BREAKING: NY Times says, "Bye, bye Wall Street." (updated)

For all intents and purposes, the New York Times this evening, in the past hour, is calling for everything but the "D-word" today and tomorrow on the front page of its website as I write this. See: "In Frantic Day, Wall Street Banks Teeter."Developments on Wall Street have become that dire as the weekend has progressed. The front page of their website is that striking. It's certainly some of the most awful headlines I've seen there since 9/11/01. (Some would say--and I might agree with them--that the implications are far worse than 9/11/01, too.)

American International Group (i.e.: A.I.G. Insurance) is calling for an immediate, emergency $40-billion bailout from the U.S. Government. In lieu of that, it's now announcing a fire sale of some of its most important assets.  Bye, bye A.I.G.

Lehman Brothers, one of the four remaining major investment houses on Wall Street will declare bankruptcy at the stroke of midnight, tonight. Bye, bye Lehman Brothers.

Merrill Lynch, one of the three remaining major investment houses on Wall Street, after Lehman announces its going under in the next half-hour (yes, this is not an exaggeration), is announcing a $44 billion buyout from Bank of America, a price which is less than half of its book value, per its financials from less than a year ago.  Bye, bye Merrill Lynch.

Washington Mutual, the nation's largest Savings and Loan, is expected to follow suit, and will go into some form of receivership or bankruptcy, probably before the week's out. Bye, bye Washington Mutual.

National City and Fifth-Third Corporation, among (literally) hundreds of other regional and smaller banks are expected to follow suit. Bye, bye National City and Fifth-Third, and hundreds of other regional and smaller banks.

UPDATE: Getting practical about all of this, and filing it under "getting you coming and going," the failure of WaMu, alone, will eat up most of the remaining funds in the FDIC's (that's the Federal Deposit Insurance Corporation's) cash reserves. This is the entity that guarantees your bank accounts for the first $100,000 on account. Most of the remaining bank failures (and even the most conservative of estimates has that somewhere in the 1,000-bank range), will be paid for by the federal government--that's you and me--pouring hundreds of billions of dollars into the FDIC's coffers.

Tags: American International Group, Lehman Brothers, New York Times, U.S. financial crisis, washington mutual (all tags)

Comments

87 Comments

And kiss your assets goodbye...

Hang on to your hats folks, Obama's administration could end up looking more like FDR's than we ever could have possibly imagined.   Oh, the ironies of history...

by Shaun Appleby 2008-09-14 07:46PM | 0 recs
Yep, yep, yep...

First, he need to be elected. And hopefully now that the Lehman-Merrill-AIG fallout may be the last straw that breaks our financial market's back, this should be more than enough to wake up the American people to the reality of our VERY weak economy. Not only are we near recession, but if managed wrongly we really can fall into DEPRESSION. And now that we've become such an interdependent world, our sneezing can very well cause the world economy to catch a brutal cold.

I hope we'll have a President Obama & Democratic Congress in January 2009 that will be able to clean up the mess that the Bush-Cheney-McCain GOP regime is leaving us.

by atdleft 2008-09-14 08:56PM | 0 recs
Re: Yep, yep, yep...

Yeah, well it certainly seems that we're headed that way.  Ironic but appropriate that the deregulation of the last two decades would come home to roost in the last two months of a watershed election.  We could all soon be on universal single-payer health care or none at all.  And even Greenspan has disowned McCain's economic policy which is even more hare-brained than Bush's:


Former Fed chairman Alan Greenspan in April endorsed Sen. John McCain, R-Ariz.,  saying, "I'm Republican and I support John McCain, who I know very well and who I respect a lot."

But Greenspan today told Bloomberg's Al Hunt that he cannot get behind McCain's proposed $3.3 billion in tax cuts, saying "unless we cut spending" the nation cannot afford cuts that big.

"Unless it's paid for on the so-called pay-go, I'm not in favor of it," Greenspan said. "I'm not in favor of financing tax cuts with borrowed money.''

Jake Tapper - McCain-Endorser Greenspan Does Not Endorse His Tax Cuts ABC 13 Sep 08

Maybe time to dust off the 'voodoo economics' narrative and take it out for some air.

by Shaun Appleby 2008-09-14 09:04PM | 0 recs
"pay as you go" is a recipe for a deeper

recession. It's time to start listening to Greenspan's economic advice and doing exactly the opposite. Let's hope Obama's U of Chicago boys understand that.

by fairleft 2008-09-15 07:48AM | 0 recs
Sure

I don't disagree, just noting the disendorsement of one of McCain's very few notable economic supporters.  Personally I hold Greenspan responsible for much of the current 'credit crisis' on the grounds of permissiveness.

by Shaun Appleby 2008-09-15 07:52AM | 0 recs
Yeah, everyone's afraid to say it...

...choosing to take comfort in some technical definition of the term, but face it folks, we are in a Depression. It's time the American public was told the truth. Not only is McSame lying to us, but Chimpy, Bernanke and Paulson, too.

by bobswern 2008-09-14 07:46PM | 0 recs
Re: Yeah, everyone's afraid to say it...

