NEVER in the history of Wall Street have so many who are so senior fallen so fast.

And its no wonder. Citigroup, Merrill Lynch, Morgan Stanley and UBS have all lost billions of dollars as the crisis that began in the subprime mortgage market has ripped through the financial markets. There is enough finger-pointing at most major banks to cause carpal tunnel syndrome.

This year the leaders of some of the worlds most respected financial institutions Д leaders who are paid first and foremost to manage risk Д have been caught either unaware or uninformed about giant risks their companies took. Their financial engineers concocted securities so complex that even the brainiacs cannot figure out what those investments are worth. And the few banks that got it right, like Goldman Sachs, now face a sobering question: Will they be so agile next time?

The landscape on Wall Street is already changing drastically. Firms once known for their savvy risk managers, like Bear Stearns, or for their conservative stockbrokers, like Merrill Lynch, have been crippled by the credit squeeze. Meantime, other firms that have run into trouble in the past, such as Credit Suisse, have emerged relatively unscathed and are now angling for clients and market share.

The credit bubble that is now bursting, like the dot-com implosion before it, was fueled by the fantasy of easy money. Everyone knew the music would stop, but as Charles Prince, the former Citigroup chief executive, famously said, until it stopped, the bank would keep dancing. Any smart trader knows that challenging the conventional wisdom is often a sure bet. Here are 10 bits of well-worn Wall Street defenses that many must wish they had questioned this year.

High Pay Means Low Risks

Wall Street chief executives are paid princely sums to manage risks. But not only did these executives pile into tricky, hard-to-value assets, they also seemed incapable of keeping track of their falling value. And those ranks are packed with the best and brightest.

As one chief executive after another was shown the door, it began to feel like a Wall Street version of “And Then There Were None.” The scramble to replace top executives at Citigroup, Merrill Lynch and UBS laid bare the dearth of talent on the Street. Many rising stars have left big Wall Street banks to join hedge funds and private equity firms. Power-hungry chiefs failed to set up solid succession plans.

Morgan Stanley had at least one good reason to leave John J. Mack in place after it reported its first loss ever this week. If the board had sacked him, it would have to hunt for a new leader, and the pickings are getting slimmer.

Spreading Risk Is Good

This makes sense. If big banks load up on risky assets, they cannot make as many loans, which is bad for the economy (witness what is happening today).

But the banks no longer hold the loans they make. Instead, they package them into securities and spread the risk just about everywhere. No one knows who is exposed to subprime home loans, for example. Losses from such investments have turned up in towns in the Arctic Circle, public schools in Florida and big banks in Germany, among other places. What is more, the banks spread the risk but ended up with it anyway, which is why Wall Street has taken more than $40 billion in losses on mortgage-related investments.

Your Board Will Protect You

Unless you are E. Stanley ONeal and you rack up $5 billion, I mean $8 billion, I mean $12 billion, in losses. At Merrill, ONeal announced huge write-downs Д and then kept revising them higher. No one has figured out why the Street did not take bigger hits last February, when the floor fell out of the subprime mortgage market. Virginia Reynolds Parker, head of Parker Global Strategies, called it the year of slow confessions. That may be too kind.

Computer Models Will Save Us

Unless they dont. Despite being packed with Ph.D.s from around the globe, the Street forgot that algorithm-filled computers could not predict everything. So-called Black Swan events happen more than you think. And in 2007, such completely unexpected events occurred in February, August and November.

Buyouts Will Backfire

Not yet, anyway. For much of 2007, everyone fretted that reckless loans used to finance buyouts would break Wall Street. Instead, the real danger turned out to be complex structured finance investments linked to mortgages.

(12-17) 12:33 PST NEW YORK, (AP) —

Treasury prices rallied Monday, as investors sought the safest available assets to stabilize portfolios ahead of a year-end that is likely to be turbulent for financial markets.

Late December is always a critical time for the credit markets. Banks need to straighten out their balance sheets and keep money flowing to consumers as they make their holiday purchases. This year the usual seasonal pressures are greatly compounded by questions about whether extraordinary efforts by the Federal Reserve and four other central banks to keep the markets liquid will succeed.

The extent to which souring subprime mortgages will harm the rest of the economy is still not known, too. And investors overall are being cautious about stocks, which Monday were trading lower in the U.S. and on many global exchanges.

