From pubs in London to bars in New York, everyone is asking the same question: Why is this financial crisis different? The answer is simple albeit not sexy. The rot has set in.
The world's investment banks are basically houses built on pillars of money. Sometimes those pillars are cash, often bonds; these days pillars are made up of derivatives, swaps, options and other frighteningly complex instruments.
But these pillars are the strength that supports not only the bank itself, but also its debts and liabilities. What has happened is that the rot has got into the pillars and no-one noticed. If they were wooden it would be worms. The very financial instruments that make up the core of the banks are questionable.
No-one can say for certain how much these instruments are worth, if anything. No-one knows if counterparties to deals are financially secure and will be around tomorrow. The very structure became doubtful.