Economy rocked by a new type of trouble

This is the downturn that wasn't supposed to happen.

When bankers were leading the successful effort in the 1990s to build unprecedented national institutions and break down Depression-era regulatory walls, they argued the new giants would be strong and agile.

For a few years, they appeared to be right. The Asian financial meltdown of 1997 bounced off the banks. The recession of 2001 was the first in modern times that didn't involve a banking crisis.

Now, however, as the economy hovers on the edge of recession, the trouble is centered in the very giants created by the 1990s deregulation and consolidation, including Citigroup and Bank of America. These institutions, along with investment banks such as Merrill Lynch, are struggling not only with the housing collapse, but the implosion of exotic mortgage securities.

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