The New York Times reports that another European bank hedge fund has been wiped out due to its investment in subprime mortgage backed securities (SMBS). Netherlands' NIBC Holdings reported that it lost at least $188 million on investments in the American mortgage market for subprime loans. It joins Paris' BNP and Düsseldorf, IKB Deutsche Industriebank, and some Australian hedge funds and banks.

With the globalization of financial markets, it's clear that nobody knows which banks, hedge funds, insurance companies, and pension funds own those SMBSs. Nor do they know how much money banks have lent these institutional investors. But if the banks decide they want their money back, and the collateral is worthless, then the institutional investors will either need to sell more liquid holdings -- e.g., stocks -- or they will file for bankruptcy.

In a rather lame move, the Wall Street Journal reports that in an effort to see if they're hiding losses, the SEC is examining the books of U.S. investment banks to see if they're marking down the value of their own subprime portfolios in the same way as they are marking down those of their clients. But what's really needed, as I suggested above, is a view of the global damage -- not just the situation in the U.S.

Clearly European banks see the solution as pumping cheap loans into its banking system. The European Central Bank in Frankfurt lent more than $130 billion overnight at a rate of 4 percent to tamp down a surge in the rates banks charge each other for very short-term loans. The ECB last injected funds in this manner on September 12, 2001. We knew then why the ECB did what it did. Today we only have a vague idea.

And it looks like Ben Bernanke is stepping into the fray as well. Bloomberg News reports that the Fed has purchased $19 billion worth of mortgage-backed securities (MBSs). Technically, the Fed accepted these MBSs as collateral on its overnight loans to banks. I would really like to know which MBSs they accepted -- those backed by subprime mortgages or others with better credit quality.

If you own stocks, this process will cost you money. The question is whether you will sell now to avoid further losses or hold on through the painful downdraft. It is hard to know what to do because of the lack of hard numbers on how big the problem is.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter.