Mercury Rising 鳯女

Politics, life, and other things that matter

Bad moon rising

Posted by Charles II on September 14, 2008

It’s good to remember, as we watch Black Monday unfold, that it could all have been prevented for about $100B by bailing out the little guy– people who took on mortgages in good faith because they wanted a place to raise their families.

Nouriel Roubini:

It is now clear that we are again – as we were in mid- March at the time of the Bear Stearns collapse – an epsilon away from a generalized run on most of the shadow banking system, especially the other major independent broker dealers (Lehman, Merrill Lynch, Morgan Stanley, Goldman Sachs). If Lehman does not find a buyer over the weekend and the counterparties of Lehman withdraw their credit lines on Monday (as they all will in the absence of a deal) you will have not only a collapse of Lehman but also the beginning of a run on the other independent broker dealers (Merrill Lynch first but also in sequence Goldman Sachs and Morgan Stanley and possibly even those broker dealers that are part of a larger commercial bank, I.e. JP Morgan and Citigroup). Then this run would lead to a massive systemic meltdown of the financial system.

(emphasis added)

Francesco Guerrera et al., FT:

Wall Street was in turmoil on Sunday as Merrill Lynch found shelter in a $44bn takeover by Bank of America and Lehman Brothers headed towards filing for bankruptcy….

BofA’s rapid U-turn, which saw it abandon talks to buy Lehman and move to Merrill in the space of a few hours, will throw the spotlight on Morgan Stanley and Goldman Sachs. The two could soon become the only independent investment banks in the US….

However, a deal could saddle BofA with more troubled assets. The bank bought the stricken mortgage-lender Countrywide and a purchase of Merrill would force it to clean up the bank’s trading books,which have already cost Merrill some $52bn in writedowns and credit losses.

Mr Thain, the former Goldman Sachs executive and former head of the New York Stock Exchange who joined Merrill last year after the departure of Stan O’Neal, is almost certain to leave the firm if the BofA takeover goes through.

He is a fervent supporter of John McCain, the Republican presidential candidate, and some experts expect him to seek a political career.

(emphasis added)

Well, of course. Precipitating the Great Depression of the 21st Century should have great voter appeal.

Update. And the pins continue to fall. Already the Euro and Yen have spiked about 2%. My guess is recent dollar strength/commodity weakness represented gains being brought home to finance a gigantic deleveraging of balance sheets. Once that ends, previous trends may continue, though the continuing fall in economic growth may keep commodities weak.

Hugh Son, Bloomberg (hat tip, Johnny Angel):

American International Group Inc., the insurer struggling to avoid credit downgrades, is seeking a $40 billion bridge loan from the Federal Reserve as it tries to sell assets, the New York Times reported.

The insurer has turned down a private-equity investment because it would have meant handing over control of the company, the Wall Street Journal said on its Web site, citing unnamed people. AIG may get access to the Fed’s borrowing window in an “extreme liquidity scare,” Citigroup Inc. analyst Joshua Shanker said in a Sept. 12 research note.

David Mildenberg and Bradley Keoun, Bloomberg:

Bank of America Corp. agreed to buy Merrill Lynch & Co. in a deal that values the 94-year-old firm at about $44 billion after its shares plummeted in the past week, two people familiar with the deal said.

It’s Black Monday on the East Coast and the sun just keeps rising.

4 Responses to “Bad moon rising”

  1. Stormcrow said

    The Lehman Brothers Chapter 11 is now official. H/T to Calculated Risk: Lehman Intends to File Bankruptcy.

    Here’s the Lehman Brothers press release, as a PDF: Lehman Brothers Holdings Inc. Announces It Intends to File Chapter 11 Bankruptcy Petition; No Other Lehman Brothers’ U.S. Subsidiaries or Affiliates, Including Its Broker-Dealer and Investment Management Subsidiaries, Are Included in the Filing.

  2. On the plus side, there will be less resistance to a major green energy public works initiative once the private economy is recognized as unsound, and it will be hard to blame anyone but the current administration for the present collapse.

  3. Stormcrow said

    Mahakal, you’re making the implicit assumption that the “undecided” voters are going to be making up their minds by some sort of rational thought process.

    Anybody with a working brain has already decided, long ago. The people who haven’t, yet, are living in a rosy pink fog.

    What they are liable to listen to is the hate machine, and it’s running on full throttle at this point.

    Oh, and Sarah Palin is so pretty, and she’s just like one of us.

    The fact that she’s stark raving insane and corrupt to boot isn’t even going to register.

    Get ready for 4 years of McCain. Or, more likely, 2 or 3 years, followed by a state funeral, followed by President Palin, followed by banana dictatorship for the rest of the foreseeable future.

  4. Charles said

    What wellspring of cheer do you drink out of, Stormcrow?

    The die is not cast. Probably a third of voters are making up their minds and will do so up through the week of the election. Palin’s brand of religion is not very popular, even on the right. Many fundamentalists regard Pentecostalism as suspect.

    It’s true that the electorate’s grasp of things is shallow. I would bet that a large number don’t know who the Republican is and who the Democrat is. I also know that there’s a concerted effort to blame the Democrats for the financial crisis, a matter I may blog about. It’s moderately sophisticated, superficially persuasive, and made the more credible by the collaboration of certain good government groups. A little more hard-headed analysis says that actually Republicans created the problems; Democrats just didn’t scream very loudly or turn down campaign contributions.

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