treasury bills were being sold not bought, a sign investors aren't even running to the one sure thing they've always been able to count on.

Here's the scary part: they may be on to something. If Fannie and Freddie have to be saved at all costs, who do you think will do the saving? You got it: we the taxpayers! Don't believe the dummies who tell you debt and deficits don't matter; they do, and are already eating more and more of our budgets for just interest payments.

People are starting to get all the pieces of the puzzle - gas prices, credit crunch, housing crisis, layoffs...etc. They don't like the picture that's coming together.

I don't know the prescription for recovery, but I do know it won't be quick and painless. The faith and confidence of the public is shaken and if our leaders aren't careful the next shoe that drops will turn that fear into something worse. These are perilous times.