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Henry Paulson ends bailouts, saying, ‘Mission accomplished!’

… while Rahm Emanuel reads Wall Street CEOs the riot act

Across the nation, Americans are celebrating the end of the Wall Street War. The big bankers are saved!

No more bailouts, says Henry Paulson.

In “Has the worst of financial crisis passed? Paulson says yes,” McClatchy’s Kevin G. Hall writes this morning:

Taking care not to declare victory, the chairman of the Federal Reserve and the secretary of the treasury told Congress on Tuesday that the unprecedented rescue efforts over the past eight weeks appear to have prevented the collapse of financial markets and returned them to a semblance of normalcy.

Yes, if by “normalcy” you mean astounding numbers of foreclosures, massive budget cuts in every state from South Dakota to South Carolina, layoffs of hundreds of thousands of people, outrageously high mortgage payments still due on houses that are suddenly worth nothing.

In essence, Paulson really did declare victory. Now, who exactly is going to make Wall Street safe for democracy?

Listening to Paulson announce the end of the Great Bailout of ’08 is like listening to George W. Bush on May 1, 2003, when he declared, “Mission accomplished!”

One difference: Bush was in his cute little military playsuit, and Paulson was wearing his normal coat and tie.

One similarity: More Americans have suffered in Iraq since Bush declared victory, and more Americans will be suffering here in the States since Paulson’s hailing of a return to normalcy.

One big difference: In Iraq, the government at least tried to stop suicide bombers or hunted down their colleagues afterwards.

Over here, it was the investment bankers who blew up Wall Street, and the federal government stepped in to hand over billions of dollars to help those suicide bombers who survived.

Paulson patched the potholes on Wall Street — mission accomplished. What about the collateral damage? Helpless civilians in Iraq, helpless civilians here in the States.

Not only are Americans losing their homes at record rates, but the collateral damage from Wall Street’s suicidal behavior is immense. States and cities have drastically slashed budgets, which means that vital public services like education, health, and mass transit are of course the first to go. Who’s fraggin’ whom?

Contrary to what Paulson says, the war is not over, despite the fact that Wall Street is pulling out jobs from under us.

One sign that the conflict isn’t over is that for the first time in decades, an emissary of a U.S. president came to Wall Street and read CEOs the riot act. Straight up, Rahm Emanuel called on them to support — gasp! — universal health care.

What is he, some sort of Commie?

In “Emanuel Sets a Challenge,” the Wall Street Journal‘s Jonathan Weisman writes:

Since the president-elect named Mr. Emanuel his chief of staff, the famously voluble Chicago congressman has limited his public appearances and strained to stay out of the news. But on Tuesday night, he was combative with a business audience.

He was asked his views on the push by labor unions to allow workplaces to be organized with the signing of cards attesting to union support rather than a secret ballot. Mr. Emanuel declined to say whether the White House would support the legislation, but he said the unions are addressing the concerns of a middle class that has seen U.S. median income slide over the past eight years, while health care, energy and education costs have soared.

He said business leaders should help find solutions to the middle-class squeeze or face a revolt. “We need a strategy as a country to make sure they have an opportunity to move up that ladder,” he said. . . .

He stressed that the new administration would “throw long and deep,” taking advantage of the economic crisis to push wholesale changes in health care, taxes, financial re-regulation and energy. “The American people in two successive elections have voted for change, and change cannot be allowed to die on the doorsteps of Washington,” Mr. Emanuel said.

True, Emanuel also left the big cigars with a we’re-all-in-this-together message:

“I want you to know, I’ve got your back,” he told them. “I’ll feel better knowing that you’ve got my back.”

You can only hope that Emanuel, said to be a ruthless operative, was simply channeling the similarly ruthless Michael Corleone‘s words to Frankie Five Angels, “Keep your friends close — and your enemies closer.”

If Emanuel’s true to his words of praise for unions looking out for the middle class while businessmen aren’t, then these CEOs had better watch their own backs.

If there’s no CEO currently within your reach, take a stab at these stories . . .

NO PARTICULAR ORDER:

N.Y. Times: ‘For More of Mexico’s Wealthy, Cost of Living Includes Guards’

Jewish Daily Forward: ‘Yid Vid: Natalie Portman and Rashida Jones Address the Economic Crisis’

A Glimpse of the World (Howard W. French): ‘Obama and Africa: The Change We Have Been Waiting For?’

[A] new war looms in the Congo, a place where unbeknown to most Americans the United States has played a critical and mostly disastrous role since independence from Belgium in 1960. According to respectable international estimates some four million people have died in the Congo as a result of wars there since 1996, the greatest toll anywhere since World War II.

There is a powerful argument to be made that this disaster, along with the Rwandan genocide that preceded it, is Bill Clinton’s most important foreign policy legacy, and an Obama policy toward Africa run by many of the same people and carrying forward Clinton era thinking would be a sign of disdain for the continent and its problems.

McClatchy: ‘Why not let Detroit’s Big Three go bankrupt?’

N.Y. Daily News: ‘MTA’s in fast lane for big hike’

Express bus riders are looking at $7.50 per trip, up from $5, under the plan being released by the MTA tomorrow, according to sources.

“What, are they insane?” Liz Salsbury said as she boarded an express bus to Queens in midtown Tuesday.

McClatchy: ‘America could get its first black attorney general’

Wall Street Journal: ‘Emanuel Sets a Challenge’

President-elect Barack Obama’s incoming White House chief of staff challenged chief executives and other business leaders Tuesday night to join the new administration in a push for universal health care, saying incremental increases in coverage won’t be acceptable.

McClatchy: ‘Taxpayers will pay for Gonzales’ private attorney’

McClatchy: ‘Under Iraq troop pact, U.S. can’t leave any forces behind’

N.Y. Daily News: ‘Court clerk indicted in mortgage scam’

McClatchy: ‘Has the worst of financial crisis passed? Paulson says yes.’

Washington Post: ‘Why Clinton Can’t Decide’

N.Y. Daily News: ‘Ex-Clinton deputy Holder hailed as “smart” and “fair” guy’

N.Y. Times: ‘Holder Seen as Justice Choice as Obama Forms Team’

N.Y. Daily News: ‘Teachers rule again: School jobs steady as others decline’

Wall Street Journal: ‘Top Traders Still Expect the Cash: Wall Street CEOs Are Giving Up Pay, but Hotshots Are Another Story’

 

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Daily Flog: Break out the campaign! Party at the Waldorf!

Count the ways that Americans are cooked: Obama and McCain roast, the markets boil dry, Google sops up the gravy.

At last we have a slogan for this century’s depression: United We Fall! Last night was a celebration of our one-party system, and what a party it was.

The Al Smith Dinner at the Waldorf was a prime example of the lame leading the blind.

Were the candidates themselves cooking?

My colleague Roy Edroso delivered the best post-dinner punch line:

But seriously, folks, these guys kinda suck. We give the edge to McCain, but that’s like saying Jeff Foxworthy is funnier than Bill Engvall.

Oh, SNAP! Still haven’t gotten a review of the dinner from the Survivors’ Network of those Abused by Priests.

But after you take a look at the photo of Cardinal Egan heartily laughing with John McCain and Barack Obama and you read the New York Times tiresome recap (like everyone else’s) of the jokes, browse SNAP’s library of stories about abused altar boys and shuttered churches in poor areas. Or go straight to a reprint of a 2003 Times story, “Cardinal Egan Spurns Members of Review Board Studying Abuse.”

That one’s a real knee-slapper.

At least Obama and McCain were funnier than John Kerry was at the 2004 dinner. Actually, Kerry didn’t even get a chance to display his humorless personality because Egan didn’t invite the candidates. That was because of the Catholic Kerry’s stance on abortion.

And in 1996, the candidates weren’t invited because Cardinal O’Connor was pissed off at Bill Clinton over abortion.

Good thing 2001 wasn’t a presidential election year, Wall Street being bombed and all.

