that would focus on (job-creating) infrastructure and transit improvements. And Treasury Secretary Paulson says the CONTINUED >>
Hi. More stuff on the stock market (a wilder ride than anything at Six Flags); the credit markets (harder to decipher than a Paul Thomas Anderson film); and the plot point no economic meltdown is complete without: the rogue trader (dude, where's my $7 billion?)
Between the Federal Reserve, the Executive Branch, Congress (working together.. gasp!), state regulators, the Government-Sponsored Enterprises (FannieMae, FreddieMac), Jim Cramer and Larry Kudlow, the powers-that-be are throwing everything including the kitchen sink at the equity markets, which have been tip-toeing a little too close to the abyss lately. Huge, surprise Fed Funds rate cuts, 2-minute drill stimulus packages, bond insurer bailout tirades and meetings, hikes in conforming loan limits, it's all coming, rapid fire. Will it be enough, or did the excesses of the past few years create so many problems that even the kitchen sink can't put out all the fires? Let's start with the bond insurers.
A couple of months ago, I spent a bunch of time trying to understand what a Structured Investment Vehicle was and whether the Treasury Secretary's idea of setting up a Super-SIV so banks could pool bad stuff they had parked in their SIVs in one place. A lot of reasonable people writing about the issue said the Super-SIV would never get off the ground, and it turned out, it didn't. No one wanted to invest in the Super-SIV, so the banks started repatriating what was in their off-balance sheet SIVs onto their books, and we all saw giant write-downs at bank after bank in Q4. Now there's talk of a bailout of a group of bond insurers called monolines, which used to provide plain-vanilla coverage to municipalities, but branched out into exotic credit derivatives during the last few years. That included insurance for bonds based on mortgage debt, which has now gone bad. The fear is that if the insurers default, it will have a really nasty ripple effect throughout the entire global financial system. The downgrade of one of those insurers, Ambac, on Friday may have been what triggered the global stock market freakout Monday and Tuesday.
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Hi. Hoo boy, the past few days make me wish I could just noodle around on this blog instead of attending to my actual job. We live interesting times, and this morning's stock market open was more exciting than a Giants field goal attempt at Lambeau (sorry Williams boys-- your boys are going down!) Since this space has been in an obessive-compulsive mode over the economy and the financial markets since last July, we'll just dispense with the obvious and start digging into what's under the surface. There's are big questions about what's really going on in the banking system and the financial markets now, and we'll try to ferret out the best the internet has to offer for some answers.
The obvious: the Fed (with one absent and one dissenter) cut the Fed Funds target rate by a whopping 75 basis points this morning, an hour before the stock market opened. It was the first emergency Fed Funds cut since September 17, 2001 and the biggest one since the FFT became the fed's main policy tool back in 1990. Was it a surprise? Sort of.. there was certainly a lot of speculation they'd do it based on the mondo-world-sell-off from the day before. Did it work? Well as we all saw, the Dow plunged 464 points then reversed, made it all the way to -38 and has been holding in the -100 points or so range for much of the day. So, stick save by the Fed.. an outright crash averted for today. (And the second time the market seemed to be heading into the abyss and was "saved" by an emergency cut-- the last one was the surprise Discount rate cut August 17. By the way, that was 1,108 Dow points ago.) But lots of question about what the Fed may really be looking at as it slashes away at the FFT, especially with demand for bank credit way, way down. Trying to parse what's going on behind the scenes, Russ Winter of the Wall Street Examiner channels Jerry Maguire and wants the banks to "Show Me the Moneeeeey!" And the Financial Armageddon blog take the deflationist side of the argument, which would explain agressive rate cuts in the face low interbank demand, high commodity prices and consumer inflation. On the fundamentals front, Bank of America and Wachovia reported earnings today. Or "earnings" might be more appropriate since they were bascially zero for the fourth quarter.
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Hi. After a break over the holidays, this twice-weekly tour of the internet and the blogosphere in particular is back. Did anything happen while I was out?
Oh yeah. People actually caucused and voted! Since you can get your fill of horserace and tactics coverage from innumerable sources, I'll just stick to the relentless and deserved bashing the media is taking in the wake of New Hampshire. Salon has two representative offerings up: Joe Conason takes the overall view of media hostility toward Hillary Clinton boomeranging (a phenomenon which has shown itself in the 800+ comments posted to Brian's essay on this very blog.) And Rebecca Traister looks at it from the female voters' point of view.
And Josh Marshall looks at Karl Rove's offering on Obama in today's WSJ and points to the "dog-whistle" words embedded therein.
Fed Chairman Ben Bernanke says the Fed is ready to aggressively lower the fed funds rate because "downside risks to the economy have become more pronounced." See Citi/Merrill below for more on the nature of the downside. BUT! (and there's always an ever-lovin' but, isn't there) the Chairman acknowledges that inflation pressures may be putting the fed's ability to slash at will into a nasty box. QUOTE: "...any tendency of inflation expectations to become unmoored or for the Fed’s inflation-fighting credibility to be eroded could greatly complicate the task of sustaining price stability and reduce the central bank’s policy flexibility to counter shortfalls in growth in the future." To quote a great American philosopher: D'oh!Read Bernanke here.
