• Let’s Have a Commission
    Posted by on September 16th, 2008 at 11:38 am

    Good news! John McCain has a plan to fix the credit crisis, let’s form a commission!

    We need to set up a 9/11 Commission in order to get to the bottom of this and get it fixed, and act to clean up this corruption…They’ve violated the social contract that capitalism and the citizen have, and we can’t ever let this happen again. I’ll make sure it never happens again.

    Commissions are basically community organizers, but for nicer communities.

  • By the Way
    Posted by on September 16th, 2008 at 11:23 am

    My Buy List is up 0.58% today.

  • S&P 500 Daily Changes
    Posted by on September 16th, 2008 at 11:17 am

    Yesterday was the biggest sell-off since 9/11. Here are the daily changes for this decade.
    image712.png
    The worst day came on April 14, 2000 when the S&P 500 lost -5.83%. The Monday after 9/11 (September 17, 2001), the market dropped -4.92%. Yesterday, the market lost -4.71%.
    The best day came on July 24, 2002 when the market jumped 5.73%. The second-best day came five days later when the market rose 5.41%.

  • Barclays seals Lehman deal
    Posted by on September 16th, 2008 at 10:40 am

    From the FT:

    Lehman Brothers on Tuesday reached a deal to sell certain parts of its business to Barclays, which had been in talks over the weekend to buy the entire investment bank before it filed for bankruptcy protection on Monday.
    The two parties reached a deal in the early New York morning, though the exact Lehman businesses involved, and the price at which they will be sold, remained unclear. A deal could be accompanied by a small capital raising by the UK lender.
    People close to the matter said it was likely that the deal centered around Lehman’s core US broker-dealer operations, which perform securities underwriting tasks, provide merger advice to lucrative clients, and conduct trading.

  • Thanks Eliot
    Posted by on September 16th, 2008 at 10:29 am

    Larry Ribstein has a great post on the failure of SOX. Weren’t all those controls there to protect us?

    Remember when SOX was supposed to, at enormous cost, expose the weaknesses and risks lurking in companies so they could be addressed to avoid another Enron? As Tom Kirkendall and I have been observing for awhile: fat lot of good SOX did. Could we please think about that when we try to regulate in the wake of this catastrophe?
    And while we’re at it, let’s think about yesterday afternoon’s market plummet. That happened (and it’s likely to continue this morning) because AIG, facing catastrophic downgrades of its securities, needs 70 billion by tomorrow to avoid bankruptcy.
    Should we worry about that? Here’s what the WSJ has to say:
    The company, whose stock fell 61% yesterday, is such a big player in insuring risk for institutions around the world that its failure could shake the global financial system. much of its exposure is related to credit default swaps, insurancelike contracts tied to corporate defaults. * * * The market for credit default swaps is immense, trading against about $62 trillion of debt. Some participants in the largely unregulated market worry that the default of a major player such as AIG could trigger chaos. * * *
    [T]he firm is used by many companies world-wide to manage a range of risks, including exposure to investments in subprime mortgages. Its demise would potentially make it harder or more expensive for businesses to control their risks.
    How did this happen? Well it’s worth speculating that it had something to do with AIG being left without its long-time leader, Hank Greenberg, for which we can thank Eliot Spitzer. As I’ve noted, per the WSJ (last May):
    A careful and lengthy look at the evidence available so far . . . suggests that the AIG case, like so many others that Mr. Spitzer brought, was an example of prosecutorial excess. Instead of uncovering some great fraud by a titan of industry, its main result has been to damage the company, and harm innocent managers and shareholders. * * *Trading above $72 in February 2005 before it was Spitzerized, AIG shares closed yesterday at $39.57. The company’s directors defend themselves by saying Mr. Spitzer gave them little choice but to dismiss Mr. Greenberg. Whether that was true at the time, they – and Mr. Spitzer – owe an apology to AIG shareholders.

  • In Retrospect
    Posted by on September 16th, 2008 at 10:25 am

    The $10 BSC got in March is looking pretty good. Lehman’s big mistake was being too small and too late. If they blew up bigger and earlier, they’d probably be in much better shape today. (It would be hard to be in worse shape.)

  • Now They Tell Us
    Posted by on September 16th, 2008 at 10:15 am

    WaMu Rating Lowered to Junk by S&P on Mortgage Losses

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  • The Bubble Isn’t All Bush’s Fault
    Posted by on September 16th, 2008 at 10:08 am

    I just don’t get the argument that the credit bubble is the fault of George Bush, or free market ideology. People toss around the words “more regulation” as if that’s the obvious cure. Sure, if we restricted the number of people who got mortgages, I assume the bubble would have been averted. But who would have been the first person barred from getting a mortgage? The message I’m getting from this crisis is not that government should do more, but it’s really how little the government can do.

  • Oil is Down Again
    Posted by on September 16th, 2008 at 9:51 am

    As far as impacting the overall economy, Lehman’s downfall doesn’t mean very much. In the larger scheme of things, Lehman was never really a big company. The media always like to use the, how will this effect Main Street angle. Simply put, it won’t.
    But what will impact Americans is the plunge in oil. I see that oil is down sharply again and is now below $92. I remember way, way back when we would have thought $92 for oil was expensive. For example, the beginning of the year.
    In my very unsophisticated analysis, I think gold is due for a big fall.

  • Goldman’s Net Plunges
    Posted by on September 16th, 2008 at 9:44 am

    The market is rattled again this morning as Goldman Sachs (GS) reported a major earnings decline. For their third quarter, Goldman earned $1.81 a share which beat Wall Street’s consensus of $1.73. This is a major shortfall compared with the $6.13 a share it made for last year’s third quarter.
    I’m seeing a lot of scary headlines (Goldman Sachs net plunges 70 percent) but some perspective is needed. Goldman is still making a lot of money, just not the absurd amounts seen in 2006 and 2007. GS’s profits are up 25% in the last three years. Annualized, that’s not a huge increase, but it’s still up.