This year, Wall Street’s bombing itself, and more (but slower) deaths can only result from the resulting depression into which we’re sinking.

Speaking of leftovers . . .

NO PARTICULAR ORDER:

McClatchy: ‘3rd-party debate’s only confirmed participant: the moderator’

N.Y. Daily News: ‘Where you sit says a lot about where you stand at annual Al Smith dinner’

Politico: ‘McCain, Obama try to be funny…on purpose’

Washington Post: ‘Life’s Basics More of a Stretch: Inflation, Stagnating Pay Squeeze Low-Wage Workers’

McClatchy: ‘ “Birthplace of Flight” is on bleeding edge of job losses’

Wall Street Journal: ‘Financial Crisis May Diminish American Sway’

Wall Street Journal: ‘Oil’s Slide Deepens as Downturn Triggers Sharp Drop in Demand’

BBC: ‘US industrial output down sharply’

McClatchy: ‘Google’s Net Climbs 26 Percent’

McClatchy: ‘Private sector loans, not Fannie or Freddie, triggered crisis’

BBC: ‘European shares lose early gains’

BBC: ‘China press freedoms due to end’

N.Y. Daily News: ‘Nude portrait of Sarah Palin hung in Chicago tavern’

BBC: ‘Police battle police in Brazil’

Slate: ‘Dubya, Stoned’

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Daily Flog: Future heads toward a sharp loss; robot monkeys mesmerized by TV

The only market in New York City still functioning is the farmers’ market in Union Square — at least it’d better be when I stop by later this morning to buy something from Apple Mary.

Wall Street? Don’t even go there. Yesterday was its worst day since 1987 or 1937 or 1934, or 1642, depending on which panic-stricken “expert” you listen to.

Things continue to be “unprecedented” — a word that, as I’ve noted, pops up everywhere but unfortunately is not overused. What could be scarier than that? The Wall Street Journal trumpets one of its excellent stories this morning this way:

“U.S. Weighs Backing All Bank Deposits”

U.S. officials are discussing temporarily backing all U.S. bank deposits if economic conditions continue to worsen, a move that would mark another unprecedented step.

Depression? How about psychosis? Everywhere but in China, which stands to take over the world economy a lot sooner than expected. Only there are government officials able to step back and watch while Wall Street burns down and the fire spreads elsewhere. See McClatchy’s ‘China sits out global crisis, focusing on own growth.’

Here? Nothing but panic in the financial markets, and the shit’s already rolling downhill. Return to America’s best newspaper chain and see McClatchy’s Kevin G. Hall: ‘American heartland is suffering from Wall Street’s woes.’

As for people who have to wear ties every day, the Washington Post‘s “Fears of Recession Deepen Rout: Stock Decline Sweeps Through All U.S. Sectors and Pummels Asian Markets,” is stuffed full of paragraphs like this one:

“I’ve never seen a panic like this,” said David Wyss, chief economist at Standard & Poor’s. “I’ve seen stock market drops, but not an overall panic.”

Don’t go farther south into lower Manhattan than the Village Pet Store and Charcoal Grill in the Village, where you can see the mysterious artist Banksy‘s exhibit of robotic pet hot dogs.

Read the N.Y. Times piece “Where Fish Sticks Swim Free and Chicken Nuggets Self-Dip,” if you want, but stop by for what might be the most pertinent image: a robot rhesus monkey sitting with headphones on, mesmerized by a TV screen. He’s supposed to be watching porn, but he’s probably watching the BBC.

Perhaps the person who has the best perspective on the situation is Seth Glickenhaus, who was around during the Great Depression’s inception. At 94, he’s still picking stocks for his investment firm.

Exactly two years ago today, Barron‘s Sandra Ward extracted this overall analysis — mostly accurate — from Glickenhaus (read it at seekingalpha.com):

He’s negative on the economy, citing: 1) High oil prices. 2) High insurance costs. 3) People holding adjustable-rate mortgages about to be hit with big increases. 4) Housing market decline. 5) Huge income disparity.
• “We are clearly at the end of [interest] rate increases.”
• Companies are better managed today, and adjust to problems faster.
• Federal spending is dismally distorted toward military; talk of deficit reduction is absurd.
• War spending takes money away from constructive parts of market.
• He thinks the public is fed-up with Bush. • Oil might hit $200—in 2200!
• Japan and Europe will stagnate; India and China will continue to grow.
• He’s more worried about deflation than inflation.

OK, so companies aren’t better managed and they aren’t adjusting faster. But Glickenhaus makes you think: You want to end the war in Iraq? Maybe we’ll be too broke and will have to bring our troops home. Maybe when they get back here, they’ll have to defend D.C. against a new Bonus Army. Maybe they’ll want to stay over there rather than return to the U.S. only to find their families sitting on the curb after losing their homes. No, they’ll surely want to get out of Iraq, even if it means they’ll have to go on guard duty at banks here.

Only slightly less fearful than Iraq is the global panic, because there aren’t any more poorhouses for us to go to. Go back to yesterday’s news and read “Fear Trumps Greed as Market Woes Paralyze Economies,” in which Bloomberg’s Matthew Benjamin and Michael McKee deftly parse the psychology of the horrorshow “feedback loop” (as the BBC and others call it):

Investors are in the grip of a panic that psychologists and historians say isn’t necessarily rational and may intensify. They aren’t buying stocks, and more importantly, suddenly afraid they won’t be repaid, they aren’t making loans by buying bonds. Banks have also tightened credit.

“People are driven by images of the best and worst that can happen,” says George Loewenstein, a professor of psychology and economics at Carnegie Mellon University in Pittsburgh. “The image of the worst is much more vivid in their minds right now.” . . .

Normally, a little fear is a good thing, economists say. For decades after the 1930s, memories of the Great Depression tempered optimism and kept asset bubbles from growing too large.

Today’s fears, however, have reached an intensity that magnifies every additional piece of information and creates a vicious circle, according to Hersh Shefrin, professor of behavioral finance at Santa Clara University in California.

There’s plenty more in this adroit story:

Charles Geisst, a finance professor at Manhattan College in Riverdale, New York, sees a parallel to 1932, with credit markets bad and the stock market falling just ahead of the presidential election that put Franklin D. Roosevelt in the White House.

“But I’m not sure anyone is FDR this time,” says Geisst, author of Wall Street: a History, who puts the possibility of another Great Depression at 50 percent. “I don’t think either candidate has a clue what they’re dealing with here. This is more than a political problem that’s going to blow over.”

So who should take a stab at trying to be the new FDR? Loudmouth stock expert Jim Cramer, as glib in print as he is on TV, opts for Barack Obama over John McCain. In his recent New York piece “Wall Street, Fall 2009,” Cramer writes:

What will New York look like a year from now? The answer: bad and probably worse, and perhaps downright catastrophic. Three degrees of awful.

The first step was passing the bank-bailout legislation. Now that it’s done — and if it didn’t get done we would have been looking at a guaranteed economic collapse — the critical issue will be presidential leadership.

And while any president will be an improvement over the current one, there is a growing belief on Wall Street that Barack Obama has the capacity to lead us out of this wilderness while John McCain does not.

I’ll go a step further: Obama is a recession. McCain is a depression.

That may well be, but America is a depression, not a recession.

Before the newspaper industry tanks and while I still have my computer, I’ve typed these headlines . . .

NO PARTICULAR ORDER:

OpenSecrets.org: ‘Wall Street’s Favorite Candidates’

Slate: ‘Who Died and Made Bloomberg King of New York?’