All these factors have made for exceptionally robust demand for Treasurys in recent weeks. Analysts said the trend should continue throughout the remainder of the year.

“The year-end pressure in the market is to buy Treasurys,” said Tom di Galoma, head of Treasurys trading at Jefferies & Co. “You don’t want to sell Treasurys now. There are more accounts looking for Treasurys than not.”

The benchmark 10-year Treasury note increased 10/32 to 100 14/32 with a yield of 4.19 percent, down from 4.24 percent late Friday.

The 30-year long bond gained 17/32 to 106 with a yield of 4.62 percent, down from 4.66 percent late in the prior session.

The 2-year note rose 5/32 to 99 25/32 with a yield of 3.24 percent, down from 3.32 percent late Friday.

The Fed Monday offered $20 billion in 28-day credit to commercial banks. Auction results will be announced Wednesday morning by the Fed. The program is intended to encourage commercial banks, which lately have been hoarding cash, to lend more freely to businesses and consumers. The banks appear to have been holding onto their cash in case they have to take more writedowns for bad debt.

News from Australia has the credit market concerned that the U.S. commercial real estate sector will be hit by fallout from the subprime crisis.

Overnight in Sydney, securities of Australian property trusts Centro Properties Group and associate Centro Retail Trust crashed 76 percent after the operator of U.S. malls cut its earnings forecasts because of increased debt financing costs linked to the U.S. subprime mortgage crisis.

The property company previously thought it could obtain attractive debt terms in the U.S. commercial mortgage-backed securities market, but borrowing costs have surged after the spike in defaults on risky mortgages. Worries about being struck with bad debt have caused lenders to demand bigger premiums for funds and sometimes to refuse to make debt deals.

“We never expected, nor could we reasonably anticipate, that the sources of funding that had been historically available to us and many similar companies would shut for business,” Chief Executive Andrew Scott told reporters in a conference call.

New data from the Treasury Department showed a rebound in foreign demand for U.S. assets in October, following weakness in September and August. Foreign investors avoided U.S. assets late last summer as bad news first surfaced about the U.S. subprime problem. But foreigners bought $97.8 billion in U.S. assets in October, after a $32.8 billion decline in September.

“The big rebound suggests the declines in August and September were a function of the jump in credit fears and the flight out of U.S. assets,” said Action Economics.

Demand for Treasurys was reinforced by new data from the New York Fed showing that growth in the New York region’s factories slowed in December. The Empire State index this month fell to 10.3, the lowest level since May, from 27.4 in November.

Separately, the National Association of Home Builders said that mortgage market problems and excess inventory issues kept builder confidence at a low level in December for the third month in a row. The organization’s housing market index held even at 19, the same result registered in November and October and the lowest reading since the series began in January 1985.

Slightly more than 10 years, or more precisely 3,685 days, since the road crash that killed her, the inquest into the death of Diana, Princess of Wales and her companion Dodi Fayed finally opened yesterday in a rather nondescript courtroom off an obscure corridor high up towards the back of the high court in London.

In court 73 over the next six months the well-rehearsed facts of the crash in the Pont l’Alma tunnel in Paris on the night of August 31 1997 will once again be picked over in the hope of reaching what Lord Justice Scott Baker, the high court judge who has taken on the role of acting deputy coroner for west London for the duration, described as closure.

He is the fourth coroner to have been appointed to the case but the first to have got as far as launching the inquest in front of a jury.

In his initial charge to the 11 jurors - six women, five men, four from ethnic minorities - sworn in yesterday morning, he said: “You will be in the public eye as no inquest jury has ever been before. We all will be. But you must not let that deter you from approaching the facts dispassionately, disregarding anything you hear, or have heard, outside this courtroom. There is no reason why the task should overawe you.”

He can hope. By that time the opening joust had already taken place outside the court in the Strand, with the orchestrated arrival of Mohamed Al Fayed, Dodi’s still grieving father.

He told the waiting thicket of cameramen: “I am hoping for justice. I am a father who lost his son. I have been fighting for 10 years. At last I want to have justice.”