While there is no formal definition of a 'depression' and we are still disputing the accuracy of the term 'recession' for our performance in the previous two quarters I think it's fairly safe to say we are in 'deep do-do' and the market is probably going to make the same assessment in the morning.

by Shaun Appleby 2008-09-14 07:54PM | 0 recs
9/15/08 will be long-remembered... n/t

by bobswern 2008-09-14 07:58PM | 0 recs
Re: 9/15/08 will be long-remembered... n/t

We'll see, since '87 it seems a lot depends on the extent to which world markets react before the opening bell and to what extent they feel it necessary to join the expected free-fall.  We have been leaning heavily on that cushion for awhile and it remains to be seen if all the stuffing has been knocked out of it yet.  I'll be watching the London opening pretty carefully, Tokyo is hanging in there so far today, or I should say 'tomorrow.'

It would be ironic if the US markets took a bath and the international markets shook it off like a wet dog, that's bound to happen sooner or later.

by Shaun Appleby 2008-09-14 08:14PM | 0 recs
Re: 9/15/08 will be long-remembered... n/t

Apologies, I was looking at Friday's results for Tokyo, apparently Tokyo, Seoul, Hong Kong and China are all closed Monday for local holidays.  Hmmm...  Food for thought there.

by Shaun Appleby 2008-09-14 08:19PM | 0 recs
Closed: Tokyo, Seoul, Hong Kong, China

Isn't that convenient?

by susie 2008-09-14 09:05PM | 0 recs
Re: Closed: Tokyo, Seoul, Hong Kong, China

'Tis rather, or at least timely.

by Shaun Appleby 2008-09-14 09:25PM | 0 recs
Sydney markets down today...

Apparently hanging tough, however.  From the WSJ:


The S&P/ASX 200 index was down about 0.8%. Banks were still weak, though off their morning's lows. Macquarie Group was 4.8% lower after falling more than 7%, while shares of Australia and New Zealand Banking Group were 1.8% down. Commonwealth Bank of Australia and National Australia Bank was down 2.4% and 2.6%, respectively.

   
Sydney Retreats on Financial Tumult
WSJ 14 Sep 08

Apparently trading is down about 1.5% overall by midday.  Not too bad, really.  

by Shaun Appleby 2008-09-14 08:28PM | 0 recs
Sydney markets down today...

Apparently hanging tough, however.  From the WSJ:


The S&P/ASX 200 index was down about 0.8%. Banks were still weak, though off their morning's lows. Macquarie Group was 4.8% lower after falling more than 7%, while shares of Australia and New Zealand Banking Group were 1.8% down. Commonwealth Bank of Australia and National Australia Bank was down 2.4% and 2.6%, respectively.

   
Sydney Retreats on Financial Tumult
WSJ 14 Sep 08

Apparently trading is down about 2% overall by midday.  Not too bad, really, but probably pretty ugly if you're watching from the trading floor or expecting to retire soon:


The share market was over 2 per cent weaker at noon as US financial sector uncertainty continued to affect local banks and insurers.

At 12pm (AEST), the benchmark S&P/ASX200 was 108.4 points lower, or by 2.21 per cent, at 4795.4, while the broader All Ordinaries had lost 96.4 points, or 1.94 per cent, to 4860.7.

Shares tank amid Wall St crisis AAP 15 Sep 08

 

Stay tuned, the Sydney close seems our first major titbit until European exchanges open in a few hours.

by Shaun Appleby 2008-09-14 08:37PM | 0 recs
And worse yet...

I'm watching CNBC now, and they're showing all the futures for the major European indeces down sharply. The DAX (Germany), CAC (Paris), and FTSE (London) are all in for triple digit losses as soon as they open. As I said upthread, our sneezing is causing the entire world to catch a nasty cold.

by atdleft 2008-09-14 08:59PM | 0 recs
Re: And worse yet...

Yes but is it merely a sneeze or a death rattle, that's the question?  Sydney has shed about 2.5% now, financials down by over 4%.  Not a great confidence builder so far but not a landfill either.

by Shaun Appleby 2008-09-14 09:08PM | 0 recs
Re: And worse yet...

they have safety valves to prevent total melt down.

by bruh3 2008-09-14 09:19PM | 0 recs
Re: And worse yet...

Yes, well we'll be having a full scale 'fire drill' in a few hours.  I earnestly hope the levee holds because we are in no position to withstand a breach.

by Shaun Appleby 2008-09-14 09:22PM | 0 recs
Re: And worse yet...

well I would suggest precious metals.

by bruh3 2008-09-14 09:37PM | 0 recs
Re: And worse yet...

Yeah, the gold mining shares on the ASX are all doing great.

by Shaun Appleby 2008-09-14 09:42PM | 0 recs
Re: And worse yet...

Yeah- I am new to investing, but my friends have warned me not to do anything tied to the American dollar. ie, no real estate, stocks etc. Us debt maybe. I am still learning.

by bruh3 2008-09-14 09:54PM | 0 recs
Re: And worse yet...

Sometimes CASH is an option. Probably not American dollars, though.

by vcalzone 2008-09-14 09:57PM | 0 recs
Re: And worse yet...

I am also just learn currency stuff but its complicated to me

by bruh3 2008-09-14 10:12PM | 0 recs
Re: And worse yet...

As at 3PM AEST the ASX is rallying a little, now down 1.84%.  Not too bad but mining stocks are paying the freight.

by Shaun Appleby 2008-09-14 09:49PM | 0 recs
Re: And worse yet...

