"Nothing will come of nothing," railed King Lear. And we all know what happened to him. The quote is apt when looking at supposedly safe tranches of collateralised debt obligations - an activity guaranteed to send anyone mad these days. These securities were supposedly so safe that Citigroup's $43bn drawer-full did not even merit a mention a few weeks ago. Now they are the main cause of a potential $8bn to $11bn writedown.

In CDO-land, a security that sits at the top of the capital structure does not imply its collateral is pristine. It just means that there are a lot of other securities below it, which will absorb initial losses. The danger is that this cushion is not much protection if the underlying collateral turns to dust. This risk is now so big it can take down Wall Street bosses and could wipe out a quarter's worth of earnings at one of the world's largest banks, even though the actual cash flows these structures are paying have not been affected yet.