As a erstwhile cog in the wheel of lending in the USA for over 30 years, I am only mildly surprised at the magnitude of the problems we are seeing. Happy and retired I was not aware of the scope of involvement of by Fannie Mae, Mac and Lehman but I have known from the time I first read about 115-120% mortgage loans that there would be problems.

How dumb can you be? The mortgage industry has the most stringent credit requirements in lending. Not only do they look at performance but they look carefully at debt and the ability to service the mortgage. What they forget is that after the mortgage is set their own subsidiaries are waiting in the wings to grant more credit on far less stringent terms. This effectively wrecks the debtor's ability to service and leaves the lender in the dreaded upside down position, the bane of any secured lender.

The next shoe to fall in a down economy is likely to be the billions out there in unsecured credit card debt that is granted at high interest rates with almost no regard for ability to repay.

Watch the landscape and it will tell. High profile advertising for borrowers and desperation lending is always a recipe for disaster.

Good news for the forensics people though, the phones will be ringing off the wall from whatever government agency handles this bail out, looking hopefully for assets that might hidden by the defaulted debtors. It will be S&L revisited.

Watch out for Hedge Funds in the future. This is another cottage industry that has flourished for anyone with a bit of guile and the wherewithall to rent office space. The vetting process has been less than efficient.