Is there a good blog for people new to investing?

by bruh3 2008-09-14 09:54PM | 0 recs
Re: And worse yet...

Apologies but I wouldn't know, I am a concerned observer not a participant.

by Shaun Appleby 2008-09-14 10:48PM | 0 recs
Re: And worse yet...

You seem to know alot more on this topic than most of us -- I appreciate your posts here.

by cameoanne 2008-09-15 10:50AM | 0 recs
Closing result from Australia

Not as bad as it could have been, still:


The share market has suffered its biggest one-day fall in six months, on the back of bad news from National Australia Bank and a weak lead from Wall Street.

[...]

"If we take the All Ordinaries as a proxy for the broader market, then we're down about $40 billion [Australian Dollars] for the day," said Conrad Burge, investment manager at Fiducian Portfolio Services.

$38.5bn wiped off share market News Corporation 15 Sep 08

Mining sector stocks, especially gold, saved the day.  Banks and financial institutions got pretty well dunked with those tied to troubled US investment firms particularly savaged.

by Shaun Appleby 2008-09-14 11:09PM | 0 recs
Re: And worse yet...

But now the FTSE is apparently dropping like a stone from the moment London opened.  Early yet, but still not particularly promising unless just a flurry to cover margin calls.

by Shaun Appleby 2008-09-14 11:30PM | 0 recs
Uh-oh

So far the stage is set for some high-stakes drama in a few hours on Wall St:


The UK's FTSE 100 index fell nearly 3% in the first few minutes of trade, and France's Cac 40 index dropped 2.3%.

In Asia, the key share index in Australia was down 2.5%, and in Singapore the STI dropped 2.9%.

In Taiwan, the benchmark share index dropped more than 4%, and in India share prices fell by more than 5%.

Several of Asia's major stock exchanges - in Tokyo, Hong Kong, Shanghai and Seoul - were closed for holidays.

World shares fall amid US turmoil BBC 15 Sep 08

It's Wall St's move unless London and Germany rally dramatically in the next few hours.  Hope the Chinese don't mind seeing their most significant debtor digging deeper into their own Federal pockets.

by Shaun Appleby 2008-09-14 11:47PM | 0 recs
General CW...

...without linking to anything, in particular, is that certain European countries (i.e.: UK, Ireland, Spain, and others) will tank as badly as the U.S.

But, most of the rest of the world will recover quickly, or they'll hardly be affected at all (countries like Russia and Brazil, for instance).

by bobswern 2008-09-14 11:51PM | 0 recs
Re: General CW...

Well so far the Europeans are getting creamed, London, Frankfurt, Paris, the lot.  There's got to be a rally in there somewhere but it sets the stage for a pretty nail-biting morning on Wall Street if this trend continues.

by Shaun Appleby 2008-09-15 12:08AM | 0 recs
I'm thinking 400-500 pts. before the...

...automated trading controls kick in. Suspended trading in a select group of financials, etc.

by bobswern 2008-09-15 12:28AM | 0 recs
Re: I'm thinking 400-500 pts. before the...

Won't that bring confidence to the global markets on the morrow.  The European markets are bleeding profusely right now though nothing like the opening plummet, though they are all still headed South after a brief plateau, check it out.  Fasten your seat belts and prepare for some turbulence...

by Shaun Appleby 2008-09-15 12:41AM | 0 recs
Re: And worse yet...

Three hours into trading and the Europeans seem to be steadying a little, albeit at a lower altitude.  Thank goodness for bargain hunting investors with cash.

by Shaun Appleby 2008-09-15 01:43AM | 0 recs
Re: 9/15/08 will be long-remembered... n/t

heh happened to watch V for Vedetta last night (the DVD not the god awful butchering on TV) and that strikes a nerve...in a lot of ways

by zerosumgame 2008-09-15 06:46AM | 0 recs
But because they won't...

Tell the truth to us the people, it's time for Obama & other Democratic leaders to:

1. Explain WHAT the crisis our economy is falling into.

2. Explain WHY our economy is near collapse (REPUBLICAN led deregulation gone mad, REPUBLICAN ties to big business blinding them from the reality we working class people are facing).

3. Explain HOW Democrats will fix what the Bush-McCain-GOP regime broke (reregulate the markets, assist the suffering working class, rebuild our economy).

by atdleft 2008-09-14 09:06PM | 0 recs
Re: But because they won't...

1. Yes, Obama has addressed this and needs to focus on it and the solutions to it more.

2. Unfortunately not just Republican deregulation, Democratic too.  It was a trap that the Clinton adminstration and the Republican Congress fell into in the 90s.  It's just gone from bad to horrendous under Bush.

3.  All of that.  Re-regulate.  Get rid of any vestige of trickle-down as anything that does any normal working person any good.  Emphasize the concept of workers as the significant vessels of our country's economic worth.  

by mady 2008-09-14 09:20PM | 0 recs
A major shakedown of the investment
banks was on the cards for sometime now. Purely from the market POV, this actually brings back the efficient frontier with the appropriate risk factor. The Government intervention in similar situations actually allowed the risk factor to diminish so far, that the young hedge fund managers were playing around with stakeholders money like mononpoly money..
 
by louisprandtl 2008-09-14 08:22PM | 0 recs
At this point, I'd almost rather lose

This is going to be an unmitigated nightmare for the next President, whomever that is.  I'm being serious here.  

