Rainy days and Monday’s
So, today is Black Monday. I’d say the Texican’s feel that way; Ike did major damage and tallied up as many as 15 lives, including some in the Midwest … here in the Patch, we got a dose of him over the weekend, with more flooding and destruction. Weather [most specifically water] is winnowing us away; but, like the skies, that’s only the Grey news.
Today is Black because of Lehman Bros. and Merrill Lynch and all the other banks waiting in line to panic; the Rich are freaking … it’ll take awhile to trickle down to the Average Joe/Jane who started panicking months ago and have more reality-base than Wall Street.
I think we should also note that it’s Black because the Pakistani government doesn’t like us much anymore, which gives us another [undeclared] war front; and Palin has further pissed off the Russians, so there’s a chilly wind blowing in from the Caucus now. Storms ahead there, I’d expect … and since our roof just blew off, there’s not much to stop the rain.
Grey can be found in the missed opportunity that business news is sweeping under the carpet, too — MSM has finally have enough of McMouth and his Lady Liar, and come out punching. But, no time to read the news when you’re running to the bank and checking your portfolio. Or maybe it’s not quite that Grey for the Dems, who knows — the Independent vote is often Libertarian, and those guys have already converted to gold and hidden their cache in the baseboards.
There’s no word in the English language as complicated and deeply rooted to who we think we are as “money,” except maybe “sex.” With both concepts in play, expect a lot of personal crisis around you, as people find themselves reassessing reality. And don’t have a meltdown yourself, dearhearts — we saw this coming years ago. It will be what it is; we don’t need to add anxiety to it. Trust your instinct, try not to lock up in fear or add to the hysteria.
This is a necessary step, a stick in the cogs of predatory capitalism; if capitalism is to survive, it will … like John McCain … have to find it’s honor again. Still, as the article from FireDog points out, we may need a flotation device — I’ll suggest hope; it floats, or so they say. In that regard, here is a short collection of clips and Tubes to help buoy you. [Note: the Palin counter-rally was half-again larger than her own speaking audience on Friday.]
You’ll find a financial collection below; mainstream, blogs, yadda. The last piece puts it all in perspective.
Alaska Women Reject Palin Rally
Tina Fey as Sarah Palin on SNL
Remember dearhearts — money is illusionary, especially American money [except for Libertarians, who can bite theirs, and bounce it against the wall.] It’s not our only resource — and it’s definately not The Source.
Jude
Greenspan On The Meltdown
“Perhaps a once-in-a-century event”
- Alan Greenspan
McCain On ‘Black Monday’: Fundamentals Of Our Economy Are Still Strong
September 15, 2008
John McCain may want to refine his economic message a bit more during this potentially disastrous week for the financial sector.
On the campaign trail in Jacksonville, Florida, the Senator declared this morning that “the fundamentals of our economy are strong,” despite what he described as “tremendous turmoil in our financial markets and Wall Street.”
The line may seem like GOP boilerplate, save for the fact that this morning, the McCain campaign released a television ad that began: “Our economy is in crisis.”
Moreover, with financial and job markets in disarray, and with Lehman Brothers, the troubled investment bank, filing for bankruptcy, it may not be the wisest political message to tell voters that the fundamentals are a-okay.
“You know,” said McCain, “there’s been tremendous turmoil in our financial markets and Wall Street and it is — people are frightened by these events. Our economy, I think, still the fundamentals of our economy are strong. But these are very, very difficult time. And I promise you, we will never put America in this position again. We will clean up Wall Street. We will reform government.”
Many conservatives and McCain supporters have argued, against the prevailing sentiment, that despite Wall Street’s failings, the economy is actually on firm footing. Donald Luskin, who described himself as “an adviser to John McCain’s campaign,” made such an argument in Sunday’s Washington Post. But despite modest growth and relatively low unemployment rates, many economists see dire signs in today’s economic landscape. On Sunday, former fed chairman Alan Greenspan said the market was the worst he had ever witnessed and predicted another major bank would close soon. Meanwhile, inflation is rising, real wages are declining, and the problems in the housing market persist.
