Tuesday September 23 Housing and Economic stories

TOP STORIES:

ALMOST ARMAGEDDON - MARKETS WERE 500 TRADES FROM A MELTDOWN - (www.nypost.com) The market was 500 trades away from Armageddon on Thursday, traders inside two large custodial banks tell The Post. Had the Treasury and Fed not quickly stepped into the fray that morning with a quick $105 billion injection of liquidity, the Dow could have collapsed to the 8,300-level - a 22 percent decline! - while the clang of the opening bell was still echoing around the cavernous exchange floor. According to traders, who spoke on the condition of anonymity, money market funds were inundated with $500 billion in sell orders prior to the opening. The total money-market capitalization was roughly $4 trillion that morning. The panicked selling was directly linked to the seizing up of the credit markets - including a $52 billion constriction in commercial paper - and the rumors of additional money market funds "breaking the buck," or dropping below $1 net asset value. The Fed's dramatic $105 billion liquidity injection on Thursday (pre-market) was just enough to keep key institutional accounts from following through on the sell orders and starting a stampede of cash that could have brought large tracts of the US economy to a halt.

WaMu, Under U.S. Pressure, Scrambles for Deal or Capital - (online.wsj.com) - Washington Mutual Inc. pushed Sunday to decide its fate, continuing talks with potential buyers amid mounting pressure from federal regulators... With WaMu expecting losses of $19 billion on its mortgage portfolio during the next 2½ years, some would-be bidders favor a government-assisted takeover, people familiar with the matter said

A Nation of Village Idiots - (huffingtonpost.com) Don't let them tell you this economic meltdown is a complicated mess. It's not. Our national financial crisis is readily understood by anyone who has seen greed and hypocrisy. But we are now witnessing them on a profound, monumental scale. Conservative Republicans always want the government to stay out of business and avoid regulation as long as they are making lots of money. When their greed, however, gets them into a fix, they are the first to cry out for rules and laws and taxpayer money to bail out their businesses. Obviously, Republicans are socialists. The Bush administration has decided to socialize the debt of the big Wall Street Firms. Taxpayers didn't get to enjoy any of the big money profits on the phony financial instruments like derivatives or bundled sub-prime paper, but we get the privilege of paying for their debt and failures. How did we get here? That's pretty easy to answer, too. His name is Phil Gramm. A few days after the Supreme Court made George W. Bush president in 2000, Gramm stuck something called the Commodity Futures Modernization Act into the budget bill. Nobody knew that the Texas senator was slipping America a 262 page poison pill. The Gramm Guts America Act was designed to keep regulators from controlling new financial tools described as credit "swaps." These are instruments like sub-prime mortgages bundled up and sold as securities. Under the Gramm law, neither the SEC nor the Commodities Futures Trading Commission (CFTC) were able to examine financial institutions like hedge funds or investment banks to guarantee they had the assets necessary to cover losses they were guaranteeing.

Paulson's Buddy Bailout Bigger Than Pentagon's Budget - (www.washingtonpost.com) The $700 billion that the U.S. government estimates that it will cost to buy the risky investments of financial institutions in coming months approaches is more than what it costs to run the Pentagon for a year. That estimate of the economic rescue plan that the Treasury department sent to Capitol Hill today is on top of the nearly $200 billion he said earlier this month that he is willing to spend on the government's rescue of Fannie Mae and Freddie Mac. The Pentagon budget last year was about $600 billion. Over time, Congress has appropriated a total of about $650 billion for the war in Iraq, plus $200 billion for Afghanistan. The spending for the bailout will add to nearly record projected deficits this year and next. The package made public today asked Congress to raise the federal debt limit from $10.6 trillion to $11.3 trillionWhat effect that spending will have on the U.S. economy is unclear, although it will almost surely complicate any policy plans the next administration will have, fiscal observers said.

