Weekend Bailouts and Subsequent Market Reactions

Another weekend, another bailout, another market reaction:

How many Sunday press releases is it going to take to save the financial system from ruin? If you’re are keeping score at home, this is now the sixth Sunday night/Monday morning press release
in 14 months aimed at saving the financial system. Consider the recent history of these weekend rescues:

• August 2007, when the credit crunch was officially recognized by the Fed, when they cut the discount rate.

• December 2007, with the announcement of the TAF and other credit facilities;

• January 2008 Soc Gen panic, and a 75 bps emergency cut;

• March 2008 with the Bear Stearns bailout.

• July 2008 the first Fannie/Freddie rescue attempt

• September 2008 the actual Bailout of Fannie/Freddie

Five observations/questions/takeaways from the past of weekend rescues history:

1. A strong rally lasts for a while, but it eventually fades and makes a new lower low;

2. Each "rescue rally" has been shorter in duration and weaker in intensity than the immediately prior one;

3. Friday’s close becomes your new line in the sand; If and when that is breached, look out below.

4. The pre-Asian open news pattern reveals the Asset price focus is a large part of these issues; It also speaks to our overseas creditors/Overlords;

5. What form of free markets have we evolved into?  It is not Capitalism, it is not Socialism, it is not intelligent regulation. WTF is this?!?

Lastly, who wants to bet me that this will be the very last bailout? Any takers? Any?

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  1. steve from asia commented on Sep 8

    It’s getting f’ing hard to hold on to these shorts, every time spx gets 1200 in sight the damn feds come and bail someone out… spx 1350 is looking like a disticnt possibility now – so do we stay short or do we cover.

    What say ye Barry? Will todays rally fade at the open? Fight the fed?


    BR: I covered back in July !

  2. Peterpaul commented on Sep 8

    I hesitate to say it aloud, but with our collusion between corporations and the government – industry lawyers writing legislation – and squashing of rights – wiretaps on our own citizens – it appears we are becoming more and more….


    My grandfather would roll over in his grave if he knew.

  3. Richard commented on Sep 8

    I think I read something about the RNC Convention platform having a statement on the government NOT bailing out corporations.

    Ford, which has been making overtures for a few years now, wants the government to loan it money.

    This isn’t how a free market works. If you mismanage that’s your fault. Don’t use taxpayer money to pay for the sins of a few.

  4. Jack commented on Sep 8

    Putting lipstick on a recession makes it look quite attractive.

  5. jo sebek commented on Sep 8

    I think in a post Marxist world we can rule out the label of fascist. Maybe we should just call it an establishmentarian economy. Big Money, Big Auto, Big Ag, …

  6. dblwyo commented on Sep 8

    Is anyone willing to consider the alternative case here ? Not just the catastrophe if Frannie was allowed to fail but that intervention is a necessary government function. Even more broadly that markets don’t exist without a government institutional framework on which to build them. One doesn’t get upset over having publicly provided police, fire or ambulance services. Or state highways or any of a myriad other public services including a legal system,a military and so on. Ask yourselves would markets even exist without private property rights, without a court system to resolve disputes, without a regulatory framework to define standard measures of product and acceptable behaviors. The question is not whether regulation and intervention is necessary but it’s nature, timing and extent. Consider that we’ve all wallowed in the benefits of Frannie’s excesses and greeds since we all were likely investors who rode the bull markets up since ’04, which wouldn’t have happened without the Housing put which was enabled to a great degree by Frannie. For anybody who makes their living off of markets to object to regulation is a tad disingenuous. Not least of the reasons being that letting Frannie go would not only collapse the markets but would indict the credit-worthiness of the US itself:
    A review of all the inter-connections and consequences plus some good readings. But if you read nothing else read Bob Solow’s review of Kevin Philips book “Bad Money” here: http://tinyurl.com/56ojml
    One of the world’s great economists takes apart a very bad polemic and in the process explains how and why markets work and what kind of reforms you ought to be pushing for.

  7. txchick57 commented on Sep 8

    Probably time to think about bidding for SKF in the 90 area or under (prior low). I’ll probably cover the short today.

    This kinda reminds me of 2001 and you know what happened after that.

  8. t commented on Sep 8

    “5. What form of free markets have we evolved into? It is not Capitalism, it is not Socialism, it is not intelligent regulation. WTF is this?!?”

    Corporatism. (…which is what Mussolini called fascism…)

  9. Bruce commented on Sep 8

    Dr. Hussman’s musings this morning I think are very close to the way I see it too…

    Deja Vu (Again)….


