Credit crisis spreads

Private equity companies that bought out public companies like Chrysler now need immediate cash because of the credit crisis. This does not bode well for the employees of those companies.

It seems that private equity funds (I also call them Kings of Junk) that were hit badly by recent junk bond crash are engaged in violent cost cutting at the companies they now own. That will include lay-offs, unprofitable branch closures and chopping corporations into something that could be re-sold to other hedge funds.

In a highly unusual move, the Fed changed rules last week for big banks so they could borrow billions to prop up their brokerages.

But the cracks keep getting bigger and bigger and there is no way to contain them. I am still expecting the next big shoe to drop: Commercial Real Estate as discussed in the closing remarks of Foolish Concerns, Foolish Optimism, Foolish Logic. There is another big shoe to drop too, and that shoe is jobs.

Bernanke has his hands full and there are simply too many cracks to plug. He will fail.

FYI: Blogs by industry insiders with heavy coverage on the credit crisis. All are highly recommended.

Calculated Risk

Mish’s Global Economic Trend Analysis

Naked Shorts

Also check out

Minyanville and Seeking Alpha