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Tuesday, September 30, 2008

Bailout Bust — Stocks Swoon

Revival Hopes for Bailout/Rescue package?

Intrade Bailout contract:
US Congress to approve a government bailout of banks on/before 31 Oct 2008


Defiant House Rejects Bailout - For Stocks, Worst Single-Day Drop in Two Decades
"This is much too important to simply let fail."
—Henry Paulson, the Treasury secretary, on the $700 billion economic rescue plan rejected by the House.
New York Times:
For Stocks, Worst Single-Day Drop in Two Decades -- Even before the opening bell, Monday looked ugly.

But by the time that bell sounded again on the New York Stock Exchange, seven and a half frantic hours later, $1.2 trillion had vanished from the United States stock market.

What had started 24 hours earlier, with a modest sell-off in stock markets in Asia, had turned into Wall Street’s blackest day since the 1987 crash. The broad market, as measured by the Standard & Poor’s 500-stock index, plunged almost 9 percent, its third-biggest decline since World War II. The Dow Jones industrial average fell nearly 778 points, or 6.98 percent, to 10,365.45.

Across Wall Street, no one could quite believe what was happening on the floor — the floor of the House of Representatives, not the New York Exchange...
David Brooks / New York Times:
Revolt of the Nihilists — In 1933, Franklin Roosevelt inherited an economic crisis. He understood that his first job was to restore confidence, to give people a sense that somebody was in charge, that something was going to be done. — This generation of political leaders is confronting …
New York Times:
With Deal's Collapse, the McCain Camp Attacks — WEST DES MOINES, Iowa — Besides stockholders whose portfolios were ravaged Monday afternoon, the one person with the most riding on the bailout bill that collapsed in Congress may have been Senator John McCain.
Duane R. Patterson / Hugh Hewitt's TownHall Blog: Nancy Pelosi Had Help - Barack Obama
Robert Stacy McCain / The Other McCain: Did Democrats blow the bailout on purpose?
Jackie Calmes / New York Times:
In Bailout Vote, a Leadership Breakdown — WASHINGTON — The collapse of the proposed rescue plan for the teetering financial system was the product of a larger failure — of political leadership in Washington — at a moment when the world was looking to the United States to contain the cascading economic crisis.
Phil Singer / The Marathon Blog: Bailout: The Senate Should Have Voted First
A.L. / The Anonymous Liberal: A Party in Complete Disarray
Blake Dvorak / Real Clear Politics: The Morning Report
Jennifer Parker / Political Radar:
Stephanopoulos: What's Next? Congress Mulls Four Options — ABC News' George Stephanopoulos reports: There are meetings going on right now on Capitol Hill to try to figure out what to do about the $700 billion Wall Street bailout bill that failed to pass the House today...
John Aravosis / AMERICAblog News: Stephanopoulos on Congress' options
Basic Accounting Issue Sinks Bailout Logic

John Hussman / Hussman Funds:
You Must Be Able To Read a Balance Sheet - the government is taking on financially non-viable securities and warrants on common equity, while failing to improve the capital position of these financial companies at all (unless it overpays).

Taxpayers will not make money here. As Congressman Scott Garrett noted to taxpayers on Sunday, "This morning we should be very much alarmed. Obviously, Washington is not listening to your wishes. Those who used to work for Goldman Sachs will support this deal. Those who have blocked reform in the past will support this deal. I will not support this deal." I couldn't agree more. This is not a good deal, because it will waste taxpayer money without addressing the fundamental solvency problems...
Paul Krugman:
People I agree with, part one [laying out the balance sheet issues] -- [John Hussman] explains why the Paulson plan as originally sold didn’t provide any real answer to the problem...

comment: So how can the United States be a Banana Republic if the Congress votes to not do something dumb?
Paul Krugman:
OK, we are a banana republic — House votes no. Rex Nutting has the best line: House to Wall Street: Drop Dead. He also correctly places the blame and/or credit with House Republicans. For reasons I've already explained, I don't think the Dem leadership was in a position to craft a bill …
Wall Street Journal:
The Beltway Crash — Congress lives up to its 10% approval rating. — America has survived a feckless political class in the past, and it will again after this week. But Monday's crash and burn of the Paulson plan on Capitol Hill reveals a Washington elite that has earned every bit of the disdain that Americans have for it...
Washington Post:
An Appeal and a Blame Game — Nominees Link Each Other to Crisis, Urge Action on Hill — Reacting to the House's defeat of a $700 billion economic rescue proposal Monday, Sens. Barack Obama and John McCain called on Congress to pass a new bill and then sought to blame each other for the deadlock on Capitol Hill...
Washington Post:
How the Numbers Failed the Leaders
Charles Babington / Associated Press:
Analysis: House vote against bailout wounds McCain
Rex Nutting / MarketWatch:
House to Wall Street: Drop dead
Jared Allen / The Hill:
The bailout implodes — The historic $700 billion bill aimed …
Home Prices Still in Decline

Home Prices in 20 U.S. Cities Declined 16.3% in July -- House prices in 20 U.S. cities declined in July at the fastest pace on record, signaling the worst housing recession in a generation had yet to trough even before this month's credit crisis.