    His best estimate at present is that this bailout will cost the taxpayer 250 billion dollars…

    This is still a liquidity crisis…and if you think of it as a RELATIVE crisis as I do it becomes more clear…even though the fed funds rate is now two per cent, the actual costs of borrowing and the eligibility of borrowers for credit is much more stringent than 2 years ago….so there is a liquidity crisis, even if not of Paul Volckerian dimensions….I don’t think the bailout changes things greatly…are you now via the GSE’s going to offer 100% financing?? I think not..

    Good luck….

    Bruce in Tennessee

  10. leftback commented on Sep 8

    All the king’s horses and all the king’s men couldn’t get Humpty Dumpty over SPX 1350. Don’t jump in too quickly on the short side here, there are more fools who want to get long than you can shake a stick at and there’s gonna be a lot of happy talk.

    Patience.. I just looked at GDX up 15% in the pre-open. Wow!

  11. JH commented on Sep 8

    It is “statism”. The question is to what degree. With our present system being a mix of economic socialism and fascism backed by debt-based fiat currency, the defining factor is one of legal ownership. Fascism is a system characterized by highly regulated private ownership of the means of production and goods. This bailout is now more socialism. And a bad joke. Only government promoting an “ownership society” could create something this FUBAR.

  12. John(2) commented on Sep 8

    BR: this is a mixed economy however much we want to pretend otherwise. History is littered with such bailouts Continental Illinois, the railways, Chrysler, Savings and Loan, the Airline industry after 9/11 et al. The reality is that despite all the conservative posturing about free markets, moral hazard, etc when it gets to the short strokes govt has no option but to step in and save the situation because the impact on people, institutions and the very functioning of the country are dependant upon it. Basically we need the govt however much true red blooded Americans try to decry it. If we’d only grow up and recognize that life would be much simpler and we’d avoid a lot silly factional squabbles we get into. Capitalist free markets are great but they need the govt to act as a governor as on a diesel engine. In the case of F/F as I repeatedly point out here, they are NEVER going to disappear because they perform a vital function. Personally I think they should be fully nationalized and run as public corporations and this will never happen again provided they are properly supervised.

    As to the next bailout target, look at Detroit. All these companies are up the creek without a paddle. It’s going to take years to develop the new cars and equally important a new business model to move into the new era of auto manufacturing and they don’t have enough capital to keep functioning. Should we do it? Probably, although I’ll admit it’s a bit more borderline than F/F, but if you want to retain a domestic auto industry it’s probably necessary. If these companies went down the dislocation across the mid west would be huge because of all the downstream ops. It’s amazing how the most conservative free market capitalists (Hank Paulson, George Bush) become regular little socialists when the rubber hits the road but as someone once pointed out reality has a liberal bias.

  13. txchick57 commented on Sep 8

    @leftback. Don’t be so sure about that 1350. I wouldn’t be suprised to see 1400+ before the election. Not betting my money on it but I’ve seen crazier s&**(( before.

    Ya’ll be happy. It will make for a boffo shorting opportunity.

  14. newjerseydoc commented on Sep 8

    Taking money from the poor to give to the rich is Feudalism. What’s funny is that most people don’t realized that they are being robbed because this is a form of deferred pilfering. The mainstream media either doesn’t understand, or is unwilling to tell people exactly what kind of a disaster this is, nor do you see the finger of blame being pointed to Wall Street or the Federal Reserve. Mostly, what you hear is that this will lower mortgage rates and help support housing, therefore this is a “good thing”.

  15. rj commented on Sep 8

    dblwyo, are you willing to personally pay for it though? Are you willing to forfeit 10% of your income so that the people that run Fannie Mae and Bear Stearns and Lehman Brothers can keep operating? Frankly, I’m not. I know it’ll happen though. Again, the middle class gets hosed.

    Perhaps the key is to make sure no company ever gets large enough to the point that it requires government intervention if it goes feet up. Not sure how you do that however.

  16. rj commented on Sep 8

    I’m not sure on what the name for this is. We have quasi-public institutions that buys mortgages that ran into trouble and is now being made fully public. The stakeholders in the now public institutions include American banks, foreign banks, and foreign sovereign governments.

    Perhaps a hopeless name such as “free markets with a twist”.

    These past couple years though has shown me something negative. It’s obvious that government cannot be allowed to entirely control business. I think it’s been made clear that we also cannot allow business to entirely control government, otherwise we get episodes like this. How do you do that though?

  17. stckpkr7000 commented on Sep 8

    You get em Barry! You’re a voice of reason and this entire manipulated pig of a market and financial market makes me sick and pissed off…. Can you bitch slap Cramer for me? He is truly a complete joke!

  18. WakeUpAmerica commented on Sep 8

    I am not American, nevertheless it is very painful for me to see a once great country go down the drain IN LESS THAN A SINGLE GENERATION.