N.Y. Post: ‘ “PEOPLE HAVE LOST ALL FAITH’: 678-PT. DOW FALL PUTS YEAR’S LOSS NEAR 40 PERCENT’

Wall Street Journal: ‘Futures Head Toward Sharp Losses’

N.Y. Daily News: ‘With stock market falling, advice on what to do about 401(k)’

Wall Street Journal: ‘U.S. Weighs Backing Bank Debt’

Wall Street Journal: ‘At Morgan Stanley, Outlook Darkens; Stock Tumbles 26 Percent’

CNN: ‘Smoke detected at Japanese nuclear plant’

Wall Street Journal: ‘Finland’s Martti Ahtisaari Wins Nobel Peace Prize’

N.Y. Post: ‘PRAYING FOR ALMIGHTY $$’

Guardian (U.K.): ‘Markets crash: How panic spread around the globe’

Wall Street Journal: ‘Economists Expect Crisis to Deepen’

Guardian (U.K.): ‘Huge bonuses for City high flyers will be hard to rein in’

CongressDaily: ‘Senator urges suspension of Iraq publicity contracts’

Wall Street Journal: ‘McCain Campaign Is at Odds Over Negative Attacks’ Scope’

Wall Street Journal: ‘AIG Increases Borrowings While Racing to Sell Assets’

China Digital Times: ‘China Says it Won’t Torture Guantanamo Detainees’

Detroit News: ‘College students face barriers to voting’

N.Y. Times: ‘States’ Actions to Block Voters Appear Illegal’

N.Y. Post: ‘BAGHDAD GOES BOOM – IN STOX’

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Daily Flog: Fuld shares his unbelievable pain with Congress

Disgraced CEO Dick Fuld lied before Congress yesterday when he denied selling shares of Lehman.

I pointed out in yesterday’s Daily Flog, “Celebrity Roast of Lehman on Capitol Hill,” just before the Waxman Committee grilling of Fuld, that he got $52.9 million in proceeds in only two days of market play in 2007 — while Lehman was publicly assuring its other shareholders that everything was fine. (See a list of his transactions here and my post yesterday afternoon about Fuld here.)

Nevertheless, he told the committee yesterday that he had such unshakeable faith in his company that “I never sold my shares.”

Never? Only in Neverland.

The best account of the hearing comes from the blogging of the Wall Street Journal‘s Heidi N. Moore. Doing a brilliant job in real-time, Moore managed to excoriate both Fuld and several Congress members. Actually, she didn’t excoriate them — they did it to themselves and she merely reported it.

In a witty, breezy account that gives a good glimpse of the bloviating at such hearings, she was eminently fair to Fuld. For example, here’s the key passage about Fuld and his Lehman stock:

2:18: Questions about compensation and whether it’s fair. Fuld gets really warmed up here. “I’m not proud that I lost all that money . . . but my point is, that the [compensation] system worked . . . .I received 85 percent of my compensation in stock. All the stock that I got, for the last five years, I lost that. Compensation that I received back to ’97, ’98 and ’99, I could have gotten it seven years ago. But I went to the compensation committee and extended it to a 10-year [vesting period]. I lost all of that.” He goes on, “I got no severance, no golden parachute. I got no contract. I never asked for a contract. I never sold my shares, and that’s why I had 10 million left. I believed in this company. I could have sold that stock. But I did not, because I believed we would return to profitability.” This is a crucial moment because it humanizes him in front of the questioners.

We’ll see about those golden parachutes and severance. As for his courageously hanging on to his Lehman stock, Fuld could argue that he was talking yesterday about his not selling his shares this summer, when Lehman’s meltdown was truly imminent.

But Lehman knew last year that it was in trouble while it was exuding confidence publicly, and in any case its share price was on a long decline even back then.

So Fuld’s sell-off of a million shares — yes, a million — of Lehman on June 13, 2007, and November 30, 2007 — when it was trading in the range of $62 to $78 a share, compared with its current value of 1.5 cents a share — does seem to slightly contradict his “I never sold my shares” statement.

OK, Fuld is a whipping boy for Great Depression II, just another of those convenient, symbolic characters who’s easy to blame.

That doesn’t mean he doesn’t deserve to be whipped.

Meanwhile, the recklessness of Fuld and other Wall Streeters is beating us like we were red-headed stepchildren. Nobody covers us commoners like McClatchy. Check out its “fallout” package.

Start clicking . . .

NO PARTICULAR ORDER:

McClatchy: ‘Dow closes at 4-year low as crisis mood sweeps the world’

Washington Post: ‘Unfolding Worldwide Turmoil Could Reverse Years of Prosperity’

BBC: ‘Shoppers killed by Somali shells’

Wall Street Journal: ‘Investors Succumb to Fears of Recession’

Washington Post: ‘A Quarter of Mammals At Risk for Extinction’

N.Y. Post: ‘INVESTMENT PROS WHISPER BOTTOM IS NEAR’

Waxman Committee: The Dick Fuld Show (video)

Wall Street Journal: ‘Congress Grills Lehman Brothers’s Dick Fuld: Highlights of the Hearing’ (Heidi N. Moore’s blog of the hearing)

Wall Street Journal: ‘Lawmakers Lay Into Lehman CEO’

Bloomberg: ‘Fuld Targeted by Lawmakers as Surrogate for Wall Street Excess’

N.Y. Post: ‘BODY FOUND IN MOB DIG’

McClatchy: ‘Fallout on Main Street’
• Health care premiums rise again, workers at smaller firms feel the pinch
• Groups say bailout doesn’t do enough to aid homeowners
• House votes to rein in credit-card fees, interest rates
• Consumers unlikely to start spending again soon
• Stock-market woes highlight risk U.S. families now face
• Financial crisis could make consumer credit even tighter
• Spike in jobless rate for women is worst in more than 33 years
• Economists may not call it recession, but job stats say it is

Times (U.K.): ‘ “‘Family honour” drives US father of three to murder and suicide’

Jurist: ‘Countrywide settles state lending practices suits for $8.4 billion’

Detroit Free Press: ‘Clerks’ offices swamped with voters-to-be’

Wall Street Journal: ‘Independent Voters Move Toward Obama: New Poll Indicates That Democrat Ticket Is Benefiting From Financial Crisis’

McClatchy: ‘Out of Bounds! McCain distorts Obama’s words on subprime loans’

Wall Street Journal: ‘Iceland Risks Bankruptcy, Leader Says’

Telegraph (U.K.): ‘John McCain scales back White House campaign’

China Digital Times: ‘Chinese Bloggers: A Patriot Like Me’

Washington Post: ‘A Nightmare for Sales of Dream Cars’

Haaretz (Israel): ‘The Holocaust, Tarantino-style: Jews scalping Nazis’

N.Y. Times: ‘Citi’s Lawsuit Could Hurt Image’

CNN: ‘CNN Polls: New Obama gains in battleground states’

Bloomberg: ‘Nobel Peace Prize May Go to Chinese Activist, Angering Beijing’

N.Y. Daily News: ‘Hooters celebrates 25th anniversary’

N.Y. Post: ‘CORPORATE DEBT SALES PLUNGE TO NEW LOWS’

Times (U.K.): ‘Bank shares plummet and Icesave deposits frozen’

Times (U.K.): ‘Jerome Corsi, anti-Obama author, detained in Kenya’

Washington Post: ‘China’s Reputation On Product Safety Reaches a New Low’

N.Y. Post: ‘FINGERPOINTING AMID THE WRECKAGE’

N.Y. Times: ‘Global Fears of a Recession Grow Stronger’

N.Y. Times: ‘In “Sweetie” and “Dear,” a Hurt for the Elderly’

N.Y. Times: ‘Lehman Managers Portrayed as Irresponsible’

N.Y. Times: ‘Appeals Court Postpones Testimony by Miers’

L.A. Times: ‘Is now a good time to panic?’

GovExec.com: ‘Think tank publishes transition guides for government leaders’

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Daily Flog: Wall Street’s little piggies don’t want to go mark-to-market; meanwhile, more huffing and puffing

The Senate grabbed hold of the Cash for Crash bill and finally came up with a workable version — one that may work for the Wall Street crapshooters but likely not for the rest of us, who are simply loaded dice in the palms of their hands.

Part of the complex maneuverings supposedly aimed at keeping the country from sliding into Great Depression II revolves around “mark-to-market accounting” of the assets that Wall Streeters have played with to the point of, literally, no return.

