The financial markets are in turmoil. Biggest names in the Investment banking are falling like pack of cards. This is happening in a country which is the torch bearer of Economic reforms and liberalization. We have reached a point where now it is being discussed that whether we should have liberal/free economic reform or conservative economic reform .Lehman Brothers, AIG, Merrilynch are facing the liquidity crisis because of the lending to the Subprime borrowers, who did not have the credibility and credentials to borrow funds from the bankers for taking a housing property , but were given loans because of the boom in the real estate market in USA and because Banks were getting higher interest from these subprime borrowers. The interest rates were lower so the bankers and the borrowers both could take advantage of the property boom. The concept of security margin was also compromised out of enthusiasm and to offer better terms to the borrower. This situation was similar to a banker who raises high cost funds because of credibility crisis and in the process lends on higher interest rates and thus can attract only subprime borrowers. Vulnerability of this category of bankers would be high because his borrowers would not be able to compete with his competitors. The balance sheet of these bankers who gave money to subprime borrowers was very attractive because the profits were high because of higher interest rates charged from the subprime borrower and the money was coming back as the property prices were going up and borrowers were paying back and also making money in the process. Did the risk assessment system collapsed? Did the country with best forecasters and planners could not anticipate that cycle can also reverse and the property prices can also come down?