Surely we can expect the housing market to recovery soon, right? The failures of Merrill Lynch and Lehman Brothers suggest we are not close to that occurring. The mortgage market will be even more chaotic, meaning no money for real estate.

Lehman Brothers was founded in 1850. It is a massive investment bank with fingers in financial markets across the world. On the morning of September 15, 2008, it filed for bankruptcy protection with 613 billion dollars in debt.

The essential failure of Merrill Lynch is even more troubling. Saddled with bad debt, it was thought to have a solid plan for surviving. Obviously, that was not the case. With help form the Feds, Bank of America purchased Merrill for a song at $29 a share.

Make no mistake, the failures of these two stalwarts is an amazingly bad sign. These are not some small regional banks going down the drain. This is the equivalent of Google failing and selling out to Microsoft as a last gasp gesture.

The current market is staggeringly bad. If large banking companies keep being wiped out, the liquidity for mortgages and even basic credit cards is going to disappear. Still, nobody seems to be particularly worried.

How can this be? Ben Bernanke deserves a huge amount of credit. The Fed has been taking drastic action, but with a light touch. Many banks have been taken over, but it always happens over a weekend when media attention is low.

While Bernanke has deftly kept people from panicking and rushing their banks, he can only do so much. The simple fact is mortgage securities are under massive pressures. Credit crunch does not begin to describe the problem.

The circumstances surrounding the real estate market are so bad that many larger investors will not put money into mortgages for fear of being sued by their investors. This is because mortgage securities are viewed as being so risky.

If mortgage securities are viewed poorly, the housing market is in major trouble. With no new money coming in, loans are going to be hard to get. A lack of liquidity will drive prices down and it could get very ugly indeed.

So, are we headed for the second Great Depression? With major banks failing, how can the small guys remain afloat? With no money in mortgages, how will people get cash out of their homes? In short, is this the end of the consumer America?

If we are going down, we will go kicking and screaming. The Federal Reserve is fighting with all its might. The announcement that banks from around the world will pool 70 billion dollars to help stressed institutions is huge.

Everything really comes down to Ben Bernanke and the Federal Reserve. If there is anyway to negotiate this mess, I believe he can get us through it. We may see a lot more bank failures, but it may be a health pruning.