O.T.     That nearly 500 carat diamond:

It looks so nice in its natural state. It would be a shame to cut it up.


posted by Quiddity at 9/22/2008 12:33:00 PM

Yes!

Just heard Hannity blame the entire financial mess on the Democrats. He said former Fannie Mae honchos Raines and Johnson were Obama's financial advisors - which is false. And the McCain's Fannie reform bill was stopped in 2005 by the Democrats (who were in the minority). But best of all was the list of people responsible. Schumer, Clinton, and ... Carter!

That's because the CRA (Community Reinvestment Act) was passed in 1977.

Somehow I always suspected that Jimmy Carter was the evil genius behind today's problems.


posted by Quiddity at 9/22/2008 12:28:00 PM

Strange times:

I find myself in the odd position of supporting those paleo-conservative Republicans who are opposed to the Paulson Plan, and hope that they succeed in stopping it (by filibuster or other means).


posted by Quiddity at 9/22/2008 09:25:00 AM

F*ck this:

NYSE Expands Short Selling Ban to 30 Additional Companies

The SEC has delegated to each national securities exchange the authority to identify additional listed companies that qualify for inclusion in the list of companies covered by the revised prohibition.

List of companies includes GE (General Electric Co.), GM (General Motors Corp.), and MCO (Moody's Corp.)


posted by Quiddity at 9/22/2008 08:47:00 AM

Prove it:

Paulson and Bernanke say if there's no bail-out of Wall Street, then we're headed for a depression.

Prove it.

What's remarkable in the last week is that there has been no detailed scenario presented to make the case of Paulson & Co.

It doesn't even have to involve the entire banking and securities business. And with Paulson and Bernanke's track record of failing to see, warn, and protect against the credit crisis, they deserve no deference in this matter.

What's absolutely necessary is a basic step-by-step explanation of why, for example, Hewlett Packard can't get a loan. We're told that there will be a freeze-up of credit. In what particular way? And even if a bank can't provide a loan, why is buying crap paper from the bank necessary? Why isn't a separate loan facility (e.g. another bank with better balance sheets, or a newly created bank) the solution?

For contrast, look at global warming. The science can be complicated, but it can be explained in a few broad strokes: More CO2 in the atmosphere traps more light-energy from the sun. Yes, there are other factors (soot, sulphur compounds, cloud formation), but the basic thrust is clear. We're not seeing anything like that with the financial situation.

Until a credible case, with fact and figures, can be made that bailing out the banks is necessary, then the $700 billion bailout should not be even considered.


posted by Quiddity at 9/22/2008 05:31:00 AM

What & why:

What:

The Federal Reserve said Sunday it had granted a request by the country's last two major investment banks — Goldman Sachs and Morgan Stanley — to change their status to bank holding companies.

The Fed announced that it had approved the request of the two investment banks. The change in status will allow them to create commercial banks that will be able to take deposits, bolstering the resources of both institutions.

Why:

The decision means that the Goldman and Morgan Stanley will be able not only to set up commercial bank subsidiaries to take deposits, giving them a major resource base, but they will also have the same access as other commercial banks to the Fed's emergency loan program.

The move by Goldman and Morgan Stanley is not in order to take deposits (at least not in the short term), but to be able to get money from the Fed.

The system is broken. It probably should be allowed to crumble under its own weight at this point. Let's have a lock-up of the financial system for, what, one month? Countries have recovered from worse (e.g war). Propping up a rotten system is no cure.

You want a bank? Then charter the Bank of the United States for five years. Make that the entity that grants loans to manufacturers and retailers and importers. Face it, some banks are totally insolvent and should just go away. Others, like Wells Fargo, are well managed (WFC is the only bank with an AAA rating) and will continue.


posted by Quiddity at 9/21/2008 09:54:00 PM

Treasury to purchase car loans:

Something's fishy:

The U.S. Treasury submitted revised guidance to Congress on its plan a day after first submitting it, as lawmakers and lobbyists push their own ideas. Officials now propose buying what they term troubled assets, without specifying the type, according to a document obtained by Bloomberg News and confirmed by a congressional aide.

The change suggests the inclusion of instruments such as car and student loans, credit-card debt and any other troubled asset. That may force an eventual increase in the size of the package as Democrats and Republicans in Congress negotiate the final legislation with the Bush administration, analysts said.

Why not just purchase all outstanding loans. You know, take them off the banks' books so that they can start free and totally clear of everything they've done the last decade.


posted by Quiddity at 9/21/2008 09:44:00 PM

Floyd Norris: (emp add)

2. It is unsettling to see Wall Street firms that only a week ago feared for their survival hoping to get rich off this program. It needs to be carefully monitored to keep it from becoming a scandal of its own.