Yeah, like you, I have only a hazy understanding of this. Those who are financially alliterate are welcome to read this morning’s New York Post story “PIGGY POLS IN HOG HEAVEN WITH PORK-PACKED PACT.” Daphne Retter’s funny, funky take brings a little light to an otherwise dark day of journalism:

Here, little piggies!

Congressional deal-brokers yesterday slopped a mess of pork into the $700 billion financial rescue bill passed by the Senate last night — including a tax break for makers of kids’ wooden arrows — in a bid to lure reluctant lawmakers into voting for the package

Stuffed into the 451-page bill are more than $1.7 billion worth of targeted tax breaks to be doled out for a sty full of eyebrow-raising purposes over the next decade.

More to the point of your financial future and such no-longer-arcane topics as mark-to-market accounting, lower your eyebrows, peer through this morning’s financial fog and try to grab for this guidepost: Bankers and conservative Republicans (including former anti-populace populist Newt Gingrich) favor the abandonment of mark-to-market accounting rules. To which auditors, big investors, and consumer groups reply, “Are you out of your friggin’ minds?”

Think of it like the nursery rhyme that goes, “This little piggy went to market . . .”, and add some huffing and puffing by wolves that may eventually knock down millions of American homes.

In the present case, these little piggies went to mark-to-market, and now they want to remove that accounting rule so they can instantly wipe out their losses on the books and resume playing their Neverland gambling games with our money.

In essence, the new Senate version of the bailout bill would let Wall Streeters lie even more about the value of the assets they’re trading and set us up for a rerun of the Enron scandal.

That should help things.

Or maybe the financial system is so fouled up and so wedded to its inherently corrupt trading instruments and practices that abandoning mark-to-market accounting really would help restart the credit markets and protect you from foreclosure.

Scary.

And where has Wall Street’s mayor, Mike Bloomberg, been in all this? I pointed to Bloomberg’s culpability on September 23, and now the New York Times is dipping its toe into the topic. The Times, of course, is making excuses for him. See this morning’s “Mayor’s Stewardship Is Mixed, Fiscal Experts Say.”

Enough on Bloomberg and more on the important mark-to-market piece of the corporate-bailout bill below, but first . . .

NO PARTICULAR ORDER:

Wall Street Journal: ‘Fed Considers Rate Cut as Recession Fears Mount’

Slate: ‘How to Debate a Girl, and Win’ (Dahlia Lithwick)

BBC: ‘Tanzania disco stampede kills 19’

N.Y. Times: ‘Stopping a Financial Crisis, the Swedish Way’

Jurist: ‘Ohio to proceed with absentee voting after courts rule on registration requirements’

N.Y. Times: ‘Surveillance of Skype Messages Found in China’

N.Y. Post: ‘MOB-CORPSE DIG’

N.Y. Times: ‘Studios Sue to Bar a DVD Copying Program’

Wall Street Journal: ‘Bombs Hit Shiite Worshippers in Baghdad’

N.Y. Post: ‘B’KLYN GIRL, 15, NABBED IN GRISLY DEATH OF COUSIN’

Wall Street Journal: ‘Analyzing the “Twelve Tribes of Politics” ‘

McClatchy: ‘What’s in that Senate bill? Something for everyone.’

Agence France Presse: ‘Enron-era accounting reforms blamed in financial crisis’

Far Eastern Economic Review: ‘The Great Crash of China’


Back to the dust-up over the new bailout bill’s endorsement, in effect, of abandoning mark-to-market accounting:

Over at consumerwatchdog.com, John R. Simpson issues a fire-and-brimstone warning: “New ‘bailout’ tactic would let fat cats cook books.”

Stirring the pot, today’s Wall Street Journal story “Momentum Gathers to Ease Mark-to-Market Accounting Rule” explains things pretty well. Elizabeth Williamson and Kara Scannell craft a succinct lede:

The banking industry and a band of lawmakers have used the scramble to salvage the financial-markets rescue plan to give new life to an industry push to avoid billions in further write-downs with the stroke of a regulatory pen.

It would just further cloud matters for me to try to paraphrase this, so here’s how Williamson and Scannell lay it out:

A proposal contained in the revised financial-rescue bill the Senate considered Wednesday reaffirms the Securities and Exchange Commission’s existing authority to suspend “mark-to-market” accounting. The language was meant to send a message to the agency to re-evaluate the issue.

The practice, adopted in the aftermath of the savings-and-loan collapse in the 1980s, pegs the value of assets to their current market price, rather than the price paid for them. Banks have complained the strict application of mark-to-market rules has forced them to write down billions of dollars worth of mortgage-related securities, intensifying the squeeze in the credit markets.

Critics of the proposed changes to the “mark to market” rules say gains created by easing the rules would be illusory and would delay resolving genuine doubts about the value of mortgage assets that has caused the recent crisis in confidence.

As Bloomberg’s Jesse Westbrook reported Tuesday, conservative Republicans might very well have supported the House version of the bailout bill if the SEC had suspended mark-market accounting rules.

For background, see “Auditors Resist Effort To Change Mark-to-Market,” in Tuesday’s Wall Street Journal, in which Judith Burns wrote:

U.S. accounting firms, which had been silent on the $700 billion financial-rescue package rejected by the U.S. House of Representatives on Monday, are opposing congressional efforts to scrap mark-to-market accounting rules. . . .

Some House members advocate scrapping mark-to-market accounting altogether as a way to help lenders holding mortgage loans and securities whose value have fallen sharply. Consumer groups have balked at the idea, and accounting firms are about to jump in as well, fearing such a change could deceive investors about the value of troubled loans and mortgage-backed assets.

Let the staggeringly diverse gaggle of opponents of abandoning mark-to-market accounting speak for themselves. This is what they told the WSJ‘s Burns and Bloomberg’s Westbrook:

“It’s just bad for investors,” said Beth Brooke, global vice chair at Ernst & Young LLP, in Washington, D.C. “Suspending mark-to-market accounting, in essence, suspends reality.”

“It’s absolute idiocy,” said Barbara Roper, director of investor protection for the Consumer Federation of America. “Allowing companies to lie to investors and lie to themselves is not the solution to the problem, it is the problem.”

“Suspending the mark-to-market prices is the most irresponsible thing to do,” said Diane Garnick, who helps oversee more than $500 billion as an investment strategist at Invesco Ltd. in New York. “Accounting does not make corporate earnings or balance sheets more volatile. Accounting just increases the
transparency of volatility in earnings.”

Still unclear? In NPR’s “Senate OKs Bailout Package, House to Vote Friday,” Dina Temple-Raston tries to explain:

Although senators approved the bailout plan, lawmakers aren’t out of the woods yet. Conservative Republican members of the House are still calling for some sort of mandatory insurance program that financial firms would be required to buy, but it is unclear how the program would work.

They have also asked for the Securities and Exchange Commission to suspend mark-to-market accounting rules and instead require bank regulators to assess the real value of troubled assets.

Mark-to-market accounting essentially allows Wall Street firms to value (or “mark”) the assets in their portfolio based on current market prices. The problem, critics say, is that under that accounting rule, sliding home prices affect not just the value of mortgages that are defaulting but of all mortgages — and therefore, of all mortgage-backed securities.

That, in turn, affects how much capital firms are required to have on hand to cover their debt exposure. And to raise that capital, firms end up having to sell other assets — which drives the price of those assets down, too. In other words, they say, mark-to-market accounting can lead to a downward spiral.

House Democrats have been opposed to both a change in mark-to-market accounting rules and to the insurance provision. It is unclear how they will work out those differences or how much the House will tinker with the bill when they get it. That said, the sense on the Hill is that everyone wants to get the vote behind them, key lawmakers say.

That’s reassuring that our lawmakers — like pro athletes and philandering pols — want to pull out the hackneyed reasoning to say that all they want to do is get their past mistakes “behind them.” In real time, however, the train is still hurtling down the track toward us.

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Daily Flog: White House on its knees, the rest of us on our backs, Wall Street zipping up

We feel the bankers’ pain.

