“As recently as a month ago,” says Justice Litle in Taipan Daily, “Erin Callan was on top of the world.”

The WSJ did a glowing piece on her rise through the ranks. Condé Nast’s Portfolio magazine dubbed her the most powerful woman on Wall Street.

If you don’t recognize the name — and don’t worry, most won’t — Erin Callan is the chief financial officer of Lehman Brothers (LEH:NYSE).

Or was the CFO, rather, because Ms. Callan holds that title no more. She was ousted this morning, along with chief operating officer Joseph Gregory, as a result of Lehman’s nearly $3 billion loss. Someone had to take the fall. She and Mr. Gregory were offered up to the volcano.

Ten days or so ago, Taipan Daily tagged Lehman Brothers as a downside bellwether. (You can read it here.) Watch LEH and watch the Philly Bank index, we said. Now they are both in the tank — and the markets are, too.

“On Wall Street, after Bear Stearns fainted, the other financial firms took smelling salts,” says Bill Bonner in The Daily Reckoning.

But some of them are beginning to look a little woozy, nevertheless. Lehman Bros. is said to be looking for $3 to $4 billion in new capital. The company has nine times as much in level 2 and level 3 assets as it has in tangible equity. And it’s not the worst. Merrill Lynch’s level 2 and level 3 assets equal 2,565% of its tangible equity.

And dear readers, be aware: “There’s another Bear Stearns out there,” say our friends over at The Motley Fool. “You may already own it. And just as with Bear Stearns, chances are you won’t see the collapse coming until it’s too late.”

Colleague Dan Amoss, over at Strategic Short Report, has pinpointed the next Bear Stearns – and warns that there is another credit crisis ready to jam the pipeline.

“Right now,” he tells us, “this company is desperately scrambling to dump more of its weak, illiquid assets…while laying off employees by the thousands…in a desperate bid to ‘fix’ its Wall Street profile, keep its ’shameful secret’ under wraps, and protect its stock.”

But that won’t work, Dan continues. “Buried deep in this firm’s mysterious ‘Level 3′ assets, where banks have regularly hid their riskiest mortgage-backed securities, this one company already has one very large multibillion-dollar real-estate-based asset that – just by itself – could be worth nearly 30% less than it was when this firm bought it.

“When this firm is forced to beef up earnings by selling this one asset, you’re already looking at billions in write-down losses right there. And that’s just where the unraveling begins.”

“Don’t buy shares of financial service companies with ‘Level 3′ assets of more than their capital,” says Martin Hutchinson in Money Morning.

That’s all the “Big Four” investment banks including Goldman Sachs, Merrill Lynch & Co. Inc. (MER), Morgan Stanley (MS) and Lehman Bros. Holdings Inc. (LEH), and most of the big commercial banks, too. Those Level 3 assets are probably worth very little in a real downturn, because there is no market for the assets and everybody else will be trying to sell them too.

There’s a hold up in the Bronx,
Brooklyn’s broken out in fights.
There’s a traffic jam in Harlem
That’s backed up to Jackson Heights.
There’s a scout troop short a child,
Khruschev’s due at Idlewild
Car 54, Where Are You?

Yes, crises abound for this modern-day Toody and Muldoon of the finance world. But it’s their own fault; former academic Ben Bernanke and lifelong government apparatchik Timothy Geithner have opened up a Pandora’s Box with the Bear Stearns bailout.

Sen. Chris Dodd (D-Conn.) recently pushed for help to re-liquefy the student loan market, but according to Bloomberg, that’s just the beginning:

Former Fed officials andother Fed-watchers say that Bernanke’s actions in saving Bear Stearns will expose the central bank to continuing pressure touse its $889 billion balance sheet to prop up companies or entire industries deemed important by politicians. The Fed satisfied Dodd’s request today, expanding the swaps to include securities backed by student debt.

Former St. Louis Fed chief William Poole cites Fannie Mae as a likely next candidate. And traders are betting on still others back in the investment-banking sector:

The cost of default protection on Merrill Lynch & Co. debt fell to 1.4 percentage point by April 30 from 3.3 percentage points on March 14, CMA Datavision’s credit-default swaps prices show. The cost of protection on Lehman Brothers Holdings Inc. securities has fallen to 1.5 percentage points from 4.5 percentage points over the same period.

No wonder Anna Schwartz, Milton Friedman’s collaborator on “A Monetary History of the United States,” calls the Bear bailout a “rogue operation” that the Fed had no business conducting. But it’s too late now. The Fed is fueling expectations of more and bigger bailouts. It can’t end well.

Financial stocks were among the big winners after Lehman Brothers Holdings Inc. and Switzerland’s UBS AG issued new stock to help bolster their balance sheets. With that upbeat news and a fresh quarter ahead of them, investors appear quite willing to make some bets that the worst of the damage from the nation’s credit struggles has been felt. Moreover, the moves buttressed the view that financial services companies are taking aggressive action to improve their capital bases and stave off the potential of a collapse similar to Bear Stearns Cos. Analysts believe there must be a recovery in bank and brokerage stocks to lead major stock indexes higher. Some of the biggest financial players had their biggest moves of the year Tuesday — Citigroup Inc. shot up 10 percent, JPMorgan Chase & Co. rose 7 percent, and Lehman surged 11 percent.

Read on at Yahoo! Finance.