5. This crisis is not so important that a bill really needs to be passed without time for the public to read it and study it. If Congress has to delay leaving to campaign for a few days, so be it.

11. Investors clearly think the shareholders of brokerage firms and banks are being bailed out — not just that failure is being avoided. That should not be allowed to happen.

posted by Quiddity at 9/21/2008 06:43:00 PM

Who wrote this?

Watching Washington rush to throw taxpayer money at Wall Street has been sobering and a little frightening.

We are being told Treasury Secretary Henry Paulson has a plan which will shift $700 billion in obligations from private companies to the taxpayer.

We are being warned that this $700 billion bailout is the only answer to a crisis.

We are being reassured that we can trust Secretary Paulson "because he knows what he is doing".

Congress had better ask a lot of questions before it shifts this much burden to the taxpayer and shifts this much power to a Washington bureaucracy.

Imagine that the political balance of power in Washington were different.

If this were a Democratic administration the Republicans in the House and Senate would be demanding answers and would be organizing for a “no” vote. ...

It’s time to end the silence and clear up the confusion.

Congress has an obligation to protect the taxpayer.

Congress has an obligation to limit the executive branch to the rule of law.

Congress has an obligation to perform oversight.

Newt Gingrich


posted by Quiddity at 9/21/2008 05:35:00 PM

This is spinning out of control:

From Calculated Risk's post, Bailout Eligibility Expanded to Foreign Institutions: (emp add)

Treasury Secretary Henry Paulson said Sunday that foreign banks will be able to unload bad financial assets under a $700 billion U.S. proposal aimed at restoring order during a devastating financial crisis.

"Yes, and they should. Because ... if a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution," Paulson said on ABC television's "This Week with George Stephanopolous."

That last highlighted part "if they are clogged with illiquid assets", presumably means illiquid assets of any kind from any part of the globe. It could be mortgage-backed securities based on real estate in Portugal.

So now Paulson is proposing to vacuum up all the crap paper in the world. You can be damn sure that foreign banks will adjust their books so that they can shovel as much junk as possible into the "business operations in the United States" tent. Who's going to check their books if they are headquartered abroad?


posted by Quiddity at 9/21/2008 10:51:00 AM

Are the Democrats in Congress about to demonstrate that they are absolutely worthless?

Looks like it.


posted by Quiddity at 9/20/2008 09:06:00 PM

Mystery box:

First it was Sarah Palin.

Now it the Paulson Plan.


posted by Quiddity at 9/20/2008 08:50:00 PM

We could still see a financial collapse:

The peculiar nature of the "Paulson Plan" allows the Treasury Secretary to give money in exchange for any mortgate-related assets, free from any review.

It designed to give Paulson the ability to shove billions of dollars to banks as soon as possible in exchange for paper that cannot be properly evaluated - because that would take time, which cannot be spared.

If time is a critical factor - which it appears to be - then if Congress doesn't get it voted on fast enough, the financial system could lock up.

If it is going to lock up, I'd say it would be within the next 14 calendar days.


posted by Quiddity at 9/20/2008 12:40:00 PM

Giving all control to Paulson:

From the proposal: (emp add)

The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States. ...

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

"mortgage-related assets" means derivatives, many which are completely worthless.

A hint of the money involved:

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time.

And

Sec. 10. Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

The "taxpayer" won't be footing this, at least not in the near term. It will be paid through an increase in the debt (which requires foreign purchases of U.S. bonds). In subsequent years, that increased debt will make it harder to pay for lots of programs (education, health care, energy programs, infrastructure, etc).

It's not just residential:

Mortgage-Related Assets.--The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

posted by Quiddity at 9/20/2008 09:17:00 AM

Connecting the dots - ten years after the fact:

McCain

McCain noted the Illinois senator had taken large campaign contributions from both Fannie Mae and Freddie Mac and that the one-time head of Obama's vice presidential search team, Jim Johnson, had received a $21 million severance deal after stepping down as Fannie Mae CEO. McCain's campaign released a new television ad Friday hitting Obama for his connection to Johnson.

James A. Johnson left Fannie Mae in 1998.

Johnson did have problems with his tenure at Fannie Mae, but he had nothing to do with the housing/mortgage problems that got started after the deregulation push of 1999 (Gramm-Leach-Bliley Act), subsequent changes (William Donaldson at SEC), and lax regulation (Greenspan).


posted by Quiddity at 9/20/2008 02:41:00 AM

Cry-baby Capitalism:

Is what we are witnessing. Also, I just heard Naomi Klein say that last year $33 billion was paid out in bonuses on Wall Street. Sweet.

Other fallout: This will end up straining the Federal budget, which means down the road, lots of things won't be funded (infrastructure, safety-net programs, education).


posted by Quiddity at 9/19/2008 12:22:00 PM

$1.2 trillion:

Bloomberg News ... reported that the government is considering establishing an $800 billion fund to purchase so-called failed assets and a separate $400 billion pool at the Federal Deposit Insurance Corporation to insure investors in money-market funds.

