Run, Run, Run, Run, Run, Run, Run, Run.

CIT Group is the latest financial firm to be victimized by the liquidity crunch. At work, one broker asked me why I didn't see this coming three or four weeks prior. I explained that, in today's market, it is difficult to see this coming, sort of.

What happened to CIT was akin to a 1930s run on a bank. In the 1930s, depositors, fearing a bank failure would rush to withdraw their money, thereby causing a bank failure. This is similar to what happened to CIT today (and to Bear, Thornburg, Carlyle and a host of other troubled firms). CIT was unable to access the capital markets to obtain liquidity. Why? Because investors would not purchase CIT commercial paper and bonds because they were afraid to own CIT debt out of fear of possible liquidity problems. In doing so, they caused the liquidity crisis they feared.

Fears of counterparty risk and diminishing liquidity are causing much investors and counterparty panic. This panic threatens to cause major disruptions on Wall Street. Possibly the worst disruptions since the Great Depression.

Who is immune? The real question may be; Who isn't immune. Fear, real or imagined, can cause liquidity to evaporate. Counterparties will refuse to do business with brokerage firms who may have liquidity issues. The Fed's liquidity programs may not help as planned.

There is a stigma about borrowing form the Fed. Lehman, Goldman and Morgan Stanley borrowed from the Fed's new primary dealer facility to reduce the stigma of borrowing from the Fed. Time will tell if there gestures will have the desired effect.

Some financial firms do not have access to the Fed. Problems could lie with consumer and commercial finance companies and regional banks. Some finance firms, such as CIT, have bank credit facilities. CIT tapped theirs, but what happens if banks, themselves strapped for cash, cut finance companies off from capital? The possibilities are frightening.

Fear has similar effects as greed, only in the opposite direction. The main difference is that bubbles caused by greed are corrected by price declines, investors are unhappy, but life goes on. Turmoil caused by fears, real or imagined, can have devastating results.