According to a story in the Financial Times, the Federal Reserve has asked "all big Wall Street" banks "to run a comprehensive series of stress tests unlike anything we have done before" to evaluate "how they would fare in a major liquidity shortage or sudden downturn in capital markets."

 As defaults on mortgages and consumer credit rise, a lot of phony money disappears, compelling a contraction in lending in an economy that depends on finance.  While the Financial Times suggests that this testing "could be a harbinger of a new regulatory regime if policymakers extend the Fed’s interim powers and let it take over from the Securities and Exchange Commission as the industry’s main regulator," that these tests are "unlike anything we have done before" could also suggest something more as former Clinton White House economist Nouriel Roubin "estimates the financial crisis will lead to credit losses of at least $1 trillion and most likely will be closer to $2 trillion."

 That's a lot of money, and I'm not an economist, but with federal reserve requirements, it strikes me that a lot more money than that $1-2 trillion disappears from the economy.  The Asia Times puts it this way:

As the debt securitization market collapses, banks cannot roll over their off-balance sheet liabilities by selling new securities and are forced to put the liabilities back on their own balance sheets. This puts stress on bank capital requirements. Since the volume of debt securitization is geometrically larger than bank deposits, a widespread inability to roll over short term debt securities will threaten banks with insolvency.

 But again, insolvent banks are only part of the problem.  Last year, many worried that as housing prices dropped, homeowners would no longer be able to sustain the consumer spending that has kept the economy afloat since the dot-com crash.  Now businesses will have trouble spending as well and can be expected to cut jobs before they cut profits.

 This could be a very cold winter.