Ron Paul: This Bailout Won't Be the Last - (www.usnews.com) Excerpts of a Ron Paul interview: But don't we need to get these toxic assets off banks' balance sheets? "Sure, they need to be removed. Somebody needs to suffer the consequences [but] not the taxpayer. Everybody knows that they have to be removed. They are priced too high. The assets don't have real value—some have zero and some have 10 cents on the dollar. The people who had been making profits for all these years and dealing in all of this debt creation and derivatives—that now is becoming unwound—are claiming that it would be so painful if somebody went bankrupt and therefore we have to put so much burden on the taxpayer and on the dollar because the alternative is worse. But quite frankly, if they destroy the dollar and the dollar system, then they have a much bigger problem that they are going to have to deal with and it would be the collapse of the whole international monetary system—which is conceivable." So instead of having taxpayers buy the bad debt, the market should take care of it by itself? "Sure, prices need to go down. Bad debt needs to be eliminated. The taxpayer ought to be protected. Taxes ought to be lowered...We are following the same routine that we did in the Depression, and that is artificially try to keep prices up. People were starving in the Depression and the only thing they did was try to keep wages artificially high and keep food prices high. We are doing the same thing now—we are trying to keep housing prices high. Low prices for houses mean poor people could buy a house. This is the most important part of a free market economy and that is free market pricing. Without free market pricing, the market can't work. And this is in a way a major effort to price fix."

Bush Administration Seeks "Dictatorial Power" - (Mish at globaleconomicanalysis.blogspot.com) Notice how everyone wants to rush this through even though it is the biggest financial crisis in history. One might think that something this big should be carefully considered but no... Bush says: "This is going to be a big package because it's a big problem" and "We need to get this done quickly and the cleaner the better." It seems the bigger the problem the quicker and cleaner it can be fixed. Indeed Congress will argue more over the cost of toilet seats than they will over this $700 billion (and counting) bailout. Democrats Want To Expand The Bailout: "We're going to be buying up a lot of mortgage paper," said House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat. "Between Fannie Mae and Freddie now owned by the federal government and the mortgage paper we'll be acquiring here" and the Federal Deposit Insurance Corp. running failed bank IndyMac Bancorp Inc., "we should now be able substantially to reduce foreclosures," he said. My Comment: Barney Frank is an incompetent socialist fool. Buying mortgages in and of itself will not prevent a single foreclosure. All buying mortgages will do is bail out the banks holding those mortgages. And one thing you can be most certain of is that it will be a selective bailout with no oversight as to who gets bailed out or why.

Will Bush be remembered as worst president ever? - (news.yahoo.com) – And the Bush parents (George Senior and Barbara) have created the most corrupt family in the history of the US presidency. The Bush children have destroyed banks, corporations, and entire countries. Bush runs a real danger of going down as a Herbert Hoover in this scenario,” said Beverly Gage, a presidential historian at Yale University. “He could be seen as the man held responsible for what is happening who stood by and didn’t forge a clear direction at a moment when a clear direction is what was needed.” Certainly, no president can control the course of history while in office. Hoover was elected in a boom economy in 1928 that went bust a year later.
But it’s those very moments of calamity and uncertainty that offer presidents an opportunity to show their true mettle. Thus far, Bush has not received high marks for his management of the housing crisis, particularly since it appears that his Treasury secretary has been running the show for the last three weeks.



OTHER STORIES:

U.S. Treasury Widens Scope of Plan to Buy Bad Debt - (www.bloomberg.com) - The Bush administration widened the scope of its $700 billion plan to avert a financial meltdown by including assets other than mortgage-related securities. '' -- This has become a disgusting orgy of everyone trying to jump aboard the "bailout bandwagon". This is getting out of hand before it's even begun. Also see Banks Rush to Shape Rescue Plan
Derivatives as weapons of mass destruction - (www.economist.com) WHEN Warren Buffett said that derivatives were “financial weapons of mass destruction”, this was just the kind of crisis the investment seer had in mind. Part of the reason investors are so nervous about the health of financial companies is that they do not know how exposed they are to the derivatives market. It is doubly troubling that the collapse of Lehman Brothers and the near-collapse of American International Group (AIG) came before such useful reforms as a central clearing house for derivatives were in place.
Remaining Wall Street IBs Choose Bailout Trough Over Independence - [2008-09-22] - ``Goldman Sachs Group Inc. and Morgan Stanley will become banks regulated by the Federal Reserve, after tight credit markets for...
Talking Points on H.R. 6694: Who’s Line Is it, Anyway? - (www.ml-implode.com) - Both sides of the SFDPA debate are equally guilty of “cherry-picking” both their words and statistics to support their points of...
What We Should Get For $700 Billion - (www.ml-implode.com) - `` I also find myself drawn to provisions that would serve no useful purpose except to insult the industry, like requiring the C...
British hedge funds to sue over short-sale ban: reports - (www.ml-implode.com)
Mad as hell - taxpayers lash out - (www.ml-implode.com)