Running down the press:

A surprisingly lively New York Times lede this morning:

[Yesterday] began with an agreement that Washington hoped would end the financial crisis that has gripped the nation. It dissolved into a verbal brawl in the Cabinet Room of the White House, urgent warnings from the president and pleas from a Treasury secretary who knelt before the House speaker and appealed for her support.

“If money isn’t loosened up, this sucker could go down,” President Bush declared Thursday as he watched the $700 billion bailout package fall apart before his eyes, according to one person in the room.

Not since the Clinton Administration has it been widely reported that people were on their knees in the White House and that a president talked about a sucker going down.

And this time it’s a Treasury secretary on his knees, not just an intern. This is some serious shit.

Or not. McClatchy’s Kevin G. Hall, who constantly snoops for fresh angles and comes up with solid material, writes in “Is the bailout needed? Many economists say ‘no’ “:

“It’s more hype than real risk,” said James K. Galbraith, a University of Texas economist and son of the late economic historian John Kenneth Galbraith. “A nasty recession is possible, but the bailout will not cure that. So it’s mainly relevant to the financial industry.”

The Paulson plan will get some bad assets off the balance sheets of troubled Wall Street institutions and commercial banks. That may help thaw the lending freeze.

But it wouldn’t reduce the crush of homes in or near foreclosure, said Simon Johnson, a professor at the Massachusetts Institute of Technology. That’s a problem that will surely grow worse if the U.S. economy enters recession, leading to greater job losses, which feed a vicious downward spiral of even more foreclosures and defaults on car loans and credit-card debt.

What? A story in the national press about the plight of the rest of us? How dare he!

John McCain‘s own September surprise isn’t working out too well, as another McClatchy story points out. In “McCain gets blamed for angry end to Bush’s bailout meeting,” David Lightman and Margaret Talev write:

“What this looked like to me was a rescue plan for John McCain,” said Senate Banking Committee Chairman Christopher Dodd of the Republican objections.

His reference was to McCain’s eleventh-hour intervention in the negotiations, when he declared he was suspending his campaign and postponing Friday night’s debate with Democrat Barack Obama to help negotiate a bailout plan.

Democrats think that Republicans were backing away from a compromise many of them agreed to earlier Thursday — without McCain’s involvement — in order to give McCain time to play a role and perhaps appear as a rescuer.

Senate Majority Leader Harry Reid, D-Nev., said he believed the breakdown was simply an effort to allow McCain to miss Friday night’s scheduled debate with Obama. . . .

Republicans, in contrast, said their reservations on the bailout plan were principled. The plan, they said, had too much government involvement in private industry and too high potential liabilities for taxpayers.

Yes, “principled.” Buy or sell? Sell.

No question that the month has been tough on McCain, but just think about those poor mid-level banker types on Wall Street, which is just a little more than a stone’s throw from my office. (If I had an arm like Rocky Colavito‘s and a bag of stones, I’d take the subway down there and start hurling, instead of just hurling over my latest bank statement.)

Anyway, in “Big banks delay decisions on bonuses,” the Financial Times (U.K.) reports on the plight of British bankers’ bonuses, which depend on how U.S. firms decide their own bonuses:

Morgan Stanley and Goldman Sachs are delaying their decisions about year-end bonuses as they struggle with the financial crisis.

The US investment banks have traditionally set the bar for European and American competitors because their fiscal years end earlier. But the two, which have been forced to seek regulated retail bank status, are putting off their October meetings on bonuses until they have greater clarity about the fourth quarter.

[B]anks have warned that bonus pools will be cut sharply and that top performers will get the bulk of the money. “A falling tide lowers all boats but some people will end up above the river on stilts,” said one bank executive.

Well, we appreciate that news from the other side of the pond that at least we won’t all drown. I’m certainly looking forward to my own bonus. I hope those bananas at the Astor Place kiosk are still only 35 cents apiece.

And here’s a September surprise, again courtesy of the FT, whose Cash for Crash coverage rocks and is free for the viewing. In “Hedge fund chief warns on wrongdoing,” Gillian Tett and James Mackintosh report a frank admission from a financial-world insider:

Investigators and regulators are likely to uncover significant evidence of wrongdoing when they examine the records of some of the financial companies that have failed, a leading short-selling hedge fund manager claimed.

Jim Chanos, head of Kynikos Associates, believes that some of the public statements that emerged from some of the best-known financial groups could have been seriously misleading.

“I do think that what we are going to find out, when regulators and law enforcement people get into some of these firms which have failed, was that . . . the statements which people were making were materially misleading, if not criminal,” he said in a video interview on FT.com. “It is going to shock people…the extent of the deception to the market.”

Chanos is of course saying this as a defense of short-selling, setting up the argument you’ll hear in the coming years that there’s a big difference between conniving and illegal conniving.

And here’s something else in this FT story that comes as absolutely no surprise:

Lawyers in both the US and London are considering lawsuits, many of which are likely to revolve around the extent to which bank executives knew about risks in their businesses.

Weary of skipping around the web? Do some one-site shopping this morning. Here’s a clump of readable FT stories that you could skim through and try to choke down over your third cup of coffee — remember to take small bites and chew thoroughly unless you want to spit up hairballs later in the day:

‘US “will lose financial superpower status” ‘

‘Church accused over short selling’

‘WaMu seized and sold to JP Morgan’

‘Flight from Morgan Stanley brokerage’

‘Nomura offers bonuses to Lehman staff’

‘CVS is added to ban list on short selling’

At least one of my Voice colleagues is staying focused on the presidential race: See Lynn Yaeger‘s “How I’m Contributing to McCain’s Campaign Suspension.”

And now . . .

NO PARTICULAR ORDER:

N.Y. Times: ‘In Storm’s Aftermath, Cow Roundups in Southeast Texas’

N.Y. Daily News: ‘Shoplifter turns in Brooklyn rapist’

Washington Post: ‘Health Insurance Costs to Spike an Average 8 Percent’

Slate: ‘Things Fall Apart’

BBC: ‘Arming the Taleban’

Washington Post: ‘U.S. Has Achieved “Victory” in Iraq, Palin Tells Couric’

Haaretz: ‘Jewish terrorists tried to murder left-wing professor’

Washington Post: ‘Away from Wall Street, Economists Question Basis of Paulson’s Plan’

IRIN: ‘Charity coffers face credit crunch’

Washington Post: ‘Carbon Is Building Up in Atmosphere Faster Than Predicted’

Haaretz: ‘Peres: U.S. has no choice but to save world from Ahmadinejad’

Washington Post: ‘Negotiations Falter on Financial Bailout Package’

N.Y. Post: ‘EX-CON HELD AS “JESUS RAPIST” ‘

Washington Post: ‘Debate Remains In Limbo’

L.A. Times: ‘Palin talks to Couric — and if she’s lucky, few are listening’

Baltimore Sun: ‘McCain hints debate appearance “possible” ‘

Financial Times: ‘Ex-Merrill chief considers hedge-fund return’

Jurist: ‘US military commissions prosecutor resigns due to “ethical qualms” ‘

N.Y. Times: ‘Pakistani and American Troops Exchange Fire’

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Daily Flog: Panic spreads to McCain; White House meeting will solve everything; the world sneers

You can’t spell “down” without “Dow.”

The only good thing about this morning’s scheduled meltdown meeting of George W. Bush, Barack Obama, and John McCain is that it confirms that Bush will not be president for much longer — he’s actually hosting his successors in the White House.

Otherwise, what the hell are these guys doing? This is not democracy.

Neither Obama nor McCain has won the presidency yet, and Bush is the lame duck. Even if Bush were capable, it’s not in our interest for the three of them to reach a consensus unless it’s conducted in a democratic process as a publicly hashed-out and argued bit of horse-trading (I’m not talking about a debate). Even then it wouldn’t be democratic because we haven’t elected any of these three guys to lead the country starting in January 2009.