The S&P/Case-Shiller home-price index dropped 16.3 percent from a year earlier, more than forecast, after a 15.9 percent decline in June. The gauge has fallen every month since January 2007, and year-over-year records began in 2001....
U.S. home prices down 16.3% in past year, Case-Shiller -- "There are signs of a slowdown in the rate of decline across the metro areas, but no evidence of a bottom" said David M. Blitzer, chairman of the index committee at S&P ...
U.S. home prices down 16.3% in past year, Case-ShillerCase-Shiller 20 Metropolitan Area Price Index still in decline
David Kurtz / Talking Points Memo:
THAT MEAN, NASTY NANCY PELOSI — Here's the Pelosi floor speech that Republicans claim so enraged them that they decided to change their votes on the bailout: — And here is the Republican House leadership laying all the blame at Pelosi's feet:
Discussion: The RBC, Spin Cycle and TheZoo
Paul Krugman:
Bailout questions answered — I'm being asked two big questions about this thing: (1) Was it really necessary? (2) Shouldn't Dems have tossed the whole Paulson approach out the window and done something completely different? — On (1), the answer is yes.
SilentPatriot / Crooks and Liars:
Shorter House GOP: We killed the bailout bill because Pelosi hurt our feelings
Discussion: Politics Blog
Washington Wire:
House Republicans Blame Pelosi's Speech
Matt Lewis / Townhall.com: Why Blaming Pelosi is a Stupid Strategy
Robert Reed / The Huffington Post: GOP Fallback: When In Doubt Blame Pelosi
Julie Hirschfeld Davis / Associated Press: House nixes $700B bailout bill in stunning defeat
Betsy Newmark / Betsy's Page: Come on, House Republicans, grow up!
Phil Singer / The Marathon Blog: The Cry Baby Strategy Is Back...
Bitter finger-pointing on Capitol Hill after bailout bill fails
Ed Kilgore / Democratic Strategist: Desperate GOP Spin
Chris Isidore / CNNMoney.com: Bailout plan rejected
David Kurtz / Talking Points Memo:
IT HURT THEIR FEELINGS? — Rep. Barney Frank (D-MA) …
Stuart O'Neill / The Democratic Daily: The Bail Out Bill Has Failed
The Poor Man Institute: Grand Emo Party
Ben Smith / Ben Smith's Blogs:
McCain blames Obama, not House GOP, for House vote
Marc Ambinder: A Failure To Communicate (What We Have Here) — John McCain has a fundamental problem.

Jesse J. Holland / Associated Press:
Obama: McCain's deregulation too risky for economy
Pamela Leavey / The Democratic Daily: Banana Republic — There's a lot of finger pointing …
Jeff Macke / Minyanville:
Welcome to Crazy Town, Population: Us --
Hello from New York where I’m officially starting to get flat-out hostile towards both parties working in Washington DC. I understand the kabuki theater nature of politics. I both forgive and have a grudging appreciation for a well-turned political barb. But when demonstrably clueless folks come into my house and start bringing “daughters” into the argument for doing nothing while financial markets seize; I get a little revved up. “Wall St. vs. Main St.” is a lie. Pitting Wall against Main is akin to starting a blood feud between your right leg and left leg; neither side can actually win and just engaging in the fight guarantees winding up on your ass...
Jeff Mathews is not making this up:
Nothing to Fear but Irresponsible Words --
"This sucker could go down."
—George Bush
The Irish Deposit Guarantee

The Ireland government guarantees depositsIrish Times:
Irish Government statement on guarantee arrangement:
The Government has decided to put in place with immediate effect a guarantee arrangement to safeguard all deposits (retail, commercial, institutional and interbank), covered bonds, senior debt and dated subordinated debt (lower tier II), with the following banks: Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the Educational Building Society and such specific subsidiaries as may be approved by Government following consultation with the Central Bank and the Financial Regulator. It has done so following advice from the Governor of the Central Bank and the Financial Regulator about the impact of the recent international market turmoil on the Irish Banking system. The guarantee is being provided at a charge to the institutions concerned and will be subject to specific terms and conditions so that the taxpayers’ interest can be protected. The guarantee will cover all existing aforementioned facilities with these institutions and any new such facilities issued from midnight on 29 September 2008, and will expire at midnight on 28 September 2010...

Ireland's Solution: Better Than a Bailout?

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia