The credit crisis turns 1

“Happy birthday, credit crisis,” says Prashant Gopal in It was a year ago today that two Bear Stearns hedge funds heavily invested in mortgage-backed securities filed for bankruptcy, and a third had its assets seized. That, and subsequent events, made holders of these overvalued securities nervous—and as it turns out, “they had reason to be.” Now, a year later, the credit crisis is—“like many 1-year-olds—indiscriminate about where it makes its messes.” In its path of destruction lie Bear Stearns, Countrywide, IndyMac, $925 billion in financial firms’ losses, and most sectors of the economy. “One hopes that by its second birthday in August 2009, the housing crisis won’t be in its terrible twos.”

Did Merrill’s fire sale signal the bottom?

“It is Wall Street legend that bottoms are made when the most optimistic give up,” says Floyd Norris in The New York Times, so maybe Merrill Lynch’s CDO house-cleaning this week marks the “bottom of despair on Wall Street.” Until recently, Merrill CEO John Thain was so optimistic about the prospects for his firm that it bordered on “cockiness”—but “he has a lot of crow to eat” now, after dumping billions worth of CDOs for 22 cents on the dollar. It’s hard to say if Merrill’s fire sale will help other banks avoid similar bloodletting, but the market’s reaction seems to back that theory. Even if the worst of the stock market is behind us, however, the “worst of the economy is almost certainly ahead.”