    I am european, but not of the socialist kind, rather a Mises, austrian economics guy. Reading this and other similar blogs, I am amazed at the overconfidence, naivete, blindness of the american public opinion, even of the ones writing in or reading blogs like this one, blogs that are critical of the present abuse and mismanagement of the american economy.

    I am amazed because I believe things are way worse than what is expressed in very critical blogs like this one. It is not only whether there will be a Great Depression or not (very likely)…even more important than that is what brought America to this point.

    It is about the incestuous relationship between the financial elites of Wall Street (well the West Coast too courtesy of PIMCO and friends)…and the supposedly servants of the american people, the USA Government, and its institutions (among them in a remarkable role the FED).

    Americans, instead of being told the truth, that for decades the country been spending beyond its means, continue to be induced to consume in order to maintain the Ponzi Scheme of american finance running a bit longer. All for the benefit of the Masters of the Universe that milk the american economy to self-destruction. And when this self-destruction has finally arrived, very basic principles of decency and accountability have been and continue to be disregarded in an attempt to protect the elites from the terrible mistakes, crimes, that they have inflicted on America.

    This goes way beyond subprime, alt-prime, CDOs, etc. etc….starting in earnest perhaps with the Greenspan tenure at the FED, the whole american economy has been used as a backstop for a bunch of thugs in the financial sector…socialism for the rich but on a scale big enough to ruin the present day’s (already yesterday’s) Rome.

    It is not only Republicans (although they certainly have earned the first place) that are at fault, Democrats too. I do not see neither in McCain or even Obama, the kind of clear thought that can stop and attempt to reverse the damage done. It is as if the whole country had become victim of an Orwellian nightmare. Land of the Free? Where are the economics PhDs denouncing this economic crime? Paul Vocker has been perhaps the only one saying what has to be said (and in my view not strongly enough)…but who listens? Anybody with power or influence, has been bought one way or another by the financial elite.

    I believe that, when in the future historians write about this age, they will conclude, among other things, that a financial mafia took over the US Government, political parties (both), academia, etc., so that a tiny elite could syphon huge profits at the cost of destroying the american economy. They infiltrated everything, from academia, to the methods used to compute inflation and other macroeconomic variables, to how financial information is disseminated (CNBC Ministry of Truth), in order to confuse and misinform, to deceive a whole nation. That the nation had become decadent, complacent and lazy certainly helped.

    Now, this is not a socialist point I am trying to make…only an old fashioned classic capitalist one. America today is not a capitalist country, not even a democracy, not the Empire of the Law. It is a semi-mafiose country in which ordinary, decent, hard-working americans, are being taken to the slaughterhouse by a tiny elite of crooks that have corrupted the whole country. A fascist state.

    Do something for God’s sake!. Wake up! We europeans also belong to a common Western heritage…it saddens me to see the USA go to hell because of a bunch of financial terrorists.

  19. Vermont Trader commented on Sep 8

    Buying commodity and energy shares this morning. These shares are very oversold, many are attractive on a dividend basis. They still have fairly positive fundamentals. And this stimulus is bullish for commodity prices.

    I think we will have more bailouts but who is going to bail us out?

    This will all come to a head next tuesday when the fake Fed meets and the real Fed (GS) reports…

  20. D. commented on Sep 8

    become regular little socialists when the rubber hits the road but as someone once pointed out reality has a liberal bias.

    Conservatism thrives on rule making and preserving the status quo for those who have. Liberalism is for the exceptions and the have nots.

    Ironically, people get more conservative with age just as their understanding of human nature should make them more liberal. Since the Western world is ageing, this contradiction will only intensify!

  21. Keith commented on Sep 8

    I always thought you needed capital to have capitalism. Maybe its debtism (or some other nice word for slavery).

  22. HCF commented on Sep 8

    Dow future up 286.00 right now. Still waiting for the emergency 75bps rate hike. Not gonna hold my breathe though…


  23. zell commented on Sep 8

    Stop already with the fascism and socialism. We have a market economy that is managed or mismanaged as it has been in the Bubble era. Given the chaqnce there are always members of the governing class and the financial community that are eager to juice the economy. Our trust in upper most gov’t and corporate management has enabled Ponzi schemes, public and private to flourish.

  24. Flash Foraward commented on Sep 8

    oLockhart said yesterday that the new term facility to the 12 Reginal Feds won’t be used. My God, do these people actually think we are stupid?? He knows it will be used because the regionals have told him look out below!!. As a matter of fact who wants to take a bet that this will be the Sunday October 11 announcement from Paulson?
    I didn’t think so.

