Look out for Wachovia to be the next victim as a result of suicide lending practices.

Now that WaMu, the nation's largest thrift and loan with over $300 billion in assets has fallen, expect investors to focus on Wachovia. Like WaMu, Wachovia generated billions in bad loans. What makes thing bad at Wachovia is known as "Option Arm Loans". This type of loan allows the borrower to set their own payment on their mortgage. That's right!  The borrower can make a payment an interest-only payment, a negative amortized payment, or a principal and interest payment. Whatever they desire. Like I have said before, what were these brainiacs thinking?

Currently, Wachovia is suffering serious defaults and delinquencies as the company's loan portfolio blows up.

While the current disgrace, a bailout package, is being hashed-out by Congress, it is abundantly apparent the amount is insufficient in preventing a further collapse. It just isn't big enough. The $700 billion originally proposed was based on 5% of all mortgages going into ultimate foreclosure. However, forcelosure are at slightly over 2%. Add in loans in default (more than 30 days past due) and the number of bad loans has already surpassed 5%.

Published reports have estimated that forcelosures could surpass 1 in 10 loans.

The U.S. has lived with free money on credit for years and now it's time to pay the piper. Now with a credit contraction in progress started, any attempt to expand credit will fail primarily because consumers are tapped out, banks can't resist sqeezing a higher rate, or a late or over the limit fee. Combine these issues with rising unemployment and you have a perfect storm that no federal scheme is going to stop.

If people can't pay their debts, taxpayers can't do it for them.

Hold on for more of the same. Has anyone noticed, after WaMu, Bear Stearns, Lehman Brothers, AIG, Fannie Mae, Freddie Mac, and Merrill Lynch, the world hasn't collapsed yet.

It's heartburn for investors that will continue for sometime. Look for a Dow below 10,000.

We have heard the phrase "the institution is too big to fail". Well, this problem is too big too fix.