Chicken Little’s Brethren, on the Trading Floor - New York Times

The reason that things are so bad on Wall Street come from sub-prime loans. Stein is right, the sub-prime loan market is relatively small when compared to anything else, however the problem is that the risks were not clear to investors for the derivatives of the loans. I'm talking about the slicing of these loans and repackaging of them with other debt. A lot of that stuff has been priced out, but the consequence was the ups and downs that we had on the market yesterday.

It's this repricing of this debt that has folks jittery. Why would that be? There's plenty of money out there, this debt is relatively small. As I understand it, the problem is that the packages of the debt that included subprime loans were bought with even more debt. As people call in the new debt, there's no one to sell the old debt to. That's the reason why things are shaky and that banks in Germany have to bail out one of its brethren. Mallaby's column makes a better case for what's really happening versus Stein's Pollyannaish predictions.