Besides, you can hardly call this a meeting of the minds if one of the participants is Bush. The mindless, careless, disinterested front man hasn’t been running the country — Dick Cheney has, with the help of three guys formerly on our payroll: Karl Rove, Don Rumsfeld, and Paul Wolfowitz.

Democracy is what’s going on in Congress right now: messy, contentious, and often ugly, with alliances shifting and factions of Democrats and Republicans forming with each other and dissolving, instead of a strictly bipartisan war in which Republicans march in lockstep at the White House’s bidding.

Democracy is also messy, ugly episodes like the Bonus Army, the economy-ravaged, broke World War I vets who camped out in protest in D.C. and clashed with the Army in 1932, during Depression I.

Is a Wall Street Executive Bonus army forming? Or is the government worried about the broke-ass rest of us descending on D.C.? The Register (U.K.) reports this morning, based on an Army Times story: “US Army unit deployed to home front: Nonlethal force for civil unrest.” (For background on the grim 1932 clash, see NPR’s 2005 video and story “Soldier Against Soldier: The Story of the Bonus Army.”)

Still, there may be no need to rush into a massive bailout — as Press Clips reader John McGowan argues in a detailed comment attached to my Tuesday item “Krauts Sour on Wall Street Bailout.”

Don’t pay much attention to Bush’s speech last night. He doesn’t know shit about the economy — even with his daddy’s help he couldn’t make it in the oil bidness, and he became the Texas Rangers’ owner without investing hardly any money at all. (The real owners brought him in so they could pimp for a new stadium at public expense, a previous example of his pimping for corporate welfare).

Now, he’s performing as the front man for the GOP/Wall Street types who hunger for a quick dose of corporate welfare at our expense through a plan that would throw the rest of us onto the welfare rolls.

Yes, there is definitely pressure on the U.S. from other countries to be quick about a bailout plan (“Overnight Markets,” Financial Times).

Although maybe there’s not as much pressure from other countries as Hank Paulson and crew would have us believe: See this morning’s Washington Post story “U.S. Appeals Abroad Fall Flat as Leaders See No Crisis at Home.”

Still, there’s no doubt that something does have to be done quickly, but maybe it doesn’t have to be an entire, massive bailout right this second. Aren’t there more intermediate steps that could calm things down without putting the average American in deeper hock for the unimaginable future?

But in this country, there’s always such a rush by lobbyists that all important issues can’t be fully hashed out. Remember that during the hubbub leading to the disastrous October 2002 Iraq war resolution, debate was sharply curtailed on the orders of the White House and the GOP leaders who controlled Congress.

And after the unjustified invasion, Democrats like Henry Waxman and Byron Dorgan were prevented from conducting hearings on how the Cheney-Rumsfeld regime was conducting the war. (See my April 2005 item “Fix Your Corrupt Regime” for details.)

Just one of many examples: In February 2005, Waxman pushed for a hearing on allegations of “waste, fraud and abuse
in U.S. Government Contracting in Iraq.” He was rebuffed and had to hold an unofficial hearing that, even though it revealed fascinating and major corruption including actual bundles of cash, had no official standing and, as a result, garnered little press coverage.

And now there’s a real danger of another invasion: the possibility of a GOP-engineered October Surprise involving Pakistan that could scare voters into sticking with the Republicans and electing McCain. Scott Horton laid that out in Harper’s the other day.

For guidance, however, look to the markets — the one stock exchange that hasn’t yet melted down and isn’t asking for a bailout: Intrade Prediction Market, where the current action on John Delaney‘s sophisticated and clever operation shows that the betting favors Obama.

I wrote about Intrade during the Paul Wolfowitz and Scooter Libby meltdowns, but because our site is screwed up you may not be able to find those items. So here they are:

“Wolfowitz Out? Bet On It.” (May 7, 2007)
“Wolfie’s Stock Soars” (May 8, 2007)
” ‘You’re a Criminal!’ “ (June 6, 2007)

And now here’s a collection of today’s links from all over . . .

NO PARTICULAR ORDER:

McClatchy: ‘Election officials telling college students they can’t vote’

BBC: ‘US rivals in economy crisis talks’

N.Y. Daily News: ‘Naked man falls to his death after Tasered by cops in Brooklyn standoff’

Slate: ‘Is Paulson’s bailout bill unconstitutional?’

Dawn (Pakistan): ‘We’re in a state of war: Asif’

N.Y. Times: ‘Bush Aides Linked to Talks on Interrogations’

N.Y. Post: ‘WALL STREET WHIZZES LOOK TO HEAD WEST’

BBC: ‘What would financial Armageddon look like?’

N.Y. Daily News: ‘This loss to Brewers could strand Mets in October’

N.Y. Post: ‘PLAY TRIPPER: PAUL’S GAL SKIPS MTA VOTE FOR HIS ISRAEL JAUNT’

BBC: ‘Q&A: US $700bn bail-out plan’

BBC: ‘Japan offers solution to financial crisis’

Financial Times: ‘Bail-out fears hit credit markets’

Financial Times: ‘Banking after the bail-out’

Financial Times: ‘Bail-out cost ‘impossible’ to estimate’

AME Info (Dubai): ‘Jordan poised to enter nuclear age’

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Daily Flog: In NYC, the end of the houses that Ruth and ruthlessness built

History was unmade this weekend in New York City: In the Bronx, the closing of the House That Ruth Built, and in lower Manhattan, the closing of the houses that ruthlessness built.

A double dose of tears for those Wall Street investment bankers in their skyboxes at Yankee Stadium.

A double dose of publicly subsidized bailouts for both the Yankees and the investment banks.

But first . . .

NO PARTICULAR ORDER:

MarketWatch: ‘End of capitalism as we know it’

Telegraph (U.K.): ‘Islamabad hotel blast ‘was Pakistan’s 9/11’

N.Y. Post: ‘COPS: JEW GUYS NEED TO TALK!’

The Register (U.K.): ‘Sockpuppeting civil servant Wikifiddles himself’

McClatchy: ‘Congress’ fiscal conservatives declare free market “dead” ‘

Jurist: ‘Former Special Forces officer wins transgender discrimination lawsuit’

Financial Times (U.K.): ‘Taxpayers shoulder trillion-dollar deficit’

N.Y. Times: ‘Foreign Banks Hope Bailout Will Be Global’

Wall Street Journal: ‘Goldman, Morgan Scrap Wall Street Model, Become Banks in Bid to Ride Out Crisis’

Financial Times (U.K.): ‘Obama Targets Wall Street Greed’


Running down the press:

The closing of Yankee Stadium prompted a bevy of retired baseball players to hitch up their belts over their big bellies and weigh in, but the best quote in the past few days came from former Detroit Tigers pitcher Jim Bunning:

“The free market for all intents and purposes is dead in America.”

McClatchy’s James Rosen, in his Friday story “Congress’ fiscal conservatives declare free market ‘dead,’ ” called that offering from the flame-throwing right-hander-turned-right-winger-Kentucky-senator a “knockdown pitch.”

And that was before the monumental news over the weekend that Wall Street’s investment bankers committed harakiri.

How did the press cover the news that Goldman sacks itself?

Sufferin’ seppuku! Pretty darn well! And with surprisingly large doses of reality, like this piece from the Financial Times (U.K.): “Taxpayers shoulder trillion-dollar deficit.” And this one from the Washington Post: “A Sense of Resentment Amid the ‘For Sale’ Signs.”

If Barack Obama weren’t black, he’d now be a shoo-in. After all, John McCain had pushed the GOP’s scheme (hare-brained even before Wall Street’s meltdown) to privatize Social Security. And the GOP (McCain included) has always preached deregulation. See this Wall Street Journal story for details: “Crisis Draws Attention to McCain Social Security Plan.” And then look at this one from the Financial Times (U.K.): “Obama targets Wall Street greed.”

