Wall Street firms are heavily exposed to the US subprime market, as illustrated by the chart. Searching for ever-higher investment returns, brokerage firms bankrolled subprime lenders with credit to fund mortgages. Some packaged and sold bonds backed by their loans and operated their own subprime lender, such as Merrill Lynch’s First Franklin. Those who have fared best in the face of subprime difficulties are those who limited their exposure – either by not becoming involved in subprime lending in a major way, or by doing a better job of hedging their positions, as with Goldman Sachs. Cleaning up the mess that subprime lending has become will likely occupy Wall Street firms until at least the early part of 2009, given the scale and extent of their exposure to the sector. One of the major lessons to take away from the subprime debacle is the critical nature of liquidity. In the worst circumstances, an illiquid broker or bank can quickly become a bankrupt one. Wall Street firms involved with the subprime saga are a long way from bankruptcy but the liquidity issue is ever present.