McCain acknowledged, to various degrees, these topics in his Monday morning speech.
“I promise you we will never put America in this position again,” McCain said. “This is a failure. We’ve got take every action to build an environment of robust energy supplies, lower inflation, control health care costs, access to international markets, low taxes and reduce burden of government to allow people to move forward toward a future of prosperity.”
But his proclamation that the fundamentals of it all remained positive is surely music to Democratic ears.
UPDATE: Sure enough, Obama spokesman takes aim…
Today of all days, John McCain’s stubborn insistence that the ‘fundamentals of the economy are strong’ shows that he is disturbingly out of touch with what’s going in the lives of ordinary Americans. Even as his own ads try to convince him that the economy is in crisis, apparently his 26 years in Washington have left him incapable of understanding that the policies he supports have created an historic economic crisis. ++
Lehman bankruptcy shakes world financial system
Raw Story
Monday September 15, 2008
Lehman Brothers declared itself bankrupt Monday and Wall Street rival Merrill Lynch had to be taken over in a new financial earthquake that sent global markets into a slump.
The US Federal Reserve, European Central Bank and Bank of England injected tens of billions of dollars into money markets after the fall of the banking titans under the weight of the massive financing of bad loans.
Lehman Brothers said it would file for bankruptcy on Monday after a frantic weekend of negotiations failed to arrange a rescue.
In the fallout, Bank of America took over Merrill Lynch in a 50 billion dollar deal, insurance giant AIG was reported to have sought a massive emergency loan to head off its own crisis and a group of banks set up a 70 billion dollars global emergency fund.
“You’ve probably seen more in one day of financial history than we’ve seen since the great crash of 1929,” Macquarie Private Wealth associate director Marcus Droga said.
“I’m not suggesting the US market will crash tonight, but in terms of landmark events, it’s an historic day,” Droga told Dow Jones Newswires.
Despite reassurance from central banks, European and Asian stocks plunged by three to five percent, and the dollar fell.
The Federal Reserve eased conditions for collateral in return for the provision of funds to banks and said it was working “to identify potential market vulnerabilities in the wake of an unwinding of a major financial institution.”
The European Central Bank said it injected 30 billion euros (43 billion dollars) into money markets to keep them going after the Lehman collapse.
The Bank of England injected 5.0 billion pounds (6.3 billion euros/9.0 billion dollars) into short-term money markets.
“It seems clear that a category five storm is making landfall in the US financial system and a lot of very messy stuff is hitting the fan,” Michael Panzer, author of the book “Financial Armageddon,” said on his blog.
The Wall Street Journal warned in an editorial Monday that Americans should brace for “a very rough Monday” and called for more government actions in support of Wall Street.
Lehman said the bankruptcy was authorized by its board of directors and will take place at the US Bankruptcy Court for the Southern District of New York Monday.
The bank said in a statement it was acting “in order to protect its assets and maximize value.”
“Customers of Lehman Brothers, including customers of its wholly-owned subsidiary, Neuberger Berman Holdings LLC, may continue to trade or take other actions with respect to their accounts,” the statement said.
The bank lost an estimated 3.9 billion dollars (2.7 billion euros) in its fiscal third quarter amid fresh writedowns on mortgage assets.
Last-ditch efforts to find a buyer collapsed Sunday. A London source at British bank Barclays said it walked away from negotiations because of concerns it would have to guarantee the 158-year-old US firm’s trading commitments.
Bank of America said it was buying Merrill Lynch for 50 billion dollars in a transaction that creates the world’s largest financial services company.
The acquisition gives Bank of America the largest brokerage in the world with more than 20,000 advisers and 2.5 trillion dollars in client assets.
