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The underlying problem is the derivatives market. As Lehman is liquidated, its securities must be sold to someone at some price. When that happens, we have a new, recent price for those securities.

However, a number of banks have their capital invested in such things. When the trade occurs, the banks must adjust their capital numbers - perhaps below minimum levels. Thus, there is a cascading effect.

The real excitement now is in AIG. They're looking for $75 billion after a credit downgrade. Will they survive? I certainly wouldn't buy their bonds, much less their stock.

This feeds back into the housing market. We had a robust housing market, partly due to freely available mortgage money. It is unlikely that anyone will touch new "creative" mortgage securities for quite awhile. Hence, perhaps less money for new mortgages - thus putting downward pressure on house prices. Will people keep paying the mortgage on a house that isn't worth nearly what they paid for it? Hmm.

By the way - the credit default swap (CDS) market is around $60 trillion dollars. (Yes, trillion with a "T"). It is unregulated, uncontrolled, and unreported. In essence, someone, somewhere guarantees that a debt instrument will be repaid. The lack of transparency in such a large market is problematic.