  25. VennData commented on Sep 8

    When the rich benefit, and the middle classes get screwed… When you cut taxes on the rich, and then raise them on the rest it’s called Reaganism.

    Oh no. How dare you mock Him!

    With a little smile and a twinkle in the eye, a promise of no ‘flag burning,’ no ‘saying condom on TV,’ they’ll filch your wealth, give it to Wall Street and tell you you’re a real American.

    The cost saving to the lumpen proles of these GSE repackagers on their precious home mortgages, will be made up for in higher taxes and more Federal debt to pay for bailouts… this will ease the discomfort of US diplomats on overseas trips, “See, we saved the value of the debt we sold you.”

    GOP: The Free market party. What a hoot. “Give us another Reagan…”
    “Oh if we could just find another Reagan”

    Well, you got one.

  26. TheFinancialNinja commented on Sep 8

    Heads up. This ‘bailout’ just triggered $1.47 TRILLION in Credit Default Swaps on Fannie and Freddie.

    The clowns that wrote these CDSs are probably dead. No way this is spread out enough over the entire system to avoid at least some implosions…

    Fannie and Freddie: CDSs, $1.47 Trillion Triggered

  27. Chris D. commented on Sep 8

    I don’t think it’s quite “fascism.” Fascism is more than just corporate-government collusion. I think newjerseydoc’s idea of “deferred feudalism” is good. To a certain extent we have upside social Darwinism and downside socialism. But, it all ends up with crony capitalism where the many below work in servility for the few at the top. The government doesn’t control the capital of the owner but the capital of the worker. It’s a fascinating inversion. Everyone suffers some degree of servility but within a highly regressive system. For example, the CEO of Fannie or Freddie could pay his portion of the servility in the first few hours or days of his working year. The drag is quite a bit more significant for most of us.

  28. Pete commented on Sep 8

    Election year pandering . On second thought, sheer madness! This is awful.

  29. Greg0658 commented on Sep 8

    1st – Socialism is a Sergeant in the Army payscale E6 approx (currently)

    2nd – Stop calling this “a Bailout” – it is “an Arrest” (finally)

    dblwyo hit the mark 1st “would markets even exist without private property rights, without a court system to resolve disputes, without a regulatory framework”

    Capitalism, Socialism, Corporatism, Communism, Facism (we have it all)

    as long as Corporations can continue as is (drain capital / reward slimly / go bellyup / no hangin & start again) … this aint Capitalism but it is America

    might be a wakeup call baby step closer to Utopianism tho

  30. Holdtight commented on Sep 8

    Ruh-ro-1.5 TRILLION, yes TRILLION in default swaps were not taken into account. Somebody in the White House has just said to the operator “Get me Hank Paulson…now!!!!”

  31. Ivo commented on Sep 8

    @ WakeUpAmerica & all

    Hi I am also European and think 100% the same way as you. Additionally the US capital markets give the global tone (still). I was also surprised how can this BS still be bought.

    Then recently I watched the Zeitgeist movie (very popular in some intellectual circles here) and start to realize that US financial markets are not the main show…And it just fits perfectly with my frustration about financial markets behavior currently.

  32. John(2) commented on Sep 8

    “people get more conservative with age just as their understanding of human nature should make them more liberal. Since the Western world is ageing, this contradiction will only intensify!”

    Actually D. I find I’ve become more liberal particularly over social issues as I’ve got older. As for economic issues there isn’t really a left and a right side in the context of 21st Century economies, there’s merely reality. That’s why people like Paulson do socialist things like bailing out F/F and Democrats pass free trade bills. The basic laws that govern economic activity are fairly well known and understood because most of them have been tried and tested over the last hundred years. We just lose sight of them occasionally because of imperatives like greed or political advantage. There are a few political theories out there like communism and supply side which are promoted by idealogues but we all know they don’t work. None of this is rocket science today, Paulson and Bernanke are pulling levers and they have a fair idea of what the outcome will be unlike in the thirties when it was largely guesswork.

  33. Rob P commented on Sep 8

    BEAR’S SUNDAY MAIN EVENT (BULL TRAP!) This is THE watershed event for the BEARS. There are no more magical bullets in the pockets of our leaders! Rate cuts are inflationary, jobs disappearing, and there are no more Fannie/Freddies out there! This is it. Ben, Hank, and all the plunge protection team members have officially screwed themselves now. I’m predicting an unbelievable drop in the next month or two like nothing I’ve (or you have) ever seen. The shorts have full run at it now with all the “long bulls” getting seriously burned from today’s pile in and then panic selling in just a few days/weeks. I’m not going to bet my life on it, but I’m sure betting all my finances on it! The Wall St choreographers have played this all so beautifully! Good luck to all.

  34. dblwyo commented on Sep 8

    rj – the answer is yes. Turn about being fair play two related questions. a) how much of your/our/my income in the last five years was related to the Housing bailout ? And b) what’re the chances that I’d loose more than 10% without a bailout ? I’d argue well over 60% probability of a 30-40% loss or better.
    The other question/challenge you lay down – controlling the size of these things – was and is the heart of it. Greenspan, et.al. started trying to reign them in years ago and couldn’t because of their lobbying. What you should and are really asking is what kind of regulatory regime do you find acceptable and desirable ? No better opportunity in decades than you’ll see in about eight weeks to make you preferences known.

  35. pmorrisonfl commented on Sep 8

    If you look at USGov’s balance sheet, they don’t take in enough to pay the bills as it is, so this additional burden probably won’t be paid either. Even if USGov had the courage to ask taxpayers to foot its bills, the taxpayers don’t appear to have enough extra to pay it. The end result would appear to be Feudalism, where the wealthy own the land and capital goods, and the rest of us serve at their pleasure.

    I suspect that the current powers-that-be find this to be a better situation than any alternative. Not being a power, and not being a revolutionary, I’m not sure what the alternatives are, but I’d like to find a credible one.

  36. Rudy H commented on Sep 8

    So far DOW up 293..about 1 billion per point courtesy of the US taxpayers. Hmmmm, if the auto guys get 50 billion…that’s right you can tack on 50 more big points. Just saw Cramer foaming at the mouth on CNBC opining on this suckers rally as his sort of point of redemption… I pity the fools who take his advice.

  37. John(2) commented on Sep 8

    “I’m not going to bet my life on it, but I’m sure betting all my finances on it!”

    I wouldn’t bet your life on it. This rally probably won’t have legs but Armageddon ain’t going to happen. At worst Dow trades in 11,250-13,000 range for next year.

  38. John(2) commented on Sep 8

    As someone observed yesterday some of these comments demonstrate the level of understanding of political economy amongst posters.

  39. VoiceFromTheWilderness commented on Sep 8

    It used to be in this country that when a large financial entity got into such bad shape that it became necessary for others to intervene this was considered a bad thing. People took it as a sign that something was amiss. These days the very same people that have spent 30 years telling us of the glories of free market capitalism, and of the evils of government (St. Reagan: Government is the problem), now cheer when the government props up a failing goliath. That the mob both votes for deregulation, and buys stock when behemoths fail is a tell of massive cognitive dissonance, or outright participation in fraud.

    Either way, they are fools, taking all of us down with them.

  40. VoiceFromTheWilderness commented on Sep 8

    Definitely not the last bailout, and this most recent event should really count as 3 not 1, which would bring your total to 8 in 14 months.

  41. Donkei commented on Sep 8

    The notion of defensible private property rights and obligations is the foundation of capitalism and liberal democracy.

    We have only half the equation right. We have private property rights without private property obligations, including most importantly, the obligation to suffer losses for failing to understand risk.

    This is a symptom of a society that has come to believe that there can be rewards without the pain of risk.

    It is reflected in our negative savings rate, our addiction to debt, essentially, our unwillingness to face systemic troubles with a clear-eyed view to doing the hard things necessary to solve them.

    This bail-out represents the end of the beginning of the decline of American world hegemony. The decline is here and now.

    There is a simple principle that states whatever the government says is its intent by its actions, the exact opposite will accrue.

    We are about to see that principle exhibited as the government bail-out of the residential mortgage market is sure to ultimately destroy it.

  42. rj commented on Sep 8

    “Greenspan, et.al. started trying to reign them in years ago and couldn’t because of their lobbying.”

    If Greenspan wanted to reign them in he should’ve just increased interest rates earlier which would’ve slowed down the housing boom. No lobbying depends on that. Congress, Fannie Mae, Freddie Mac don’t have any control over the Federal Reserve board.

    “Greenspan, et.al. started trying to reign them in years ago and couldn’t because of their lobbying.”

    The idea of our country as a neo-feudalist enterprise interests me and is something I have thought of before. Back in medieval times, you had a king but his power was not absolute, because you had a lot of dukes and earls and crown princes and marquis that each had a modicum of control over their own small territory. They swore loyalty to the king, but generally did their own thing. The king was dependent on them for troops from time to time, and perhaps money.

    Here’s the analogy: the president is the king, and your various corporations are your earls/dukes/crown princes, providing the money to the king and the members of government in the lower court to buy influence for their various schemes against fellow dukes. One can even say that they’re starting to provide troops for the king with the existance of companies like KBR, Halliburton, and Blackwater.

  43. John(2) commented on Sep 8

    “These days the very same people that have spent 30 years telling us of the glories of free market capitalism, and of the evils of government (St. Reagan: Government is the problem), now cheer when the government props up a failing goliath.”

    This comment from Voice is very true. It’s called a political confidence trick but you have to admit the Republicans are pretty good at this particular skill.

  44. roger commented on Sep 8

    The Government accounts for about 40 percent of the U.S. GDP, according to James Galbraith´s calculations in The Predator State – which, to my mind, is the best name for what is going on at the moment. The notion that capitalism runs on its own has always been one of those beliefs, like the belief in the immaculate conception, that defies rationality. Businesses incline to profit – and they will happily profit in collusion with the government, just as they will happily use any source of legal money to get out of unprofitable jams. All talk of ¨creative destruction¨mistakes a macro description of one aspect of the economic system for the messy pattern of economic reality.

    Unfortunately, the Government didn´t simply nationalize Freddie and Fannie, because of rightwing superstition having to do with ¨the bad government¨. Myself, I think the government should bailout the auto companies, as part of an energy strategy that would force Detroit to make energy efficient cars. I have no doubt that Italy, France or Germany wouldn´t hesitate. We have long ago shucked laissez faire – probably around 1910 – and the majority of people are much better for it. Unfortunately, we have returned to a seedy rhetoric of laissez faire, disguising the rule of a new plutocracy. That is shameful.

  45. FatMan commented on Sep 8

    …abolish the fed….establish a constitutional monetary system….eliminate ponzi-ed social programs…terminate the family trees of the pirates…

    I guess all we can do is daydream about “change in America”.

  46. Bruce commented on Sep 8

    Just another non-linear event for our linear brains to interpret…

    Still out of the market, but I would bet you a discounted Starbucks that by September 22 the dow is lower…two weeks.

    ..still got to come up with that 20% down..

    Bruce in Tennessee

  47. CNBC Sucks commented on Sep 8

    @WakeUpAmerica and all,

    I disagree STRONGLY on one thing. The fault is not entirely with The Masters of the Universe. This is a government of the people, for the people, by the people. I will give you the non-Bush version of an American saying: Fool me once, shame on you; fool me twice, shame on me. I am afraid, we might be seeing “Fool me three times, America goes into depression and chaos.” You may say all you want about Obama, but when people embrace a VP candidate (not to mention a Naval Academy flunkie for President) who attended 5 colleges in 6 years to find any school that would give her a communications degree, and who was mayor of a remote fishing village of 9,000 people just 2 years ago, I think that should give you some idea of how incapable the US electorate has become in governing itself. Americans have voted against their own interests out of pure, appalling ignorance and superficiality of thought, and it looks like they may do so yet again.

    Remember, Rome did not fall from attacks from the outside, until it rotted with corruption from the inside.

  48. catman commented on Sep 8

    Fannie had a stock offering four months ago at 27.5 usd a share. As Mel Allen used to say – How about that!

  49. rww commented on Sep 8

    wow. Refreshing skepticism from the market this morning.

  50. Sing Expat commented on Sep 8

    I want to know when they will start rounding up bankers and shipping them to Gitmo for some “enhanced interrogation”. Some poor schlep drives Osama Bin Laden around for a while and he gets tortured for years and sent to a maximum security prison. A bunch of Wall Street gangsters (including Greenspan, Bernanke, Paulson, and the crew at Frannie) steal billions and make every attempt to destroy the US economy and they get pensions, pay offs, and directorships at hedge funds.

    I say line them all up and shoot them for high treason and crimes against humanity. Start at the very top with the President; try him for treason and colluding with his rich cronies to defraud the US people.

    How much more will we accept? My guess? Lots more. Same frickin’ morons who lap up “9-11”, the “American Dream”, the “Bastion of Democracy”, and “God’s Country” will continue to believe that Republicans are best for America. Those voting for Obama can believe that he will change things; and they can have a poney for Christmas as long as they believe that.

    Fire, blood, rage, rebellion. Where is Jim Jones when you really, really need him?

    This rant brought to you by someone who is really pissed off about paying $100k a year to support American crap while living abroad for twenty years.

  51. K Ackermann commented on Sep 8

    Here, let’s try this one:

    It’s the great neocon experiment. Maybe Rumsfeld wrote a “snowflake” about how much smoother and more efficient the government would run without a congress. Goodness gracious, Heaven’s to Betsy, why NeoCon Inc. could pay homage to Friedman by not just removing all market impediments, but actually employing the full power of the government to support the mission of Empire.

    Perle: “Don, we love it. But how to get rid of Congress?”
    Cheney: “Ever hear of the Unitary Executive theory?”
    Fieth: “Even better at wartime. I know a country who is going to take care of Syria, but they want Iraq gone too.”
    Poindexter: “This is going to get dicey. We will need total information awareness.”
    Cheney: “We need to put a boot on the necks of the people. We need breadlines, chaos, and a savior. We don’t need a constitution.”

  52. Paul W commented on Sep 8

    If the market goes up 20 points today, Cramer will pronounce it a rally. Sad indeed my friends,sad indeed.

  53. andrzej commented on Sep 8

    Barry what is your take that the bailout was an answer to the threats of Asian banks walking away from the US entirely? With China and Japan selling their stakes in FNM and FRE, was this a stop loss that the Fed enacted to get them to hold their positions and a promise that they would recover in time?

    My guess is that this may be a means of sparking up some more inflation. If the consumer will not consumer than we will take the money from his taxpayer side and put it into the economy to recover from the credit losses faster and get the economy spinning again.

  54. cdrueallen commented on Sep 8

    WTF is this?!?


  55. gn commented on Sep 8

    “..still got to come up with that 20% down..”

    Naw. If it will help “stabilize” the housing market, I’m sure the new GSE policies will become much more accommodating toward those poor borrowers who need a little help achieving the American Dream of home ownership. After all, it’s all about increasing risk profiles, since the private market doesn’t seem to get how good that would be, and what better way to increase risk than to loan 100% of the price of a depreciating asset!

  56. zackattack commented on Sep 8

    Sack check time.

    One-year trendline for the $BKX is at 75.09. This would also be a 38.02% retrace off the July 15th lows.

    80 is the bottom of a 17-year channel, violated in March.

    You gotta take a defined-risk shot at an entry like that.

    *Imagine* the psychological effect of a negative, or even weak close today.

  57. catman commented on Sep 8

    zackattack – Imagining is getting easier by the minute…

  58. Bruce commented on Sep 8

    Well, if orders were placed over the weekend, and there was any kind of short covering at the open, subsequent to that the market has lost 200 points today!! and the nasdaq is negative?

    WTF? Forget my previous post of 2 weeks to retrace….I apparently was wildly optomistic….!

    Bruce in Tennessee

  59. Jeff M. commented on Sep 8

    If this market doesn’t close up solidly, where does it go from here? Me-thinks down in a not-so-pretty fashion.

  60. Jtil commented on Sep 8

    “Fascism is Capitalism in decay” — Vladimir Lenin

  61. Darkness commented on Sep 8

    Perhaps the key is to make sure no company ever gets large enough to the point that it requires government intervention if it goes feet up. Not sure how you do that however.

    Oh, this is easy. The FTC and the DOJ, when your company gets to large, simply says: You have to cut in half, or thirds, we don’t care how many pieces and we don’t care along what lines, as long as you cut it up. Most companies would be better off in the long run, like microsoft would have been if the doj had forced them to divide up.

  62. Anonymous commented on Sep 8

    If Vegas is setting the over/under on future bailouts at 0.5, I’m certainly taking the over!

  63. Remember Stalingrad commented on Sep 8

    Eric Kraus is an investment consultant based in Moscow who also writes about Russia. I was struck by something he wrote recently about the rules laid down by Putin when he reigned in the oligarchs in 2000.

    “…while they were
    welcome to continue stealing from each other,
    they were to stop robbing the State [aka the taxpayer]; and,
    while they were free to build huge fortunes,
    their business activities were to also promote
    the overall economic development of Russia.”

    In other words, he put a stop to the exact same situation we have here in which our own oligarchs are free to plunder the taxpayer and totally disregard the economic effects on the country.

    He was able to do this because he still had a power base, i.e., the state. Russia’s new capitalism had not yet progressed to the point where it had consumed the government and he was smart enough to foresee that eventual outcome and prevent it.

    This is why I am not optimistic for the future of the US. There is noone in a position to reign in our oligarchs. Once the government is taken over by corporate interests, it is very difficult to take it back.

    Recall that the last major outbreak of fascism wasn’t toppled from within but only as a result of a horrible war.

  64. Bruce commented on Sep 8

    Oh, and USA today says McCain is now 4 points ahead in the latest poll and Russia is sending ships to Venezuela for combined exercises…


    If markets hate uncertainty, these last 12 months have been a doozy…

    I have been investing for many years, and even when things were bad in the past, you at least could see the light in the tunnel…I am not exactly sure where the tunnel is anymore…zig and zag have had a litter of pups!

    Bruce in Tennessee

  65. DL commented on Sep 8

    “Lastly, who wants to bet me that this will be the very last bailout? Any takers?”

    I’m willing to be that this will be the very last bailout between now and the election.

  66. Russell commented on Sep 8

    Per Krugman’s blog – “nationalization” or “deprivatization”: you say banana, I say tomato – who cares? It’s distinction w/o a difference. Through the Treasury’s direct MBS purchase program and Agency recap mechanism, the Federal Government has assumed the authority of directly setting the price of a broad class of residential mortgages. Who honestly thinks Congress or the President, from whatever Party, is ever going to give up that entitlement for their voting constituencies? Welcome to Medicare Part F.

  67. georgia pig commented on Sep 8

    I’d go with corporatism, i.e., concentration of power in non-democratic entities that have access to tax revenue. In Germany and Italy, it was accompanied by a cultural tribalism that is used to justify the appropriation. In this case, it’s the “ownership society” mythology. Funny that the Fannie/Freddie bailout corresponds to the packaging of some obscure governor as the American EveryMom.

    Of course, it’s all to keep the furriners lending us money. The question I have is what happens when they won’t be able to hide the fact that the “bailout” requires a solvent government, and that the governement will not impose the auterity measures needed to maintain the solvency?

  68. brion commented on Sep 8

    “5. What form of free markets have we evolved into? It is not Capitalism, it is not Socialism, it is not intelligent regulation. WTF is this?!?”

    intelligent deign.

  69. Jessica commented on Sep 8

    The larger problem is not the bailouts per se. It is that we have misallocated capital on a large scale for years and right now are working with great intensity and ingenuity to prevent capital from being re-allocated appropriately. This continued misallocation has caused and will cause damage at least a magnitude of order greater than the bailouts.

  70. Bruce commented on Sep 8

    Brion…man you are way to sharp…

    Very nice.

  71. Bruce commented on Sep 8


  72. Tom commented on Sep 8

    All Paulson has done is postpone the depression of all depressions to 2010.

  73. Clint Golden commented on Sep 8

    To all you posters typifying this as a Republican fiasco, go shovel that shit some where else.

    Anybody that does not have a political axe to grind knows this Fannie Mae / Freddie Mac clusterfuck has been going on for decades and has been perfected by greedy people in both political parties with much of the media keeping there head far up there asses seeing and hearing no evil.

    Statesmen putting F&F in Receivership and unwinding it from the incestuous relationship with Congress/Government may be the best hope to get us out of this mess with the least pain.

    To you agitators: Go fuck yourselves.

  74. tom a taxpayer commented on Sep 8

    WakeUpAmerica – You analyzed this sorry mess we are in very well, and I want to expand on one point:
    “And when this self-destruction has finally arrived, very basic principles of decency and accountability have been and continue to be disregarded in an attempt to protect the elites from the terrible mistakes, crimes, that they have inflicted on America.”

    What makes many of us screaming mad about the bailout, isn’t the bailout per se. It is the federal government giving a bailout but not getting justice for the terrible mistakes and crimes that led to the bailout. It is the federal government giving a bailout but not conditioning the bailout on the most severe punishment for those committing the terrible mistakes and crimes.

    What makes us screaming mad is Fannie Mae Chief Executive Daniel Mudd and Freddie Mac CEO Richard Syron waltzing out with golden parachutes.

    What Paulson should have said to the two CEOs is that there is enough indication of mismanagement and “accounting irregularities” that they will not get a dime until a Department of Justice investigates to determine whether these were “terrible mistakes” or “crimes”. If only “terrible mistakes”, then they may get a few dimes. If “crimes”, then they will get time in prison, and no dimes.

    What makes us screaming mad is that Hank Paulson is the biggest Wall Street fox ever allowed in the biggest henhouse (U.S. Treasury). Outrageous!
    Whatever role Mr. Paulson and his firm Goldman Sachs may have had in the subprime CDO fraud, Ponzi schemes, fleecing of pension funds, and other financial crimes remains to be seen…preferably by a state and federal investigations of Goldman Sachs and other investment banks.
    Can Treasury Secretary Paulson be expected to investigate and prosecute Goldman Sachs CEO Paulson?
    What makes us screaming mad is Mr. Paulson has a screaming conflict of interest.

    Public confidence in the banking system will only be restored after vigorous investigation and prosecution of those guilty of the biggest financial crimes in U.S. history. Hank “the mole” Paulson is a person of interest.

  75. Rob P commented on Sep 8

    OMG… my sides hurt! CLINT GOLDEN!!! You rock man! “To you agitators: Go fuck yourselves.” lmao!

  76. Laurentsj commented on Sep 9

    This is Capitalo-Communism, The bottom 99% slaving for the top 1%.

    From a gutted middle class conservative, soon to be extinct breed.

  77. A German Reader commented on Sep 9

    Which part of the bet do you intend to take?

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