Treasury Secretary Henry Paulson, who took part in weekend discussions in New York, said the actions “will be critical to facilitating liquid, smooth functioning markets, and addressing potential concerns in the credit markets.”
Analysts expected Lehman’s bankruptcy to hit a range of companies dealing with the Wall Street giant and could worsen the global credit crunch.
The German finance ministry said links between German banks and Lehman Brothers were “manageable”.
Japan’s financial watchdog on ordered Lehman Brothers’ Japan unit to retain certain assets within Japan, it said in a statement.
The US Securities and Exchange Commission said it was “taking actions” to protect the deposits of Lehman’s customers, who are protected by SEC rules and an insurance fund.
In a related action, a consortium of 10 global commercial and investment banks announced plans to provide 70 billion dollars to help offset a credit squeeze.
Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, and UBS, said in a joint statement they “initiated a series of actions to help enhance liquidity and mitigate the unprecedented volatility and other challenges affecting global equity and debt markets.”
They also said they would work together “to help facilitate an orderly resolution” of the derivatives exposures between Lehman Brothers and its counterparties.
“These actions reflect the extraordinary market environment,” the statement said.
Meanwhile, The New York Times reported that AIG was seeking a 40 billion-dollar bridge loan from the Federal Reserve in the face of a possible downgrade from credit ratings agencies that could spell its doom. ++
Please find something to use as a flotation device
Attaturk, FireDogLake
Monday September 15, 2008
I’m no economist, but to paraphrase the immortal (not even in the Schuyler Colfax sense) Sarah Palin, I’ve had money so that makes me a freakin’ economics expert. Therefore, as a newly ordained economist let me say this sure seems like it’s going to be bad:
According to people briefed on the matter, Lehman Brothers will file for bankruptcy protection on Sunday night, in the largest failure of an investment bank since the collapse of Drexel Burnham Lambert 18 years ago…
But wait, that’s not all:
Because of the harsher treatment that federal bankruptcy law applies to financial-services firm, Lehman cannot hope to reorganize and survive as a going concern. It will instead liquidate its holdings…Moreover, changes to the bankruptcy code mean that counterparties to Lehman’s credit-default swaps can seize their collateral at any time, posing an enormous potential risk to the entire financial markets. Investment banks, hedge funds and other financial players labored throughout Sunday to offset their exposure to Lehman, moving their contracts to other firms.
But now how much will you pay?
Ten of the world’s big banks have kicked in 70 billion into a liquidity fund, not to buy Lehman but to shore up the market tomorrow.
Hey, that’s like six-months in Iraq!
ACT! now, before it’s too late!
American International Group Inc CEO Robert Willumstad turned down a private equity infusion and turned to the Federal Reserve for help, the Wall Street Journal, citing people familiar with the situation, reported Sunday.
Why should a capitalist rely on capitalism, when capitalism is so mean to them?
The American International Group is seeking a $40 billion bridge loan from the Federal Reserve
Wait a minute, that’s about three and a half-months in Iraq.
Financing for all these months in Iraq doesn’t just grow on trees you know.
[stop, check Google to make sure this is right]
Let me rephrase, we need to save those trees for Iraq occupation money only!
Remember, if you call today, they’ll throw in a genuine set of ginsu seppuku knives!
This uncomfortably high-chance of financial collapse is brought to you by the folks who are John McCain’s economic advisers, truly. And for an example of “just” how on top of it all McCain’s folks really are, see his advisor Donald Luskin just yesterday in the Post. ++
Lehman’s Collapse Rattles the Really Rich
Vicky Ward, HuffPo
September 15, 2008
The phone has rung off the hook all weekend. “Are you OK?” I’ve asked friends whose husbands have been at Lehman Brothers. No, of course they are not. They just saw everything they’ve worked for go down the drain. A lunch barbecue with a Lehman executive who has been there 16 years was canceled. No explanation needed.