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Hi. Starting out today with the most interesting political story of the day, Republican presidential candidate Ron Paul's monster one-day haul of $4.2 million, all from a viral fund-raising campaign on the internet. Also, some bad news from some big banks, and the new must-have accessory for lazy geeks everywhere.
The Ron Paul haul took everyone by surprise, and Glenn Greenwald has a trenchant post about why so many people would flock to a long-time Congressman with highly unconventional views on a lot of issues-- Greenwald points out that his candidacy allows those who are deeply dissatisfied with the Washington Beltway establishment "to read into (his candidacy) whatever they want to see -- even if it isn't really there -- and to use the candidate as a proxy for their otherwise ignored and stigmatized causes." And outsidethebeltway rounds up a lot of the coverage from today and says the haul won't catapault Paul into actual contention for the nomination, but I'd argue that's not really the point.
Now it's on to the perils of Citigroup, beginning with a nice overview of the whole mortgage/credit meltdown situation from the Financial Times. Mike Mish Shedlock blogs at Minyanville about Citi's regulatory filing yesterday. And Dean Baker at the American Prospect points out that Citi's interim Chairman Robert Rubin made an eyebrow-raising request to his former colleagues at the Treasury Department just before Enron blew up.
What else to we have to be concerned about? Business Week's Matthew Goldstein on bond insurers. And Mish again, writing on his own blog Global Economics on how commercial real estate could be the next domino to fall.
One of the posters at MarketTicker pointed out a blog called Bits of News last night-- love it. Here's a droll essay on dinner roll economics. And a cogent argument on the latest batch of government numbers (GDP and job creation) titled: "How to Hide a Recession."
And if you're persuaded by Ian Welsh at the Agonist, the presidential candidates of both parties might want to be careful what they wish for, because according to his analysis, the next president will be the next Herbert Hoover.
And on that cheerful note, my longtime friend and colleague Brett Holey calls to our attention an item that's a must have for the 40 year old virgin in your life. Talk about the ultimate pop up!
Hi. So the stock market didn't hear the Halloween BOO! until this morning, but it was clear from the opening bell that fear is back, and Citigroup is wearing the scariest mask. Also, ganging up on Hillary Clinton, the AG and the torture debate, and Boston, you're my home.
The NYTimes reports on an analyst's estimate that Citigroup is facing a $30 billion capital shortfall which might lead it to cut its dividend or sell assets. And Reuters reports on Credit Suisse Q3 profits. After writedowns? Zero. Which puts them near the top of the Q3 class. Uh-oh Washington Mutual. Now it's criminal. Calculated Risk picks up on the New York Attornety General's investigation of the country's largest real estate appraisal company and Washington Mutual, allegedly conspiring to inflate propert values. And that's on top of THIS. And the NYPost's John Crudele (what makes me think they won't be booking him as a guest on FBN any time soon?) on the SEC poking around Goldman Sachs' miracle third-quarter profits that came from shorting mortgage debt (some of which they had a hand in originating) while the rest of the I-Banks were getting crushed.
The RealtyTrac foreclosure numbers are out and as you'd expect they were awful. Common Sense Forecaster has the release. And here's an interesting sign of the times on what it takes to seel your house these days.
A bunch of people took issue with yesterday's gangbusters GDP report, noting that the inflation measure contained therein was, ummm, not exactly credible. Crudele (again) sums up in plan language. Thanks to the BigPicture for introducing the term "quantum bogosity" in relation to this. But here's another more disturbing theory.
And everybody who was arguing after yesterday's GDP report and Fed Funds rate cut that the U.S. is in a "goldilocks economy," the American people don't seem to agree.
The Hill reports on a conference call of Hillary Clinton supporters, post-debate.
Sidney Blumenthal writes about AG nominee Michael Mukasey's short journey from restorer of integrity to waffler on torture. Macsmind doesn't think waterboarding is illegal, and thinks the Democrats are just posturing.
And finally, is this the greatest year any city has ever had, sports-wise? (JINX!)
Hi. Brian is getting ready to moderate what could be a dramatic face-off in Philly between the Democratic candidates, who are now watching Hillary Clinton threatening to lap them in the national polls. This against the backdrop of the first major-league big-shot casualty of the mortgage/credit mess. Also, weird email traffic from Iraq, and a Flight of the Conchords tribute to "toughness" in honor of tonight's battle on the mean streets of Philly. (OK on the verdant campus of Drexel U.)
So we all saw Obama telling the NYT that he's taking the gloves off over the weekend. Will he? Mark Murray points out that Clinton's camp has posted videos of Obama and Edwards pledging to be nice. The AP previews tonight's potential dust-ups.