And the owner of Harrods, whose deep pockets have fuelled the labyrinthine legal process, first in France and now in England, for good measure repeated his unwavering assertion: “I’m certain of what happened. I know they have been murdered. At last we are going to have an inquest for ordinary people. I hope it will bring the decision which I believe, that my son and Diana were murdered. I am hoping to God to find the murderer or the gangster that took the life of two innocent people. I will not rest until that’s done.”

Inside the court Mr Fayed, flanked by loyal employees, took up his place in the front row of the gallery. Dressed in a dark blue double-breasted suit and a black open-necked shirt, he sat impassively, hands crossed on his lap, gazing at the serried ranks of lawyers in front of him. Once he took a surreptitious swig from a silver vacuum flask, in defiance of court rules.

Three of the barristers are his, led by Michael Mansfield QC, grey streaks highlighting his flamboyant hair. None of the lawyers is wearing wigs or gowns. Three further barristers, led by Ian Burnett QC, represent the counsel for the inquest. Two barristers represent the Ritz hotel in Paris, two more are for the family of the French chauffeur, Henri Paul, three represent the Metropolitan police, and two the security service and the Foreign Office. Jamie Lowther-Pinkerton, private secretary to princes William and Harry, will look out for their interests, and Diana’s sister, Lady Sarah McCorquodale, will defend the princess’s estate.

Even though not all were present, the room, little bigger than a tennis court, was already crowded with nearly 30 lawyers and their clerks and at least 41 computers, laptops and screens yesterday. The cost of the investigation and inquest is expected to top 10m.

Only the bookshelves lining the walls - and most of the public gallery seats - were empty. Just a handful of Diana loyalists had turned up, the drabness of their clothes a poignant contrast with the sleek, besuited lawyers before them. One man had painted the words Diana At Last across his face with blue crayon. Outside the court authorities had arranged a marquee in the courtyard as overspill seating for spectators, but none turned up all morning and the rows of seats remained empty.

Lord Justice Baker’s opening charge to the jury, which took up the rest of the day, had all the ritual of a much-told ancient saga. A “Mercedes motor car” in which the princess was being driven had crashed into the 13th concrete pillar of the underpass. Her companion on that tragic night had been Emad El Din Mohamed Abdel Moneim Fayed, whom he would refer to thereafter as Dodi.

“Most, if not all, of you will remember where you were when you heard about the subsequent death of the Princess of Wales. None of you for a moment would have thought that after 10 years you might be on the jury, investigating the events relating to the tragedy. But you are,” he intoned, as if to say him too.

He told them: “This is a subject upon which most members of the British public and many overseas appear to have a view, often based on no evidence at all, or at best only part of the picture. Much has been written or broadcast, often showing a disregard of the facts.”

As he spoke, the coroner’s words appeared in transcript on a screen above the court, like a teleprinter giving the Saturday football scores. The foreign words appeared mangled phonetically: Bastille became Bas eel, Orly transmogrified into Orally airport, Giovanni Versace appeared as January Verse Chi and, best of all, the paparazzi turned into pap rats.

The coroner, surely with an eye to Mr Fayed’s conspiracy theories, told the jury their central function was to “allay public concerns and dispel groundless suspicion and speculation if, in truth, there is nothing to it”.

He added: “We all need to keep our eye on the ball. You do not have to unravel every issue that emerges, or to solve every sub-plot. No jury is ever asked to do that and it would be a quite impossible task … I hope everyone will remember that no one is on trial in this court and that this is an inquiry to establish what happened and why, and not to attribute blame.”

Lord Justice Baker seemed inclined to rule out some conspiracy theories immediately, pointing out that a photograph of Diana taken on holiday that summer and allegedly showing her pregnant had actually been taken the day before Dodi arrived. Of the crash itself he told the jury: “On the face of it you might think that the circumstances of what happened point to the collision having been a tragic accident, in that nobody intended that Diana or anybody else should die … and that the cause was driver error.”

Outside the court, Michael Cole, Mr Fayed’s spokesman, said: “He was surprised at the tone and contents of the opening statement … at an early stage, highly contentious and disputed material was introduced by the coroner when this should be presented to the jury in due course. Mr Fayed fears that the opening statement could present an appearance of bias.”

Next week the jury goes to Paris to view the accident site. Lord Justice Baker hopes the inquest will be over by April.