The U.S. Federal Reserve, the European Central Bank, the Bank of Japan, the Bank of England, the Bank of Canada and the Swiss National Bank, et all, practically air-dropped hundreds of billions of dollars, spreading them all over the face of the earth, in a desperate attempt to maintain liquidity yesterday. Where did they get these dollars from? Warren Buffett, of course. Meanwhile, president Bush took drastic measures: he canceled a trip – no, really – to focus on masterminding a fresh economic plan, which hopefully, will lead to happy endings (eh, sort of happy?) for Wachovia and/or Washington Mutual. More on the latest machinations, ahem, maneuverings being employed in this serious new phase of the credit crunch.

The financial crisis that began 13 months ago has entered a new, far more serious phase.

Lingering hopes that the damage could be contained to a handful of financial institutions that made bad bets on mortgages have evaporated. New fault lines are emerging beyond the original problem -- troubled subprime mortgages -- in areas like credit-default swaps, the credit insurance contracts sold by American International Group Inc. and others. There's also a growing sense of wariness about the health of trading partners.

Traders on the floor of the New York Stock Exchange Wednesday. Expectations for a quick end to the crisis are fading fast.

The consequences for companies and chief executives who tarry -- hoping for better times in which to raise capital, sell assets or acknowledge losses -- are now clear and brutal, as falling share prices and fearful lenders send troubled companies into ever-deeper holes. This weekend, such a realization led John Thain to sell the century-old Merrill Lynch & Co. to Bank of America Corp. Each episode seems to bring government intervention that is more extensive and expensive than the previous one, and carries greater risk of unintended consequences.

Expectations for a quick end to the crisis are fading fast. "I think it's going to last a lot longer than perhaps we would have anticipated," Anne Mulcahy, chief executive of Xerox Corp., said Wednesday.

"This has been the worst financial crisis since the Great Depression. There is no question about it," said Mark Gertler, a New York University economist who worked with fellow academic Ben Bernanke, now the Federal Reserve chairman, to explain how financial turmoil can infect the overall economy. "But at the same time we have the policy mechanisms in place fighting it, which is something we didn't have during the Great Depression."

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