If we had a parliamentary democracy, McCain and Obama would be duking it out on the floor of Congress, and not only would the fur fly but there would actually be meat on the killing floor. Instead, we’ll have to put up with the lame-ass, tame-ass TV “debates” moderated, massaged, and manipulated by the mainstream media. But the first debate, Friday, ought to be more interesting in light of Wall Street’s collapse.

In any case, New York’s days as the world’s financial capital may be numbered, but ruthlessness hasn’t disappeared. Wall Street’s self-destruction heralds the true end of U.S. domination of the financial world. That’s probably true, but the private-equity folks who control billions of dollars will find other ways to pick at our carcasses.

Last week at least, the private-equity types were licking their chops. In Friday’s edition of Private Equity Online, a handmaiden to the vultures smugly wrote:

‘Cleaning up the carnage’

Buyout titans have said publicly the situation is unlike anything they’ve ever seen. However, there’s also a certain amount of calm present in the private equity industry, where nerves are less frazzled than in other corners of the financial world.

This is to do largely, of course, with private equity’s core principle: long-term investment horizons are less susceptible to public market volatility and periods of short-term distress.

But it’s also to do with the opportunities available to cash-flush firms, considering the more than $60 billion (€42 billion) in pure private equity assets that are now in play as a result of the meltdown.

“Core principle,” my dying ass. Drool and slobber are their principles. The newsletter’s anonymous author gets down to it:

The collapse of Lehman Brothers makes the sale (or spin-out) of all or parts of its investment management division even more imminent. The sale of Merrill Lynch to Bank of America has suddenly put a question mark over its private equity division. And AIG’s new US government owner could indeed decide to unwind the firm’s sizable alternative platform, which is sure to include attractive assets despite the prospect of cumbersome government-run auctions.

Secondaries firms are already rubbing their hands in anticipation – one secondaries specialist told PEO his recent meetings in New York made him feel like “a kid in a candy shop”. And many big buyout shops are reportedly interested in buying the franchises outright.

Some of the private-equity scumbags (my word, not theirs) have already started infiltrating the “normal world” — at the request (insert shudder here) of Hank Paulson‘s rescue team:

David Zweiner, who joined The Carlyle Group little over a year ago to co-head its nascent financial services group, was selected last week as chief financial officer for struggling US bank Wachovia.

This week, the US government asked Clayton Dubilier & Rice operating partner Edward Liddy to take the helm at AIG. It also selected American Capital director John Koskinen for the board chairman role at troubled mortgage giant Freddie Mac, after having earlier in the month asked Carlyle senior advisor David Moffett to become chief executive.

And who knows where the lobbying for further corporate welfare will lead? Check out this morning’s Times harbinger, “Big Financiers Start Lobbying for Wider Aid”:

Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.

Financial firms were lobbying to have all manner of troubled investments covered, not just those related to mortgages.

At the same time, investment firms were jockeying to oversee all the assets that Treasury plans to take off the books of financial institutions, a role that could earn them hundreds of millions of dollars a year in fees.

Nobody wants to be left out of Treasury’s proposal to buy up bad assets of financial institutions.

So don’t start singing “The Internationale” just yet.

Go ahead, though, and download the global lefty anthem here, in any of 80 or so languages, including Billy Bragg‘s and Pete Seeger‘s versions. Or Maxx Klaxon‘s version.

If you can find it, you can even hum along to Tuli Kupferberg‘s “The New Internationale,” which encourages we “prisoners of stagnation” to arise.

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Daily Flog: Hedgehog Day on Wall Street; no one’s selling greed short

 

Every morning, the same grim news from Wall Street, but first…

IN NO PARTICULAR ORDER:

Telegraph (U.K.): ‘US “bad bank” to staunch toxic debt losses’

Bulletin of the Atomic Scientists: ‘How can we reduce the risk of human extinction?’

Dubai Weekly Newsletter: ‘Master plan of The Tiger Woods Dubai unveiled’

N.Y.Post: ‘WHAT A PUSSY! CUTE 7-LB. KITTY STRUCK TERROR IN KILLER’S HEART’

Slate: ‘Where Did the Government Get $85 Billion? Was it just lying around somewhere?

N.Y. Daily News: ‘Where’s the federal bailout for us little guys?’

Slate: ‘Cheney Unchained’

Kommersant (Russia): ‘Georgia War Spills Over to New World: Russia mobilizes Latin America for war against the U.S.’

L.A. Times: ‘Facebook reflects struggle over Islam’s role’

N.Y. Post: ‘NIGERIA NUT OUTSCAMS STOX “CROOK”‘

Running down the press:

It’s about time somebody got out the mallet and started playing whack-a-mole with hedge-fund hogs.

Now the U.S. and U.K. governments are calling a halt to short-selling? This was a questionably legal and unquestionably immoral and unethical practice long before the Great ’08 Crash.

Perhaps the best read this morning on the stock market’s suppurating sinkhole comes from Gordon Rayner at the Telegraph (U.K.), whose “Hedge funds clipped by short-selling ban” notes:

As the dust settled yesterday on the ruins of Britain’s fifth-biggest banking group [HBOS], there was little doubt as to the immediate cause of their misery – the hedge fund billionaires who have made a killing by playing poker with their livelihoods.

Rayner names names, including that of at least one New Yorker whose smile widened as the crash deepened:

Unlikely as it may have seemed even a week ago, HBOS was unable to withstand a sustained attack on its share price by mavericks who have such huge sums at their disposal that they can destroy major companies almost on a whim.

Take Philip Falcone, whose fund is said to have made £280 million by gambling that HBOS’s share price would plunge. Falcone, who has just paid £24 million in cash for a 27-room mansion in New York, has been nicknamed “The Midas of Misery” for his ability to make millions by betting on failing companies.

Falcone makes a convenient pantomime villain at a time when the nation desperately needs a hate figure. He earned a staggering £950 million last year through his hedge fund, Harbinger Capital Partners, while insisting: “It’s just money. It doesn’t define who I am.”

Rayner succinctly explains the short-selling scam and its impact, particularly when the stock market becomes as stable as a Slinky:

Mr Falcone is one of a select band of private fund managers who have made their money through the morally dubious practice of short- selling which, despite involving trading something you don’t own, is perfectly legal.

A short-seller will borrow shares from an institutional investor for a fee, agreeing to return them at a set time. The shorter sells the shares to a third party, gambling that the price will drop before they have to buy a similar number of shares to return to the lender on the set date. The difference in the price of the shares is the shorter’s profit.

Dodgy as this may sound, short-selling has been going on for hundreds of years, but the obliteration of HBOS – which has been squarely blamed on short- selling – forced the Financial Services Authority to take drastic action last night by banning short-selling of financial stocks.

Hedge fund managers (a hedge fund is a private investment fund offering the possibility of huge returns) control an estimated £2 trillion and their clout is so great that if they gang up against a company they perceive to be weak, there is little anyone can do to stop them bringing the company down.

In the same way that a donkey will become the favourite for a horse race if enough people bet on it, a company’s share price will be driven down if shorters sell enough of its stock, regardless of how healthy the company may be.

Of course, short-sellers stand to lose a fortune if share prices go up, so some have been suspected of using dirty tricks to illegally manipulate stock prices by spreading false rumours about the health of a company.

What make me laugh is the sanctimony of the huge pension funds — the ones holding your retirement money. Out of their own greed, they willingly loan the stock they’ve invested in with your money to short-sellers. It’s like your being the bank for crap-shooters who really have nothing to lose because your money hedges all their bets.

From today’s Wall Street Journal piece “SEC Issues Temporary Ban Against Short Selling”:

Calpers-California Public Employees’ Retirement System, the largest U.S. public pension fund, said it is no longer lending out shares of Goldman, Morgan Stanley or Wachovia. Lending of shares is an essential step in the short-selling process, and the move could help limit negative bets on those stocks. “We share a degree of concern about volatility in financials,” says Eric Baggesen, Calpers senior investment officer.

