Preparing for worse if that's possible

The response to the G7 communique and Paulson's subsequent press conference seems to be very negative. Many commenters hoped that the G7 would move to a British style scheme of partial nationalisation of the banks. Paulson's press conference suggested he is moving ahead with that but is still looking for private capital to assist also and the G7 communique is very vague. (The authority to buy equity in the banks was not in the original rescue package put forward to congress but clearer heads prevailed and it now seems that the bailout package will look very different.

It's really not reassuring when Paul Krugman says "Paulson sounds terrified" and others comment that he is loosing all credibility. But given that he has downplayed the crisis at every turn for the last 18 months this is perhaps not surprising.

Lets hope that Morgan Stanley does survive the weekend.