This year’s credit squeeze is following the plot of a hundred disaster movies. Calamity at the end of act one leaves the submarine/aircraft/asset-backed lender in trouble. In act two – where the markets are today – calm ensues as the hero races to repair the damage. But time is running out. The vessel has limited air/fuel/capacity to keep lending without access to the wholesale funding markets.

Merrill Lynch’s decision to take a further $3.4bn markdown on its book of asset-backed securities is a reminder that the market is in trouble. There have been some signs of improvement: Europe’s first public sale of a new mortgage-backed bond since the summer was on Tuesday. But interbank funding rates are still above normal and ABS collateral continues to deteriorate. The longer this goes on, the greater the risk of damage to the real economy.