Meanwhile, New York Attorney General Andrew Cuomo said he was opening investigations into short sellers who he believes are trafficking in false rumors to manipulate the market. “No one is saying short selling caused this crisis,” Mr. Cuomo said in an interview. “I believe it’s possible that it’s been aggravated by illegal short selling — people passing on fraudulent information and conspiring to drive down the value of a stock.”

This WSJ story also reveals that now the hedge hogs are squealing on other rats — “Hey, man, don’t look at me!” — while defending their indefensible position. That’s a short-selling position for which there are no buyers. Anyway, the story continues:

Hedge-fund lobbying groups objected to the moves, saying regulators and executives haven’t presented any evidence of abusive or manipulative short selling.

“While this is all politically pleasing to the regulatory powers that be, the fact of the matter is that there has been no evidence presented of short sellers circulating false market rumors to drive down the price of stocks,” said James Chanos, a well-known short-seller and chairman of the Coalition of Private Investment Companies, a hedge-fund lobby group.

He says regulators are missing the point as the rules don’t address the large market of credit-default swaps, which are insurance contracts to debt instruments that trade outside of established exchanges and are unregulated. “The trading in those contracts dwarfs the trading in equities in financial firms. Until the SEC or Commodity Futures Trading Commission or whomever gets their hands around that, the banning of the short selling is meaningless,” Mr. Chanos said.

In a short sale, a trader sells borrowed stock, hoping it will fall in price, a practice that is permissible. In an abusive short sale, known as naked short selling, a trader never borrows any stock and doesn’t intend to deliver it to the buyer at a later date. Executives and regulators believe some traders are abusing the strategy to pummel shares of financial stocks.

Oh, so the hedge-fund industry, which is unregulated, is blaming another part of the money-changing industry that is also unregulated.

Another WSJ story reminds us of just how dangerous the Bush-Cheney regime’s scheme of privatizing Social Security would have been. Jerry Seib points out in his column:

Anyone want to talk about privatizing Social Security in this environment? Not likely. Imagine the national wailing and gnashing of teeth that would be going on right now if Social Security funds were in the hands of failing private financial institutions instead of the government.

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Daily Flog: The Dow of panic; stocks and bondage; U.S. snatches gold

The rest of the world rushes to Wall Street to try to clean up the vomit and wipe Hank Greenberg‘s brow, but first . . .

NO PARTICULAR ORDER:

Gulf News (Dubai): ‘Traffic violators pardoned if they offer body organs’

Wall Street Journal: ‘Worst Crisis Since ’30s, With No End Yet in Sight’

N.Y. Times: ‘Administration Trying for Spy Satellites Again’

N.Y. Post: ‘CONDOMS MAKE NYC RUBBER LAND’

CNBC: ‘Morgan Stanley Is in Talks with China for Fresh Funds’

L.A. Times: ‘Insurgents in Afghanistan show strength, sophistication’

China Daily: ‘3 Chinese banks hold $297m in Lehman debt – report’

SmashHits.com: ‘Speeding bus kills 14 in India’

MarketWatch: ‘Media’s Wimpy Wall Street Coverage’

Forum 18: ‘BELARUS: Orthodox complain of KGB intimidation at village funeral’


Running down the press:

As other countries’ banks join hands, sing “Kumbaya,” and try to bail out our financial system (WSJ: “Central Banks Take Coordinated Action”), don’t you worry about us New Yorkers. We’re going to bounce back.

We’re still No. 1 in the stuff that counts. Take a look at David Seifman‘s piece in this morning’s N.Y. Post:

New York City ranks as the undisputed condom capital of the nation.

The Mayor’s Management Report, issued yesterday, showed that the Health Department gave away 39,070,000 male condoms to community groups in fiscal 2008, which ended on June 30.

That’s enough for every man, woman and child in the city six times over.

Sadly, few of them went to investment bankers and lawyers, ensuring that we’ll continue to be overpopulated with both species and thus always in danger of future Wall Street meltdowns.

The actual truth is that Wall Street hasn’t been dominant for quite some time. In fact, many of its denizens are downright submissive, as the Daily News tells us:

‘Tribeca S&M palace raided; owner, ‘Domina’ held on prostitution raps’

A Manhattan S&M club that billed itself as the “Leading House of Domination in NYC” was put out of business Wednesday after the NYPD busted its manager and seized its business records.

The ladies at the Walker St. club, Rapture, all had “extensive and rigorous” training in the art of bondage, and customers of the Tribeca dungeon were whipped and poked by professionals, its advertising claimed.

Give me those goddamn whips, and I’ll show you how to flay the backsides of those downtown bankers.


Financial Times (U.K.): ‘Housing data reinforce threat to US growth’

And a bottom of th’ mornin’ to you from London:

New housing starts fell to their lowest level in 17 years last month, sharply worse than expected, signalling the still deepening threat from the housing market to US economic growth.

Daniel Pimlott‘s story notes that this may not be such bad news for the long run:

The fall in starts is likely to further detract from US economic growth in the third quarter. But economists also believe that slowing construction of new homes is a necessary precondition to the stabilisation of the housing market and the financial system. A huge inventory of new and previously owned homes for sale is dragging down prices.

Well, that’s good: One way out of this crisis is for the price of houses to stay too high to afford. And there’s more of the same kind of supposedly good news:

The poor housing starts came as other indicators in the mortgage markets suggested a better outlook ahead.

Applications for mortgages jumped 33.4 per cent in the week ending September 12 in response to a fall in mortgage rates after the US government took over Fannie Mae and Freddie Mac, the Mortgage Bankers Association reported.

The rise in applications was driven by a 88 per cent jump in attempts to refinance – the largest weekly increase since the beginning of 2001 – as home owners rushed to take advantage of lower rates.

Yes, more money for the mortgage bankers and investment houses to play with. That’s the kind of thing it will take to lift us out of this crisis. No joke, it really is.


N.Y. Post: ‘PEDAL TO THE METALS: FLIGHT TO SAFETY BOOSTS GOLD, SILVER & OIL’

Paul Tharp‘s solid story early this morning notes:

Fearful investors armed themselves with safe cash, gold and oil to fight back a possible trading rout looming today over Wall Street.

Gold shot up $70 an ounce in the biggest one-day jump in a decade. Lending effectively shut down between US and European banks as a key lending-rate spread surged to an all-time high to break the record close after Black Monday in 1987.

Tharp recognizes that the rise in oil prices is a really slippery slope:

Oil jumped $6 a barrel here to $97.16 as investors scrambled for safety, pushing crude back onto its dangerous upward trajectory.

McClatchy: ‘Pakistan reportedly opens fire on U.S. forces in tribal area’

The only thing that may re-fill the wallets of Wall Street’s bankers is another full-scale war from which to profit. They may get their wish, if things don’t calm down a little in South Asia:

Pakistani troops opened fire Monday on U.S. forces who were trying to enter the country’s lawless tribal area, local officials said, marking a dangerous further deterioration in relations between the allies in the war on terrorism.

Both armies — and the Pentagon — denied that the reported incident had occurred, but local security officials and tribesmen in South Waziristan told McClatchy that two American helicopters had entered Pakistani airspace in the early hours and were forced to retreat when they came under fire.


Sex and money — is there anything else? How about sex, money, and movies? Turn to the Post‘s Page Six for, among other gossip, “NAUGHTY PRODUCT PLUGS”:

George Clooney has sparked a sex-toy craze. In the Coen brothers’ film Burn After Reading, Clooney plays a sex addict who totes along marital aids, including two items called “The Liberator Ramp” and “The Silky,” both of which are sold in stores. Avn.com reports sales of both are on the rise thanks to the movie. Says one retailer: “Small mentions of adult products in mainstream media can have an outsized effect on sales.”

BBC: ‘India drug firm turns to Giuliani’

Too rich. Our ex-mayor is now trying to help people acquire drugs:

Indian drug firm Ranbaxy has hired ex-New York City Mayor Rudolph Giuliani as an adviser, the company says.

The move comes a day after the US Food and Drug Administration (FDA) banned the import of more than 30 generic drugs made by the drug firm.