First quarter earnings are just around the corner and investors are hoping it can't get much worse. Wall Street is holding its collective breath.

UBS (UBS) announced today that its chairman, Mark Ospel, will step down amid $19 billion in new writedowns. According to The Wall Street Journal, the Swiss bank expects to lose $12 billion in the first quarter and has asked its board to approve an effort to raise $15 billion in capital.

In an attempt to clean up its balance sheet, UBS sold billions in risky mortgage-related assets. Yet the bank saw its book of illiquid auction-rate securities jump to around $11 billion from $5.9 billion three months ago.

Not to be outdone, American investment bank Lehman Brothers (LEH) said yesterday after the bell that it plans to issue $3 billion in preferred stock to quell solvency fears. Professor Sedacca sees more efforts to raise capital on the horizon for troubled financial institutions.

Deutsche Bank (DB) also announced more pain today in the form of a  $3.9 billion dollar hit. The Wall Street Journal reports losses stem from "leveraged loans and loan commitments, commercial real estate, and residential mortgage-backed securities (principally Alt-A)."

Calls for a bottom are rooted in hope, not fact. The U.S. housing market -- the root of the rot -- is still in free fall. Professor Mauldin explained yesterday why the bottom is nowhere in sight. Yet Lehman, UBS and Deutsche are all trading higher on hopes the worst is over. According to many, the U.S. economy won't even experience a recession.

Recessions are natural, even healthy, parts of the business cycle. The government shouldn't head them off at all costs - certainly not by micromanaging markets and directing capital to the places it sees fit. Last time I checked, that's just not capitalism.