A few weeks ago, investors were in masochistic mode. A string of hefty writedowns from investment banks were greeted with rising share prices, on the assumption that the worst was now out in the open. Merrill Lynch appeared to take a “kitchen sink” approach, with a massive $4.5bn writedown on collateralised debt obligations and subprime mortgages. Now it is clear that a large bathtub would have been more appropriate. Merrill on Wednesday increased the writedown to $7.9bn.

That is shocking. How could Merrill have got the scale of its exposure to losses so wrong? Was it not conservative enough the first time round, factoring in instead some sort of price recovery in these illiquid instruments? Or was it simply unaware of the true depth of its problem? Neither explanation will give any comfort to investors. Nor should either be enough to remove the spotlight that must now be shining on Stan O’Neal’s position as chief executive.