Plus we've got a war that's costing about $2 trillion.

Insanity. Pure insanity.

RELATED: Barry Ritholtz:

... for the past 8 years, a conservative was in the White House, with a very conservative agenda. For something like 16 of the past 18 years, the conservative dominated GOP has controlled Congress. Those are the facts.

We now see that the grand experiment of deregulation has ended, and ended badly. The deregulation movement is now an historical footnote, just another interest group, and once in power they turned into socialists.

UPDATE: John Cole is totally correct:

... folks spent years making billions upon billions of dollars on risky transactions, more money on the stock of companies that was artificially high based on those transactions, more money bundling all those transactions into more transactions, and made a killing, and when it turns out the whole thing is a big pile of shit, you and I get the god damned bill.

I do not ever want to hear another damned word about the free market. I don’t want to hear another thing about letting the market regulate itself. I don’t want to hear about the free flow of capital. I don’t want to hear about government getting out of our lives.

None of it. From superfunds to super-bailouts, I am tired of other people getting rich being irresponsible and then being told I have to pay to clean it up.

• No more bullshit about how we don't have enough money for Medicaid.
• No more bullshit about no funds for unemployment insurance.
• No more bullshit about not having enough money for safety-net programs.
• No more bullshit about "my tax money" going to other (alleged-by-the-right-wing as less-worthy) causes or people.

posted by Quiddity at 9/19/2008 10:16:00 AM

Bush bullshit:

From his statement this Friday:

The Securities and Exchange Commission has issued new rules temporarily suspending the practice of short selling on the stocks of financial institutions. This is intended to prevent investors from intentionally driving down particular stocks for their own personal gain.

We can't have people making financial moves for their own personal gain, can we?


posted by Quiddity at 9/19/2008 10:16:00 AM

Hank Paulson's bullshit:

He really said this:

These illiquid assets* are clogging up our financial system, and undermining the strength of our otherwise sound financial institutions.

Cut out the unsound activities and what's left is "sound". What a joke.

* "lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing"


posted by Quiddity at 9/19/2008 10:16:00 AM

I agree with everything Barry Ritholtz says:

Regarding:

SEC intends to temporarily ban short selling, but it's not clear if the commission has approved the move. Cox is briefing congressional leaders. Separately, the government is seeking congressional authority to buy distressed assets.

BR comments: (emp add)

This is the ultimate bailout attempt, which will have repercussions far far beyond our imaginations:

1) We suffer a loss of Market Integrity; The US is now a Banana Republic

2) Blatant market manipulation: this is nothing more than an attempt to force markets higher;

3) 60 days prior to a presidential election? This is a none-too-subtle attempt to influence the elections -- especially coming on top of the Fannie/Freddie bailout;

4) The coming pop will create a huge air pocket, ultimately leading to us crashing much lower;

5) Expect a huge increase in volatility -- upwards first, then down;

posted by Quiddity at 9/18/2008 08:32:00 PM

This man:

William H. Donaldson

Was SEC chair from 2003 - 2005.

From commentary and a story excerpt at The Big Picture:

As we learn this morning via Julie Satow of the NY Sun, special exemptions from the SEC are in large part responsible for the huge build up in financial sector leverage over the past 4 years -- as well as the massive current unwind

Satow interviews [a] former SEC director, and he spits out the blunt truth: The current excess leverage now unwinding was the result of a purposeful SEC exemption given to five firms. ...

Who were the five that received this special exemption? You won't be surprised to learn that they were Goldman, Merrill, Lehman, Bear Stearns, and Morgan Stanley. ...

Here's an excerpt from The Sun:

"The Securities and Exchange Commission can blame itself for the current crisis. That is the allegation being made by a former SEC official, Lee Pickard, who says a rule change in 2004 led to the failure of Lehman Brothers, Bear Stearns, and Merrill Lynch.

The SEC allowed five firms — the three that have collapsed plus Goldman Sachs and Morgan Stanley — to more than double the leverage they were allowed to keep on their balance sheets and remove discounts that had been applied to the assets they had been required to keep to protect them from defaults.

posted by Quiddity at 9/18/2008 08:56:00 AM

Just askin'

Doesn't the United States have an elected official at the very top, that in times of financial crisis gets out there to reassure the nation and oversee and coordinate rescue efforts.

Because that would really be helpful.

UPDATE: From Bush says he's working hard on economic turmoil

With the financial markets in turmoil, President Bush said Thursday that he shares Americans' concerns and the government will act aggressively to avert a deepening crisis. ...