The Saturday papers predicted the end of other institutions, too: Merrill Lynch, AIG. On Sunday morning one of my savviest investor friends told me not to worry about Merrill Lynch. He said it had too many good parts to implode. He had seen John Thain, the chief, very recently and had a long talk. Thain had said his bank was too valuable to go under.
By Sunday night my friend was on the phone again. Now, the news was that the Bank of America was ready to buy Merrill at $29 a share. Given that Merrill’s share price had fallen to $17 on Friday, this news, said my friend, proved that he and Thain had been right.
Sort of. We live in terrifying times. Even the election is not as much of a distraction as it should be from the economic pandemonium we are experiencing. At lunch and at dinner we all debate whether the panic is manufactured or whether a collective mental panic has always played an integral role in recessions, regardless of what the reality is.
Ordinarily people might be wondering about other things right now. For instance, there is artist Damien Hirst’s brash step of cutting out the middle man in selling his works; there is the huge exhibition of contemporary art in Russia on Wednesday.
Soon Daniel Radcliffe comes to Broadway in Equus. We’re ending fashion week. But women talked not about clothes but about children, schools and how stressed their husbands were.
Until this week I’ve never heard really rich people — as in billionaires — sound scared. But now they do. Sure, they say, it’s no time to be panicking. Stay calm and there are fortunes to be made. There are lots of assets going cheap and some people are going to get rich.
But for most of us it is time to hunker down. Time to hope we don’t get that phone call: “Are you OK?” The answer, for all of us in New York, is no, we are not. ++
Toxic Lehman
Reasons to Cheer the Fall of a Giant
PETER MORICI, CounterPunch
September 15, 2008
Lehman Brothers appears headed for liquidation and that may hasten needed reforms on Wall Street.
Efforts to find a buyer or dismember the company in an orderly fashion failed this weekend for the same reasons that CEO Richard Fuld’s earlier proposal to reorganize Lehman generated little enthusiasm.
Lehman has a negative net worth. Any accounting that said otherwise to create a deal would have been a fantasy of Wall Street bankers who refused to reckon with the full scope of their conundrum.
Fuld proposed selling Lehman’s toxic real estate and mortgage-backed securities and taking huge write downs, and selling its lucrative investment management unit, which includes Neuberger Berman, to offset those losses.
That would have left intact Lehman’s investment banking business.
An investment bank really only has three things—working capital, smart finance guys and client trust.
Capital can be raised and American business schools educate lots of sharp minds. Trust is tougher to find.
In the world of mergers and acquisitions, initial stock and bond offerings, and the like, clients often navigate complicated, perilous transactions requiring complete confidence in the integrity of their investment bankers.
After all of Fuld’s shenanigans in real estate and mortgage- backed securities, only a foolish CEO would trust Lehman to handle his prized assets. Hence, Lehman’s investment banking business is not worth much in the hands of its current management.
Less its toxic real estate assets and investment management unit, Lehman’s only real value is its client relationships. Those must be transferred to a more trustworthy firm to have any value.
No other large firm could buy Lehman whole—its toxic real estate and securities are too difficult to value. Only a fool would think he could fairly assess their value, unless those are assigned them a value of zero.
Most of the major banks hold similar toxic assets. If another major financial firm enters similar straits as Lehman, which is likely, the second fire sale would mandate an even lower book value for Lehman’s mortgage-backed securities than could be assigned now.
This explains why one of the solutions offered stalled—peeling off Lehman’s investment bank and investment management unit for sale, creating another bank holding with its toxic assets, and shoring up the latter with cash injections from other banks.
Most other banks need all the cash they have to cover their own bad securities, and any money they put into a crippled holding company would likely just be lost.
Federal Reserve loans to such a holding company would have led to bailing most of the money center banks and securities companies out with subsidies up to $400 billion. Broadly speaking several Wall Street firms are likely as insolvent as Lehman, and its demise may siren a broader financial sector restructuring.
