After being slightly higher in earlier trading, futures briefly fell into negative territory after 7 a.m. ET when Citigroup, the nation's largest financial firm, announced it would take a $3 billion charge for underperforming mortgage securities. It also warned it will see earnings per share fall by 60 percent in the just completed third quarter.

Swiss bank UBS (Charts) also said it will take a $3.4 billion hit in the third quarter due to problems stemming from the subprime mortgage crisis. The bank also said it expects to post a quarterly pre-tax loss of up to $690 million and cut up to 1,500 jobs by the year end.

Probably just the first to report this, you can expect most banks to suffer losses in the 3rd and 4th quarter of 2007. The impact looks like it will vary by bank, particularly for ones outside the US. Outside the US there are probably many banks that have no direct investment in US subprime loans and are only at risk for indirect problems.

In addition, NetBank (Charts), an online bank with $2.5 billion in assets, was shut down by the government Friday because of an unsustainable level of mortgage defaults. It was the largest U.S. bank failure since the savings and loan crisis more than 14 years ago.

I expect to see banks have problems and some more closures through the end of 2007. After that the remaining banks should have adjusted and gotten the worse loans off their books.