Yesterday's announcements of multibillion-dollar losses at Wachovia and Washington Mutual were only the latest poundings since the credit crisis took hold a year ago. Yet Wall Street, its expectations at rock bottom, cheered the reports because they could have been worse. Shares in WaMu, which posted a $3.3 billion quarterly fall, soared 6.2%. "We are redefining bad," one risk analyst told the New York Times.
This week the CEO of Bank of America insisted that the industry was making a recovery—as proven by his bank's lost of only 41%. But cooler heads warn that the crisis has a long way to go. The problem is no longer just subprime loans and the securities they backed, but a broader economic downturn that could become a recession. "The bad news is going to get dramatically worse," warned a former bank CEO.