I am writing this in Washington at 3.33 am GMT. There's been a dramatic day on Wall Street and it's not even open (actually they had to open trading this afternoon to clear the decks for tomorrow's potential meltdown). Here's what we know so far:

1. The US government has refused to put money into bailing out Lehman Brothers; Barclays Capital have pulled out of the rescue attempt, which has been orchestrated by the Treasury, the Fed and the SEC but so far failed. Lehman is set to file for bankruptcy as early as, er, around about now.

2. In a moment of contagion the massive insurer AIG, itself facing untold bad debts, is looking at selloffs or breakups, racing to save itself from collapse.

3. Bank of America just bought Merrill Lynch. For fifty billon dollars. Kersplat. Just like that.

I myself have been at the centre of the action all day: not in DC, not in Wall Street, but in the blighted inner city of Detroit. Here there are foreclosed properties, torched properties - ranging from 30k in value to 600k - and the 600k ones look like art deco mansions that would go for several million in London. This is the real epicentre of the earthquake that has just hit Wall Street: the bad lending on a massive scale that forced debt down the throats of low income people like foie down the throat of a gras.

Now, instead of writing off, oh, just a few billion here or there two major companies have had to write themselves off in their entirety. Lehman will go bust, effectively; Merrill is selling itself at half its value; AIG's predicament is right now too opaque to predict.

So what's caused this Sunday afternoon throat slitting?

First, the insistence of the US government that it would not put taxpayers money into the bailout as it did with Bear Stearns. It has just, as I am writing, issued a decree that the Fed can take all kinds of collateral against short term loans (maybe some of the Piccassos on the top floor offices of these banks, certainly their near worthless paper); but it will not bail them out.

This is a signal moment. It signalled to the banks in the worst trouble that they had no chance of being saved by the American taxpayer so instead of just one going under, three are going at once.

But don't take this at face value. It looks to me, reading the reports which are all sourced from "those close to the situation" that other banks took umbrage at the prospect of Barclays or BoA taking over Lehman at rock bottom prices and walked away. On Newsnight last week I said:

"If there is a state bailout of one of these banks then the whole blessed lifestyle of the investment bankers will have to change. The high rewards, supposedly for high risk, will have to be reined in if it turns out the taxpayer is the ultimate risk taker. The whole regulation of investment banking will have to change"

Now I do not know all these gentlemen personally, but I suspect that, given that choice, they would rather see investment bank regulation stay as it has been, asleep at the wheel during the entire Bush administration and for much of the Clinton years, allowing vast institutions to lend so profligately that they are TODAY brought down