This was one of the worst weeks for banks and the market that I've ever seen. First-quarter earnings were terrible, and few people are optimistic about next quarter. It looks as though the credit crisis still has a long way to go. Oil is more than $140 a barrel, and parts of the market are reaching new lows. Either this is the low point, or we should prepare to endure a crisis of greater magnitude than we expected. Here's what's going on.

It's getting harder to find takers

Investors are getting a little finicky about throwing additional billions at subprime-infested banks. While capital-raising efforts appear to be continuing, big banks are facing increasing difficulty finding willing investors, who are losing money on past offerings and are far less eager to continue throwing good money after bad. To give banks more access to more capital, the Federal Reserve is thinking about easing restrictions on private-equity firms in regard to their investments in banks. Large investments in banks from private-equity firms typically result in accompanying regulatory scrutiny, which private-equity firms hate. So the Fed has hinted that it's willing to find ways around some of the restrictions.

Why should big banks have all the fun?

Small banks are facing a growing problem. A common lending practice allows real estate developers to delay paying interest on construction loans, and there's a fear that the practice could be masking huge problems as the construction industry hits the skids, not to mention huge losses for small banks that could blow up down the road. Analysts have warned that as many as 150 small banks could fail in the next few years.

Subprime pink slips

Citigroup (NYSE:C) will be laying off an estimated 6,500 employees, and Bank of America (NYSE:BAC) will be letting 7,500 people go. The Citigroup layoffs are the result of fallout from past and future writedowns, while B of A says its layoffs stem from overlap in the Countywide (NYSE:CFC) acquisition. The credit crisis began with greedy executives trying to enrich themselves, and it winds up with family breadwinners being told to hit the road.

Lawyers to the rescue

American Express (NYSE:AXP) reached a settlement with MasterCard (NYSE:MA) on Wednesday for up to $1.8 billion in one of the largest antitrust suits ever. The lawsuit alleged that MasterCard had violated antitrust laws by prohibiting its member banks from offering rival cards. AmEx sought damages for lost business. Last year, AmEx had agreed to a $2.25 billion settlement from Visa (NYSE:V) in a similar suit. I guess that's one way to make money in a tough environment: Use the lawyers. If you can't beat 'em, sue 'em.

Next week begins the second-quarter earnings season. The earnings will give us insight into the extent of the current crisis and an idea of the market's likely direction. It should be an enlightening time.

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