Meanwhile, Merrill Lynch CEO Stanley O'Neal is out of his job today, less than a week after his company announced a Q3 writedown of $8.4 billion, which was nearly double what the company estimated just a week before that. Merrill got into the mortgage derivatives game late, and very aggressively, and now O'Neal becomes the higest profile casualty of the credit crisis so far. Well, casualty is probably not so appropriate, given his $160 million in parting gifts. Would that all our pension annuities alone would be worth $2 million a year. One of the lingering questions surrounding O'Neal's departure: what was that last-minute stealth cuddle up to Wachovia all about? One blogger has a guess.. and it's a scary one for Merrill. On the other hand, the NYT's Dealbook blog plumbs other reasons why that deal might have actually made sense.
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Hi. Will this end up being the most prescient blog post of the year? Even as the Bush Administration keeps saying, for the record, that they want diplomacy not war when it comes to Iran, the noise level on the war option keeps getting louder. Plus, a little politics, and when bad financial news is good.
The New Yorker's Sy Hersh started reporting on the possibilty of war with Iran in April of 2006. His latest update raises a scenario in which the U.S. strikes in a limited way against Iran's Revolutionary Guard Corps (who've just been designated a terrorist organization by the U.S. Congress) -- (P.S. We'll see your Guard and raise you one CIA) This is a scenario which Hersh's sources argue can be "sold" to the American people because of the Bush Administration's contention that the Guard is "killing our boys in Iraq." And speaking of Iraq, Hersh looks at the surge and sees it as a U.S. acceptance of ethnic cleansing. Mark Silva at Tribunes' The Swamp notes the White House reiteration of diplomacy not war in reaction to Hersh. And Downing Street denies it's on board.
The (London) Telegraph has the latest on alleged war preps: an air war training center set up in the UAE. And pronounces that the Neocons are on the march again. Chris Weigant games out what could happen after U.S. airstrikes. 5th Estate at Newshoggers takes a look at the big picture as well. The Jerusalem Post says Iran is threatening to attack 170 U.S. targets if it is hit. Glen Greenwald picked up on something the Washington Post's Dana Priest said last week.. that the only thing standing in the way of a military strike on Iran may be the military itself. Oh and the rollout goes Prime Time. And a Kos Diarist says make Congress decide.
Syrian President Assad told the BBC the target of Israel's mysterious strike was an unused military building. Here's AP's writeup of the interview. And Syria's Vice President comes right out and says the air raid was aimed at justifying a future attack. (Hat Tip: SyriaComment) Global Research says war is on the front burner. And here's a view from Israel (Hat tip: Cee in No Quarter comments)
And how ugly is the discourse over this getting? Check out Glen Greenwald's latest post, and the psychology behind the criticism of it. An speaking of ugly discourse.
Ben VanHeuvelen writes in Salon today about Blackwater's ties to the Bush Administration and the Christian Right.
Politics: while we're on the subject of the Christian Right, BulldogPundit muses on the threat to take their ball and go home. And the WSJ's Jackie Calmes reports on Page 1 today that all the focus on those social issues has changed the GOP brand.
Barack Obama, marking the 5th anniversary of the vote to authorize the war in Iraq, made some interesting points about the media in his speech today, which Greg Sargent picked up on.
It's a crazy world indeed when the biggest bank in the world announces its Q3 profits are taking a 60% hit and the Dow rallies to new all-time highs on the news. Ah yes-- now we can put all that credit crunch stuff behind us.
And the Mets historic collapse has inspired ESPN.com's often-inspired Sports Guy Bill Simmons to update his classic "levels of losing." Oh the pain!
Hi. Last night's debate on MSNBC has a lot of people using the words "Hillary" and "Inevitability..." but remember what the Sage of Montana Tom Brokaw always, always says about politics: UFO! the UnForseen will Occur! Also: looking back and forward on Iran, and the housing meltdown gets worse.. punctuated by a news report from Miami that's acheived instant icon status on the internet.
Salon's Tim Grieve lays out the moment where he thinks Hillary really turned into the front-runner (which included her endorsement of the Israeli strike on the alleged Syrian-North Korean nuclear facility. At least she "thinks" she knows that's what it was.) By the way, Senator Clinton also "thought she knew" Saddam Hussein had weapons of mass destruction and a nuclear weapons program back in 2002. Just sayin'. (and P.S. not "everybody" believed that stuff at the time.) Hugh Hewitt looked at the same exchange Tim Grieve looked at and pronounces Clinton "feckless." Powerline makes an argument heard in several places this morning: Clinton is running out the clock. But Andrew Sullivan thinks the perception of Clinton as Bionic Woman Who Cannot Be Stopped is overblown. Ed Morrissey at Captain's Quarters thinks the reason the Democrats wouldn't commit to leaving Iraq by-- gulp-- 2013 is because of... General Peteraus. And Blackfive points to a poll showing Americans disapprove of the General Betray-Us ad and tells the "haters on the anti team" to talk to the hand.