Sunday, the International Swaps and Derivatives Association held a special trading to help banks and securities companies unwind their counterparty deals with Lehman. It remains to be seen how successful that effort was, but stock market turbulence is certain to follow. Nevertheless, that turbulence is a necessary cost to force positive reforms in the U.S. financial sector.
Lehman executives will find it difficult to replicate their generous compensation elsewhere but the readjustment of banking compensation to more realistic levels and responsible schemes is necessary to return Wall Street to sanity.
Performance-based compensation practices at Lehman and throughout Wall Street, which pay big bonuses when bankers bet right but only imposes losses on shareholders when they bet wrong, has propagated the kind of toxic financial engineering that caused mortgage-backed securities meltdown, general credit crisis, and the near death experience of many Wall Street banks and securities dealers.
Paying bankers more reasonably is as necessary to restoring the normal operation of credit markets as the general deleveraging Ben Bernanke talks about.
Sadly, Vikram Pandit at Citigroup, John Thane at Merrill Lynch, and others can’t let go of the delusion that their 35-year old MBAs are worth as much as New York Yankee shortstop Derek Jeter and they in turn are worth multiples of that.
The shareholder value they have destroyed repudiates that conclusion.
As Lehman exits, attention now turns to AIG and Merrill Lynch. They will likely be reorganized, acquired, broken up or go through bankruptcy.
Sooner or later after enough dominos fall, compensation structures and business practices will return to more conservative norms of ten and twenty years ago. Only then will the credit crisis resolve and the economy have a decent shot at full recovery. ++
Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission.
The End of the Myths
Bill Noxid, Information Clearing House
14/09/08
It took a particularly long time to find any hint of reality on television yesterday. I decided that I wasn’t interested in watching the still complicit media and criminally culpable government pretend to morn the deaths of September 11, so my options were even more limited than usual. All of the cable networks were obviously covering themselves ( MSNBC even went as far as to cover itself covering itself minute by minute seven years ago ) and CSPAN was at the Pentagon. What fantastic choices… a seven year ditch or a false-flag memorial park. Therefore, unless I felt like tracking Ike, CNBC financial was my only remaining option.
To my surprise however, CNBC turned out to be a reasonably good choice. Not that the unfortunate masses of this country would know about anything other than lipstick and pigs but this imaginary economy is collapsing like the house of cards that it is, and they were actually talking about it for a change. I suspect after eight years of blowing smoke up each other’s behinds about how great the economy is, they’ve run out of ways to convince themselves this isn’t really happening. Even Jim Cramer, when asked by Erin Burnett if we were really at risk of Great Depression II, gave a very enthusiastic full body nod in the affirmative…
Obviously, this shouldn’t come as a surprise to anyone anyway. It’s been developing for quite a long time. Eight years of stealing your children’s futures to pay for killing someone else’s children while you allow your own ability to produce anything to be shuttled off to the next generation corporate slave countries, does not make for a healthy economy. If you didn’t care so much about flag pins, ceiling cracks, and pastors, you might have noticed. Not that they are helping you understand anything - considering they control all major media outlets and political parties, but that shouldn’t come as a surprise either. Their only intent is to feed your ego and keep you stupid, so ( as you can plainly see ) you don’t even notice when they are taking your lives and livelihood.
To be perfectly honest, it’s even hard for me to believe how much damage ( or how much success - depending on how you look at it ) they fashioned in a mere eight years… and I saw it coming a decade before that. They took virtually all of your rights, all of your future, all of your money, all of your health, all of your respect, and all of your dignity, and yet some of you would still rather hear how great this country is than accept the truth about what is happening and why. It’s the impenetrable American egotism that has led to this abyss and that has led you to be the least educated, most imprisoned, least healthy, most destructive, least honest, most hated populous and culture in the history of the world… and that is no small feat on this planet.
