Friday, September 19, 2008

SAR #8263

This is what a systemic financial crisis looks like.

We're From The Government and We're Here To Help: President Bush has expressed his concern about the turmoil in financial markets and said his administration was prepared to go beyond the "extraordinary measures" already taken to strengthen and stabilize them. "The American people can be sure we will continue to act to strengthen and stabilize our financial markets and improve investor confidence returns."

Curiosity: China's CITIC Group is talking with Morgan Stanley about acquiring 49% of the firm. Elsewhere in the news, pigs have learned to fly and Hell has frozen over.

New York New York: Turns out it can happen here. Or there. Many of the top co-op apartments in Manhattan have lost a fourth of their value.

Silent Auction: Hopes of finding a buyer for Washington Mutual dimmed on Thursday as an auction for the beleaguered US bank had yet to attract any bids, according to the Financial Times. Bloomberg, on the other hand, reported that WaMu had attracted "multiple bidders".

Hint: FedEx's first-quarter profit fell 22%. Undoubtedly due to the liquidity problems at AIG.

Junkman : The Fed now allows insured banks to accept equities as collateral. It also allows the taxpayers - through the FDIC - to make up the shortages when (mirable dictu!) the equity declines in value. The Fed itself is taking riskier assets - stocks, junk bonds, subprime mortgage-backed securities, leftover pizza - in exchange for perfectly good US cash.

Peter/Paul: As I understand it, the Treasury is loaning money to the Fed. My daughter used to borrow money from me, too, whenever she ran out. I've still got the IOUs.

Fool Me Once....: The world's central banks tossed another $247 billion on the fire. That makes trillions and trillions, or so it seems. Every few months for over a year they've gathered for this ceremony. Maybe this time increasing liquidity will cure the solvency problem. How's that been working out for you?

Do As I Say... The US can no pretend to be the home of free-market capitalism. The Republican-led government has repudiated decades of preaching the virtue of the free market and the nasty evils of government regulation. Too bad Friedman's not here to explain it away.

Nest Egg: US house owner's equity is at a record low 42.5% of housing value. With over 30% of US houses mortgage-free, the 50 million houses with mortgages have a lot less than 40% equity.

RTC II: Why are Paulson and Bernanke still running around? Did they make bail?

Fourteenth Amendment? Bear Stearn's adoption was helped by $30 billion of the taxpayer's money. AIG got to borrow $85 billion. Can Lehman's sue under the equal protection clause?

Briefly: The Securities and Exchange Commission appears ready to issue a ban on short-selling. The extent of the ban and the stocks to be covered are, for the moment, unclear. This is sure to cure the problem the investment bankers and broker-dealers are having with their inadequate capitalization and failed business plans.

Precision : All this government intervention with the ordinary course of capitalism is either called 'socialism for the rich' or 'nationalization'. It is neither; it is corporate fascism. Google Mussolini.

Porn O'Graph: You can fool some of the people all of the time...

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