There Is No Difference and Now Were All Screwed - (www.ml-implode.com)
Going for Broke - (www.ml-implode.com)
Bailout Eligibility Expanded to Foreign Institutions - (www.ml-implode.com)
Paulson resists calls for added help in bailout - (www.ml-implode.com)
Paulson: Foreign banks can use U.S. rescue plan - (www.ml-implode.com)
It could get much worse - (www.ml-implode.com)
Bailout plan is vast patronage under cover of martial law - (www.ml-implode.com)
Backlash Over Bailouts Grows in Congress, Wall Street - (www.bloomberg.com)
You Must Act Now - THIS IS URGENT! - (flipthisburger.blogspot.com)
Write Your Senator. Pitchforks and torches more effective though. - (PDF - senate.gov)
Bush Administration Seeking $700 Billion for Wall Street Cronies - (www.nytimes.com)
Text of Draft Proposal for Paulson Takeover of US Budget - (www.nytimes.com)
Your Money at Work, Fixing Wall Street's Mistakes - (www.nytimes.com)
Economists skeptical of bailout - (news.yahoo.com)

Foreign banks to get US taxpayer money from Paulson - (www.politico.com)
Treasury Widens Scope of Plan to Buy Bad Debt - (www.bloomberg.com)
Goldman, Morgan to Become Full-Fledged Banks - (dealbook.blogs.nytimes.com)

Stock futures off on rescue detail worry - (www.reuters.com)
Dollar May Get `Crushed' as Traders Weigh Up Bailout - (www.bloomberg.com)
In Newest Crisis, Hedge Funds Face Chaos - (www.nytimes.com)
U.S. Treasury Widens Scope of Bad-Debt Plan Beyond Mortgages - (www.bloomberg.com)
It's The End of the World as we Know it - (optionarmageddon.ml-implode.com)
Deflation Trumps Paulson - (bloomberg.com)
Rest in peace, Reaganomics - (spokesmanreview.com)
We All Should Get U.S. Bailout Tombstones - (paul.kedrosky.com)
Paulson Presses Congress to Act On $700 Billion Bailout Plan - (online.wsj.com)
Treasury Seeks Asset-Buying Power Unchecked by Courts - (www.bloomberg.com)
Emerging markets face $111bn maturing debt - (www.ft.com)
Few Funds Hit Performance Mark - (online.wsj.com)
High-risk, big-bucks era wanes on Wall Street - (www.latimes.com)
Commercial space toll worse than S&L crisis - (www.ft.com)
The Wall Street Bailout Plan, Explained - (www.nytimes.com)
Rescue Plan for Funds Will Come at a Cost - (www.nytimes.com)
Australia Suspends All Short Sales - (online.wsj.com)
Foreign Banks Hope Bailout Will Be Global - (www.nytimes.com)
Concern as Russian car demand slows - (www.ft.com)
Taiwan limits short-selling - (www.ft.com)
Moscow widens emergency funding - (www.ft.com)
Europeans on left and right ridicule U.S. money meltdown - (www.latimes.com)
Gas pains hit far-flung suburbs - (www.chicagotribune.com)
Vacancy Rate Rise on Hedge Fund Closures - (www.nypost.com)
Fed OKs Goldman, Morgan as bank holding companies - (www.reuters.com)
Stores Plan for Weak Holiday Sales - (online.wsj.com)
GM's Credit Move May Fuel Worries - (online.wsj.com)
G.E., a Giant of Lending, Is Dragged Down Along With Banks - (www.nytimes.com)
Ugly Side of Leverage Hurts Morgan, Goldman - (online.wsj.com)
Online advertising hit by spending cuts - (www.ft.com)
Your Money at Work, Fixing Others’ Mistakes - (www.nytimes.com)
A long shadow - (www.ft.com)