Aiming to be reassuring and to show that he is working on the problem, he said the markets are adjusting to the "extraordinary measures" that have been taken in recent days by the federal government.

"The American people can be sure we will continue to act to strengthen and stabilize our financial markets and improve investor confidence," Bush said in two minutes of remarks delivered outside the Oval Office.

He did not specify what actions would be taken. ...

His remarks Thursday were his first since Monday. And he has spurned every attempt by reporters to ask questions about the developments, including again on Thursday. As he finished his very brief statement and turned to walk back into the Oval Office, a reporter asked if he believed the economy was still sound. The president kept walking.

posted by Quiddity at 9/17/2008 09:09:00 AM

Is this reassuring?

From McCain says government 'forced' to bail out AIG: (emp add)

Although he is stepping up criticism of government regulators as he seeks the presidency, McCain has long favored a reduction in corporate regulation. A similar free-market thinker, former Sen. Phil Gramm of Texas, who led the Senate Banking Committee in Congress, has been an adviser to the campaign. ...

Elaborating on the charge of corruption, McCain said that many Wall Street executives had claimed "everything's fine, not to worry" and that Congress and regulators had paid no attention. "All of them were asleep at the switch," he said, and went on to blame special interests and lobbyists as well.

Asked for specific examples of corruption regarding AIG, senior McCain campaign adviser Steve Schmidt offered none.

... when asked by ABC for examples of what he would do to deal with the current problems, McCain cited only the proposals he offered well before the crisis emerged — no tax increases, affordable health care and energy alternatives among them. ...

In the ABC interview, McCain called the financial crisis "one of the most severe crises in modern times," yet on Monday morning he had maintained his oft-stated position that "the fundamentals of our economy are strong." ...

In two new television ads Wednesday, McCain asserts that he is the right leader to keep Americans' savings safe.

Forget policies, McCain doesn't have a good message on this issue.


posted by Quiddity at 9/17/2008 08:12:00 AM

Sarah Palin to visit the United Nations:

Apparently EPCOT was already booked this month.


posted by Quiddity at 9/17/2008 07:49:00 AM

Terrorists on Wall Street:

Terrorists are everywhere! How else to explain McCain when he says, regarding the credit crisis:

"We're going to need a '9/11 Commission' to find out what happened and what needs to be fixed."

Maybe the Republicans should have nominated Giuliani instead. He's the most 9/11-ish candidate out there.

Should there be a crisis in other areas, McCain will surely advocate a '9/11 Commission'. Health care costs out of control? That's because there are terrorists in the hospital (or in the billing unit of an insurance company). Let's create a '9/11 Commision' to investigate.

Bottom line: Fear. 9/11. Terrorists. Elect John McCain and he'll bomb Wall Street. That'll solve the problem.


posted by Quiddity at 9/17/2008 01:34:00 AM

Prediction:

The closer we get to election day, the more we will be reading stories about why America isn't ready to elect a black man as president.

In particular, this will become evident as polling in blue states show weak Obama leads, or even ties.


posted by Quiddity at 9/16/2008 10:44:00 AM

Dick Polman on the politics of the credit crisis:

Solid. Clear. Honest (Bill Clinton is held to account.) Worth reading.


posted by Quiddity at 9/16/2008 09:31:00 AM

McCain claims Wall Street problems are the result of "corruption": (bumped up)

Did you watch any of the three network morning shows this morning? Each had an interview with McCain where he said that the credit crunch is the result of "corruption". In the longest interview, on NBC's Today show, McCain used that word about a dozen times. (Will try to find transcript and post it later.)

It's not corruption. For the most part, the credit problem is the result of a decades-long trend of accepting risk and over-leveraging. Will the public buy McCain's "corruption" argument? Especially since much of the reckless credit expansion was the result of many Americans participating, either by being one of those sub-prime borrowers or a person that took out money from their homes to purchase, for example, an SUV.

McCain never directly addressed the issues present in the questions. All he had to say was that the American worker is great! Rah! Rah!

For those people who are concerned about their situation, McCain's performance must have seemed off-key.

(Biden was also on CBS and wasn't perfect, but got more into the details of the credit crisis than McCain.)

UPDATE:

McCain said in an interview that he didn't want the government to bail out AIG. "But there are literally millions of people whose retirement, whose investment, whose insurance were at risk here," he said in an interview with "Good Morning America" on ABC. "They were going to have their lives destroyed because of the greed and excess and corruption."

Elaborating on the charge of corruption, McCain said that many Wall Street executives had claimed "everything's fine, not to worry" and that Congress and regulators had paid no attention. "All of them were asleep at the switch," he said, and went on to blame special interests and lobbyists as well.

Asked for specific examples of corruption regarding AIG, senior McCain campaign adviser Steve Schmidt offered none.

posted by Quiddity at 9/16/2008 08:26:00 AM