Wow.

by Reaper0Bot0 2008-09-14 09:11PM | 0 recs
It's going to take multiple....

...presidential terms to clean this up. Roubini (see my post from about 24 hours ago) says decades. And, it'll be somewhere between the end of 2009 and sometime in 2011 before the real estate market starts coming back.

by bobswern 2008-09-14 09:25PM | 0 recs
Re: It's going to take multiple....
Roubini was interviewed a few days ago on "Charlie Rose", along with 2 NY Times financial reporters  and a Co-CEO of a financial firm - was it AIG? Not sure at this hour.  
Worth watching , if you can find it online.
by susie 2008-09-14 09:32PM | 0 recs
Bob,

I feel kind of stupid for asking, but what do you think will happen in the short and long term?

by Hollede 2008-09-14 09:16PM | 0 recs
Two Words/One Person: Nouriel Roubini

This NYU Professor is widely credited with being the forecaster of all this, and in quite precise detail. I've posted diaries on him and the economy both here and on DKos in the past 24 hours. There's a link from the Diary Rescue column to it currently on the front page of DKos as I write this.

It's not what I think, it's what he thinks, that matters. (He's been close to dead, solid perfect on all of this, so far.)

Essentially, we're looking at an ongoing DEFLATIONARY SPIRAL for the next few years.

Home prices plummet. People are "upside down" in their homes. (They owe more than they're worth.) We're looking at massive foreclosures. Folks are just going to walk. The one's that stay put will cut waaaaay back on their discretionary spending (we're already seeing that occurring).

The retail marketplaces and the tax base, locally, statewide everywhere, and nationally will greatly suffer.

As the retail sector suffers, there'll be an increasing wave of business bankruptcies and more jobs will be lost.

As America continues to lose its credibility in the marketplace--basically we're already at that point--it will become extremely difficult for most in our country to sell debt via bonds, and the sale of Treasury bills will also suffer greatly, to the point where demand will be nominal.

Essentially, we'll be cutoff, credit-wise, as far as other countries investing in our debt's concerned.

However, while this will created dramatically reduced "demand" throughout our society for all but the basic goods and services, foreign investors will realize that there's lots of value-plays to be had here, as well. That's already happening.

Additionally, our position as a global exporter will improve as the dollar decreases in value against other world currencies.

But, our infrastructure, our public education systems, our already-mediocre health care networks, and just about everything will be dramatically affected by all of this, since there will be little or no money to service these basic societal needs above and beyond what's being spent now (or, where we cut back in the near future).

That is your basic deflationary spiral, as it's envisioned by Roubini in his most recent writings.

P.S.--Hollede, there is no such thing as a "stupid question!"

by bobswern 2008-09-14 09:37PM | 0 recs
Re: Two Words/One Person: Nouriel Roubini

Well I have seen plenty of stupid comments, fortunately none on this thread yet ;~)

I read the Roubini diary. The man sounds like a genius

by Hollede 2008-09-14 10:03PM | 0 recs
Deflation in home prices was needed

They were too high a few years ago given average incomes.  Excess supply and foreclosures are still driving them downward, but homes are selling again because they are now more affordable for Americans.  Within a year or so they should start rising again as more Americans take advantage of more affordable home ownership.

by lombard 2008-09-14 10:57PM | 0 recs
Do you know how hard it is...

...to even attempt to obtain a mortgage these days?

by bobswern 2008-09-14 11:09PM | 0 recs
Well, I just got one

It wasn't as hard as everyone was telling me it would be and the loan carries a very reasonable fixed rate by historical standards. But I bought a house comfortably within my means in the latter part of 2008 instead of paying 15%-25% more for the same house (or 50% more for a bigger, newer house) in 2005.  When some people kept saying one should buy 3 or 4 years ago, I said "I don't think so."  When housing goes up by double digits several years running you should know it is headed for a crash.    I've seen these cycles before (although this one surely appears to be the worst).  

by lombard 2008-09-15 06:51AM | 0 recs
Re: Deflation in home prices was needed

As bobswern said, no lender is right now in the position to take risk.  The homes may be more affordable (the sellers might be getting desperate) but the money isn't there.  Everyone is holding onto what they have until this plays out.

by doss 2008-09-15 12:04AM | 0 recs
Banks have to lend

That is what they do.  Go search for sold properties on an online listing site and, if prices have become reasonable in that area, you will see more houses selling that you may imagine.  Sure, credit has gotten tighter (it did need to get a little tighter than four or five years ago) but obtaining credit is obviously not impossible.  

All of the short sales and foreclosures have accelerated a price deflation resulting in the best market in a decade or more for buyers.  You are correct that there are fewer buyers but the credit situation may not be the main culprit.  The supply of a major source of home buyers (existing homeowners) may be severely depressed as those who bought their homes in 2002 or  later simply cannot sell their homes without losing too much money.  

by lombard 2008-09-15 07:01AM | 0 recs
Re: Two Words/One Person: Nouriel Roubini

well I do have to disagree with the idea of no such thing as a stupid question "seriously, is this snark" is a very deeply stupid question...

by zerosumgame 2008-09-15 06:48AM | 0 recs
But...

What will Sarah Palin do to help us?!

by Drummond 2008-09-14 09:44PM | 0 recs
Re: But...

Lead us in prayer.

by Shaun Appleby 2008-09-14 09:46PM | 0 recs
Re: But...

Don't you know that God will protect us!!!!

XOXOX

Sarah

by Hollede 2008-09-14 10:04PM | 0 recs
Re: But...

She's gonna get a gun and a chopper and shoot all those bears trying to keep this a bear market!!!

(My GOD, the woman is a Stephen Colbert sketch.)

by BrighidG 2008-09-15 12:26AM | 0 recs
Aw Brighid, you beat me to it.

                                                                                                 

by Dumbo 2008-09-15 02:31AM | 0 recs
Teach us all how to dress a moose

by benmasel 2008-09-15 02:58AM | 0 recs
Re: Teach us all how to dress a moose

the lipstick lessons alone would be interesting ;P

by zerosumgame 2008-09-15 06:48AM | 0 recs
Re: But...

Sarah Palin is going to get us back to basics.  Pray away the gay!

by Denny Crane 2008-09-15 06:56AM | 0 recs
More oil, more nat gas, drill-drill-drill

In the year of the crude oil shock, it would seem to make sense to bring in the Governor of Alaska: the state that provides 20% of our domestic supply of energy. Inflation is the cruelest tax of all, and increasing the supply of energy will lower the price. Even the Chinese Communists--who with Cuba's support will soon be drilling 90 miles off the Florida coast--understand that. In the three days following President Bush's lifting of the OCS drilling moratorium, the price of crude dropped from $147/barrel to $129.

Gov. Palin's successful negotiation of the 1700-mile natural gas pipeline was completed after it languished in AK's legislature for +20 years. I believe that's a significant accomplishment; when I've asked ardent Obama followers what his greatest achievement is, they tell me that he "helped out" on some Ethics Reform bill, which passed by unanimous consent.

by BJJ Fighter 2008-09-15 09:23AM | 0 recs
Re: More oil, more nat gas, drill-drill-drill

'The state that provides 20% of our domestic supply of energy?'  Republican talking point since disproved, the figure for Alaska is less than 3%.  And your swipe at Obama is soooo, like, 2007, man.

by Shaun Appleby 2008-09-15 02:14PM | 0 recs
Re: More oil, more nat gas, drill-drill-drill

You're confusing domestic production with total global supply. Check your numbers.

by BJJ Fighter 2008-09-15 09:35PM | 0 recs
Re: More oil, more nat gas, drill-drill-drill

Am I?:


Palin claims Alaska "produces nearly 20 percent of the U.S. domestic supply of energy." That's not true.

Alaska did produce 14 percent of all the oil from U.S. wells last year, but that's a far cry from all the "energy" produced in the U.S.

Alaska's share of domestic energy production was 3.5 percent, according to the official figures kept by the U.S. Energy Information Administration.

And if by "supply" Palin meant all the energy consumed in the U.S., and not just produced here, then Alaska's production accounted for only 2.4 percent.

Energetically Wrong FactCheck.org 12 Sep 08

Gosh, sorry...

by Shaun Appleby 2008-09-15 09:49PM | 0 recs
Re: More oil, more nat gas, drill-drill-drill

Yeah, it's made quite a difference.

by Drummond 2008-09-15 11:37PM | 0 recs
Bye, bye Wall Street

And it needs to be screamed to the world that the architect of this disaster, Phil Gramm, is still McSame's economic "expert."

by ObamaBiden 2008-09-14 10:03PM | 0 recs
Heh. My Bank

is not even posting the value of my paltry IRA. I pray that the people who were hit by Ike in Haiti and the Dominican Republic and Houston and Galveston and in 13 other states are not counting on relief from the government. They'll see just what it is like to be treated as a nothing, a no one who doesn't have gold or lots of cash. Kind of the way Republicans have smugly and viciously been treating "the undesirables" of this country ever since they were allowed to have any power.  You filthy undesireable people earning less than 5 million a year. Wait, you will be the poor wretched "victims" of a unavoidable disaster called Republican financial policies and leadership. Certainly those making over 5 million this last year will be bailed out. We are a compassionate country. I apologize for blaming the results of an "unavoidable disaster" on those who voted Republican. I might get pretty ill tempered if they do it again, however.

by Jeter 2008-09-14 10:33PM | 0 recs
Re: BREAKING: NY Times says,

The Clinton years will soon enough be considered America's last Golden Age.

I would like to believe that Obama-Biden can handle America's coming collapse, but while I shall be voting Obama-Biden, I believe that such an administration will be as clueless as is our current Democratic Congress, with every bit as low approval ratings as GWB.

The Obama folk never got it, and never shall.  They believe Reagan was an inspiring leader.  In fact, his administration inaugurated America's road to collapse--until Bill Clinton's terms put America brilliantly back on track.

Clinton was the greatest President since FDR.  I wish the best for the Obama folk, but I believe that even if there is to be an Obama administration, it will fail--as Pelosi and Reid have failed with their Congress.

