It is spring on Wall St. With the warmer weather comes hope that the big financial crisis which seems to have engulfed everything in the world over the last three quarters is losing its steam now. In recently days John Mack of Morgan Stanley (NYSE: MS) and John Thain of Merrill Lynch (NYSE: MER) have both indicated that they see better days toward the end of the years.

Citigroup (NYSE: C) has also been able to off-load $12 billion in troubled LBO debt to guileless private equity firms including Apollo and Blackstone (NYSE: BX). The paper must be getting some of its value back.

The International Monetary Fund threw some water on expectations. Yesterday, it said that the entire cost of the present mortgage and wider credit crisis would cost banks, pension funds, hedge funds, and the related industry $945 billion. That seems like a lot of money and is certainly much more than financial companies have written off so far.

Not to be outdone on the side of pessimism, George Soros, perpetual hedge-fund wizard and long-time denizen of the Forbes 400 Rich List, says that even the IMF outlook may be to rosy. He told Bloomberg that “It will take much longer for the full effect of the decline in the housing market to be felt.”  Soros went so far has to say that he does not believe John Mack, although he did not call him an outright liar.

The FT recently pointed out that "the difference between overnight lending rates set by central banks and three-month Libor" is growing. In other words, banks are not lending money to one another. The people at the center of the system clearly believe that there is another shoe to drop, and they want to be as far away as possible.

Soros may be right. It may be a long, hot summer.

Douglas A. McIntyre

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