Believe it or not, I used to accept the myth they disseminate in this country (and force on the rest of the world) too. Unfortunately, the truth of the matter is everything they taught you was cover story for the criminal and diabolical enterprises you know as finance and government. As you should be able to discern from the hundreds of billions of dollars in “write-downs” (lost, stolen, and imaginary value) and the hundreds of billions of dollars in bail-outs (tax-slaves having no say in giving them back the money they have already stolen in order to perpetuate the illusion of an economy), criminal enterprise is exactly what it is.
If it’s any consolation, we are hardly alone. All of us on this planet are in the same predicament. The corporation purchased all of our governments a long time ago, and that should be obvious to everyone - by now. Think for a moment… When is the last time you saw a government take genuine action on behalf of its people that it couldn’t reap ludicrous power and profit from? The only (theoretical purpose of government is to tend to the needs and advancement of its people, but find yourself discarded by the corporation or get swindled out of your house by the mortgage syndicate and you’ll find out very quickly what assistance the government won’t have for you, and who’s side they are actually on. They are quick to bail each other out to the tune of hundreds of billions of dollars of your money, but if you are in need of a couple of bucks after a hurricane - you’re out of luck.
Go to C-SPAN.org and take a look at the latest hearing on the wonderful new Medicaid system they have developed for you, if you need another example. If it wasn’t so tragic, it would be hilarious. You can expect to quite literally die on the phone trying to get help from a system specifically designed to ensure that you don’t get the help. You, your children, and your children’s children pay before they are even born for every crime and scam they perpetrate on the masses, and all you’ll receive in return is speeches about flags, forefathers, patriotism, and your bootstraps…
Yet in spite of all of this empirical and inescapable every day evidence, there are those that still cling (yes, that right… I said cling) to the shallow mythologies that justify their continued denial of their own behavior, and the enslavement and molestation of the peoples and lands of this world… all while claiming to know and serve God.
A key component of the intentionally missed message of Reverend Wright was that:
“To say “I am a Christian” is not enough. Why? Because the Christianity of the slaveholder is not the Christianity of the slave. The God to whom the slaveholders pray as they ride on the decks of the slave ship is not the God to whom the enslaved are praying as they ride beneath the decks on that slave ship.”
No true follower of God could make a distinction on something as primitive as shade of skin, and call one Son and one Not, yet you have built an entire society and global economy on exactly that belief. It is the only way such a shallow mind could justify the atrocities you commit and condone against your own kind on this planet. You claim to understand the reality that God knows your every thought and action, yet you think what you think, and you do what you do.
Worst above all things, you still think you’re the highest and only form of intelligence created by God. Your arrogance is only matched by your stupidity. It doesn’t phase you one bit that in order to create a world small enough for you to be king, you have to negate hundreds of billions of years of reality and civilization on this planet alone, just so you can believe you walked with your pet dinosaurs in fig leaves like Fred and Wilma - before there were people of color… By far, the funniest myth of all.
But before you get too offended (I know, far too late for that), bear in mind that I am one of you (sort of), and I am on your side. The side of Mankind, that is. Coming to this awareness about my own country, planet, and species was no comfortable journey for me either, but it is necessary to understand in order to evolve. The alternative of living a lie and serving the corporations that purposefully suppress and poison the true nature of this glorious planet and all of its inhabitants was just not mentally, physically, or spiritually an option for me anymore.
Believe me when I tell you… It’s not an option for you anymore either. The Universe is watching and you cannot afford to wait one more second to face the truth. It is imperative that you become the stewards and contributors to the Universal Consciousness that you are designed to be, before you face the threat of the end of your time on Earth. ++
“So keep fightin’ for freedom and justice, beloveds, but don’t you forget to have fun doin’ it. Lord, let your laughter ring forth. Be outrageous, ridicule the fraidy-cats, rejoice in all the oddities that freedom can produce. And when you get through kickin’ ass and celebratin’ the sheer joy of a good fight, be sure to tell those who come after how much fun it was.”
~ Molly Ivins, 1944 - 2007
In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.
1 comment September 15th, 2008