The Clinton years were indeed America's last Golden Age.

by lambros 2008-09-15 01:36AM | 0 recs
Re: BREAKING: NY Times says,

A bit early to be writing the Obama administration's obituary, perhaps, but glad to have your vote, for all of our sakes.

by Shaun Appleby 2008-09-15 01:39AM | 0 recs
Re: BREAKING: NY Times says,

Reagan WAS an inspiring leader. They never said he was a GOOD leader. How exactly do you take "inspiring leader" to be an endorsement of his policies?

Read Obama's economic speech from March 2008 if you don't think he "gets it".

http://www.barackobama.com/2008/03/27/re marks_of_senator_barack_obam_54.php

by sab39 2008-09-15 06:14AM | 0 recs
Re: BREAKING: NY Times says,

Sorry that was intended to be a reply to the parent post, in case that wasn't obvious.

by sab39 2008-09-15 06:18AM | 0 recs
Re: BREAKING: NY Times says,

Clinton did some good, sure, but he also signed into law Phil Gramm's repeal of the Glass-Steagall act, which is what got us in this mess in the first place. I'm not sure whether it had a veto-proof majority, but I don't think so - I gather the vote in the Senate at least was along party lines, and I don't think the Repubs had a veto proof Senate majority in 1999.

by sab39 2008-09-15 06:22AM | 0 recs
So far, so good

I must say Wall Street seems to be handling this OK so far, and the European markets have recovered considerably in the last few hours.  Everybody had a bath but I think you could get away with calling this a 'correction' if everything hangs together for a few more days.

That's not to say the structural problems are any better but some of the urgent malignancies have been removed and the patient seems to still be breathing.

by Shaun Appleby 2008-09-15 07:44AM | 0 recs
Re: So far, so good

I went to bed before the NYSE closed and the results were far worse at the end of the day:


The Dow Jones industrial average lost more than 500 points, more than 4 percent, its steepest point drop since the day the stock market reopened after the Sept. 11, 2001, attacks. About $700 billion evaporated from retirement plans, government pension funds and other investment portfolios.

[...]

The Dow industrials dropped 504.48 points to close at 10,917.51, the first time since July they have finished under 11,000. It was the sixth-largest point drop ever and the worst since Sept. 17, 2001, when the average fell 684.81 points on the first day of trading after the terror attacks.

In percentage terms, the fall for the Dow on Monday was its worst since the summer of 2002. The index has shed nearly a quarter of its value since its record high last October.

Patrick Rizzo and Joe Del Bruno - Banking turmoil sends a shudder through Wall Street; Dow suffers biggest point drop since 2001 AP 15 Sep 08

$700 billion evaporated.  That's a savage loss and more worrisome is the comprehensive drubbing taken by commercial bank stocks nationwide, particularly the ones with doubtful balance sheets, their capitalisation just got eroded significantly and rating triggers could exacerbate the effect in coming days and weeks.  Regional banking failures are precisely not what we need right now.  

Methinks a lot also depends on the reaction of North Asian markets which were closed yesterday, we could still be in for a far deeper crisis than this one day of trading would seem to indicate.  Keep your seat-belts fastened and pay off your credit card.

by Shaun Appleby 2008-09-15 03:01PM | 0 recs
Bad, but not nearly as dire as you've suggested

The "bye, bye" alliteration is a little overdone, in my judgment:

--Merrill was bought by BAC at a 70% premium to it's closing price on Fri., ($29 vs. $17). This suggests that short sellers had driven the price down well below its fair value. BAC Chairman Ken Lewis is pretty shrewed, and would have no reason to overpay for the franchise. And you can't say "bye-bye", because Bank of America plans to keep the Merrill name, given the strength of its sales force.
--AIG is not asking for a bail-out; it's asking for a bridge loan from the Fed while it sells assets to raise capital. The reason that Lehman IS having to file for bankruptcy is that the Treasury has finally called an end to the gravy train, reasoning that some institutions must be allowed to fail. This will be good for the system, kind of like a purge after you have food poisoning.
--LEH is failing because of its own greed and hubris. Chairman Dick Fuld could have sold the company three weeks ago for $30/share, by some estimates. MER had the smarts to move early, before the ship started to go down.

Over 300 institutions failed during the S&L crisis, which is far greater than the number which have gone down in this cycle. And your remark about "the remaining funds in the FDIC getting eaten up" is so far from reality, it's downright irresponsible.

Even in the worst administrations, you can find something to be thankful for. Ben Bernanke and Hank Paulson are fairly brilliant, competent, and hard-working. We're fortunate that they are in charge right now. And FDIC Chairman Sheila Baer is pretty strong as well.

by BJJ Fighter 2008-09-15 08:50AM | 0 recs
Yep, that's right....

....this is all just an overreaction...everything's just peachy.

The fact that only two of the five largest broker-dealers on Wall Street are around, when all five were up and running six months ago is just in my imagination.

The fact that Alan Greenspan said the bailout of Freddie and Fannie is going to cost the U.S. taxpayer far, far more than we ever expect is just a bad dream.

And, the fact that whatever the stock market does on any given day is TOTALLY IRRELEVANT to everything I say in my diary and the entire matter, altogether, will not be repeated too often, either.

What the markets do on any given day is both totally disconnected from everything we're talking about here and immaterial. The stock market swings are completely irrational. Almost as irrational as the incompetence of the folks currently running this country.

Just go read a little Ilargi over at the Automatic Earth (http://www.automaticearth.blogspot.com) for more understanding of what I'm saying here.

The matters at hand--and your conflation thereof--are totally irrelevant and and unrelated.

Your ability to trivialize what has occurred is both absurd, and it flies in the face of even the most basic of comments made in the NY Times in the past 24 hours, as well.

Our financial services sector and banking community is fucked! That's a technical term. Sorry if it's above the paygrade of those too caught up in denying reality. But, it IS the truth.

by bobswern 2008-09-15 09:12AM | 0 recs
Re: Yep, that's right....

It's just your imagination! Quite whining and get therapy ;~]

by Hollede 2008-09-15 11:51AM | 0 recs
Re: Yep, that's right....

Or just click your heels together three times and say, there's no place like home, there's no place like home, there's no place like home. Then Glenda the Good Witch of the North will make everything better.

by Hollede 2008-09-15 11:58AM | 0 recs
Re: Bad, but not nearly as dire as you've suggeste

Fair comments all, but it's pretty safe to say the days of 'investment' banks operating independently of a commercial banking partner are over forever.  My two bits would be that this correlates to the significantly tighter regulatory operating environment of the commercial banking sector which kept their balance sheets relatively healthy and limited exposure.

It's ironic that the notorious deregulation of the investment banking sector irresistibly lured them into ridiculous leverage ratios, unsustainable risk and heavy losses, with the rest of the financial sector, not to mention taxpayers, eventually carrying the bill.  These were our 'captains of finance' and they were no more responsible for their own destiny than a bunch of kids raiding the lolly jar.

Even the free-market cowboys of Wall Street are wondering why deregulation was carried to such permissive extremes with such disastrous consequences.  And the AIG debacle is now demonstrating that lack of Federal insurance industry regulation has led some of their biggest players to follow closely behind in the stampede over the cliff.

by Shaun Appleby 2008-09-15 02:38PM | 0 recs
Hm

I agree with most of what you're saying here, but I think that you are being slightly too alarmist about Fifth Third/Nat City and the regional banks.  Most of their balance sheets are icky right now, but not icky to the point that WaMu is at, and even WaMu could still be ok, especially if JPMorganChase comes in and saves the day.

Or maybe I'm just being blindly optimistic, but your scenario of hundreds of regional banks collapsing just makes me shudder...

by gravypatrol 2008-09-15 10:32AM | 0 recs
I don't know what it's going to take...

...for people to understand what's going on here, but in a nutshell it's this: The financial services industry has been allowed to be unaccountable to the government throughout the Bush Administration. That's what has gotten us into this mess in the first place--Bush's laissez-faire mentality.

So, they've been misrepresenting the truly dire positions of their respective firms throughout this matter. Then the Bush cronies just repeat the lies to the public, and folks like many here still believe their bullshit.

Meanwhile, with every passing day, our grandchildren's future is being mortgaged to the hilt.

Go look at the following URL: http://www.bankimplode.com. You'll see this list...


    Writedowns and Chargeoffs at Major Banks and
    Financial Svces. Firms in Past Year:

    * Merrill Lynch - >$83.5B
    * Washington Mutual - $28.6B
    * National City - $14.9B
    * CIBC - $10.7B
    * Bank of Montreal - $1.2B
    * Deutsche Bank - $155.1B
    * Goldman Sachs - $84.2B
    * JP Morgan Chase - $20.1B
    * Morgan Stanley - $24B
    * Bank of America - $51.3B
    * Wachovia - $50.5B
    * UBS - $92.5B
    * Royal Bank of Scotland -$41.7B
    * Citigroup - $144.5B
    * BNP Paribas - $3.3B
    * Commerzbank - $1.06B
    * Societe Generale - $30.1B
    * HSBC Bank - $27.7B
    * Credit Suisse - $94.5 B
    * HBOS PLC - $19.0 B

And, here's just a little diddy from http://www.nakedcapitalism. com, on WaMu, a failure which is ABOUT to occur, which is going to put the FDIC in the red, adding more financial obligations to the taxpayers, since hundred more--by even the most conservative of estimates--banks are set to fail in coming weeks and months, as well.


Monday, September 15, 2008
WaMu Failure Could Trigger Extension of Deposit Guarantees
The alert have taken note that the failure of Washington Mutual, which looks increasingly likely, would consume the FDICs reserves and, as in the savings and loan crisis, force the agency to go hat in hand to Congress for more money.

But this is comparatively early in our burgeoning banking crisis for the bulwark of commercial banks to be tested. Worse, the concern is that uninsured depositors will flee weak banks, and in process, push more over the edge.

Many readers might think there is no reason for anyone to be so exposed. It's easy to divide one's deposits across many banks to remain below the $100,000 limit, right?

Not if you are a business. Many firms carry more than $100,000 in balances over the course of a month, particularly if they have a healthy payroll. And the requirements of payroll processing in particularly make it prohibitively expensive to operate multiple accounts. Although the Financial Times article does not address that issue, it does discuss that it may be necessary to increase the scope of FDIC insurance in this nervous environment.

From the Financial Times:
Attention has focused on the danger presented by the failure of Lehman Brothers. But the failure of a commercial bank such as Washington Mutual can have systemic consequences if it threatens a run on other weak banks....

The failure of a bank its size would test the strength of the US deposit insurance system and its ability to maintain the confidence of the nation's savers.

The US Federal Insurance Deposit Corporation covers the first $100,000 in deposits held by each individual in a given bank. As of June 30, 64 per cent of the total $7,000bn deposits were insured in the US - a much larger proportion than in the UK at the time when Northern Rock. the commercial bank, failed.

Nonetheless, this still leaves $2,500bn in uninsured deposits. If a high-profile failure causes these uninsured deposits to shift abruptly in a flight to safety, it could be highly destabilising for the banking system.

The US could be forced to adopt a de facto blanket guarantee on all bank deposits, as the UK did on a temporary basis during the Northern Rock crisis.

There are other precedents. At the start of the Asian financial crisis in the 1990s, the International Monetary Fund opposed extending deposit guarantees. But the IMF soon changed tack and told crisis-hit countries to issue full guarantees.

A formal blanket guarantee in the US would require legislation. But under a 1991 law, the FDIC could seek a systemic risk exemption to cover all the deposits of a failing institution, subject to the approval of its board, a supermajority of the Federal Reserve governors, and the Treasury secretary in consultation with the president.

The FDIC has no desire to invoke this authority...

The FDIC is respected for its operational effectiveness. But its $45bn deposit insurance fund is underfunded according to its own guidelines,....analysts fear it may have to draw on its $70bn Treasury credit lines. Alan Avery, a partner at Arnold and Porter, said a single failure - if big enough - "would cause the FDIC to immediately draw on the Treasury credit".

Washington Mutual had $143bn in insured deposits on June 30 - about three times the size of the deposit insurance fund, but less than half of its $307bn assets.


by bobswern 2008-09-15 11:17AM | 0 recs
Re: I don't know what it's going to take...

Yeah, those are some bad numbers, no doubt, but I can't really reach the level of worry about it that some folks are getting to.  

My reason?  

The fundamentals of the economy better be sound enough so that Obama and the Democratic Congress are able to implement some of their policies.  A complete collapse of other banking system obviously will not allow them to do so, and even an Obama victory would lead to some of the gloomiest years in our history.  

At any rate, I hope Bernanke knows what he is doing...  

by gravypatrol 2008-09-15 11:46AM | 0 recs
Black and white...

Citigroup, the largest bank in the U.S. had a stated net worth of approx. $100 billion in their last annual report. Since then, they've written down/charged-off more than $144 billion in loans.

DO THE MATH! (The rest of the world has. The only folks that don't get are the citizens of this country. Why? Because the government and the financial services sector have been cooking the books for so long, the reality is that we were in deep shit looooooong before this latest problem even arose.)

That bailout of Fannie and Freddie from 10 days ago? You remember, the one the government was trying to tell us would cost us $25 billion. It's BEST CASE result will be somewhere in the neighborhood of $300 to $500 billion in add'l expenses to the U.S. taxpayer. And, that's just one "small" bill in all of this mess. Don't believe me? Do a search on Alan Greenspan's public comments for the past few days and see what he's saying about it!

by bobswern 2008-09-15 12:13PM | 0 recs
Hope isn't a four letter word

Ok, say I DO THE MATH (which I have, but humor me).  

Tada!  I have miraculously come around to your world-view.  We are all screwed, the banks are all done, our children are screwed, our children's pets will be poorly fed and unclean, bacon costs will rise to unmanageable levels, leading to a horrifying adoption of turkey bacon as a standard breakfast meat, etc.

Now, the question is, what can I do about it?  Or are you just satisfied with being right, and proving me, the ignorant internet ignoramus, completely and totally wrong?  

You can quote me ratios/writedown levels and crippling taxpayer burdens all day, and my point still remains: if it's as bad as you say it is, we're all fucked, and all that we're trying to do in this election will mean much less, because basic individual economic survival will be the only thing anyone cares about.  Obama presidency or no, things will get ugly, and I've got too much on my plate to even consider that as a possibility.

Hope, dude.

by gravypatrol 2008-09-15 12:41PM | 0 recs
Re: Hope isn't a four letter word

Sorry, that was meant for the above thread.

by gravypatrol 2008-09-15 12:42PM | 0 recs
In a perverse way, this does...

...change the game in Obama's favor.

McCain's already acknowledged he knows nada about the economy.

Obama trots at all the former Bush economics folks (all the past Treasury Sec'ys, Greenspan, and Donaldson from the SEC, who are now supporting Obama, and they unanimously say: "McCain's freakin' clueless about this massive problem."

Where, as a society do we place our vote? The bumbleheads running on the GOP ticket, or with the greatest orator our country's seen in almost 50 years (at least)?

The answer's glaringly obvious. Who better to START (it's going to take more than one administration's terms in office to fix this) leading us out of this mess than the person advocating change and hope?

by bobswern 2008-09-15 01:26PM | 0 recs
Greenspan is now supporting Obama???

Thanks for the news flash. You should report this to CNBC, Bloomberg, etc, given that apparently, you're the first to scoop this story.

by BJJ Fighter 2008-09-15 09:32PM | 0 recs
Re: Greenspan is now supporting Obama???

Not sure that's an endorsement we want, frankly, but he's definitely cut bait with McCain.

by Shaun Appleby 2008-09-15 10:57PM | 0 recs

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