Tech Policy

The New-New Gettysburg Address

All Hail Goldman! Jeff Matthews writes an inspiring address! (and yes, he is making it up!)

Because it is Friday evening....

I actually don't think poorly of Hank Paulson or Ben Bernanke. Also, aren't we all sinners any way?
Johnny Cash singing God's gonna cut you down:

Meanwhile, after crossing the 10 trillion dollar debt mark, the national debt clock needs modification:

Finally, timeless advice from SNL: The sure-fire way of getting out of debt -- Don't buy stuff you cannot afford

Have a good weekend!

Because it is Friday evening!

The Daily Show on September 25th

...and for those who remember, from more than two years ago:

Senate Bailout Bill is 805 billion dollars! National debt at 10 Trillion!

The latest and greatest version of the bailout bill from the Senate has not only ballooned in terms of number of pages (450!!!), but also increased the expenditure to 805 billion dollars!

Not to mention that the bill includes pathetic attempts such as reaffirming the SEC's ability to suspend the reality (i.e. Mark-to-Myth rather than Mark-to-Market), and EXEMPTION FROM EXCISE TAX FOR CERTAIN WOODEN ARROWS DESIGNED FOR USE BY CHILDREN (Thanks CR!).

This bill started with a very bad idea (PIG). It was marginally improved last week (Lipstick on the PIG), before the current farcical attempt (PIG with lipstick in all the wrong places!).

Meanwhile, the U.S. national debt now exceeds 10 trillion dollars! As CR put it "Hey, at least the borrowing rates are low!"

Because it is Friday evening....

Every Breath You Take....

and of course, you remember Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund :

and this:

Have a good weekend!

John McCain is an Unmitigated Disaster

Let me just repeat that: John McCain is an unmitigated disaster.

As the news rolls in of the biggest ever bank failure in the U.S. history, John McCain thinks that the solution to the current financial crisis may lie in suspending the capital gains tax for two years and providing tax incentives to encourage firms that buy up bad debt.

John McCain who until last week was pronouncing that the fundamentals of the economy are strong, is now trying to pull the a huge stunt. The latest agreement between Senate democrats and republicans as well as house democrats, while not ideal, is a huge improvement over the King Henry plan. John McCain's attempt to inject himself into the negotiations over the bailout plan are despicable.

I beg the American people to please save the world from this unmitigated disaster.

Say NO to Paulson's Garbage Barge Trust*

The more I read and think about the Paulson's current bailout plan, the more I become convinced that the plan in it's current format should be not allowed at ANY cost.

1. Naked Capitalism: Why You should hare the Treasury Bailout Plan

2. Krugman: No Deal

3. Krugman: Thinking the Bailout Through

4. Brad DeLong: No Deal

5. John Hussman: An Open Letter to the U.S. Congress Regarding the Current Financial Crisis

6. Calculated Risk: Some Thoughts on the Bailout

7. Calculated Risk: Paulson Plan: Will It Work?

8. Jeff Matthews: “Bail Out the Drunks, O’Malley, and Round Up the Usual Suspects”

Remember one thing: The Current Paulson plan has NO PROVISION TO HELP HOMEOWNERS UNDER DISTRESS. The plan is to protect the financial institutions that hold toxic securities.

If the ordinary citizens of the United States do not want to be saddled with additional fiscal burden without any guarantee of helping the national economy, then it is important to stop the Paulson plan in its current format.

* Garbage Barge Trust

End of an Era on Wall Street

With the Fed release that in about a week Goldman Sachs and Morgan Stanley will cease to exist in their current status as independent investment banks, one chapter in the history of wall street is over. GS and MS will now become bank holding companies, subject to a greater set of rules that apply to mega banks such as Citigroup and JPMorgan.

Stupid is as stupid does: SEC to temporarily ban short-selling

The WSJ is reporting that the SEC os considering a temporary ban on short-selling. Apparently, John Mack of Morgan Stanley has called for such a move. The move follows a similar directive in England that has temporarily banned short selling in financial securities. The Big Picture has more. I am not sure if SEC is actually as stupid as to actually ban short-selling even for a short period.

Back in April, David Einhorn said that outlook for Lehman's stock was dim and the likely response from the regulators will be to "send me a subpoena and Send Lehman a Coke".

This evening, NY state Attorny General Andrew Cuomo announced that he has started a "wide-ranging investigation into short selling in the financial market" related to companies such as Lehman, AIG, Morgan Stanley and Goldman Sachs.

This is CRAZY!

How stupid are these people?

Now, I don't know if David Einhorn will actually get a call from Mr. Cuomo or not. He is hardly the only big star who was short Lehman for some time.

My favorite blogger Barry Ritholtz may or may not have been short Lehman, but he sure warned about it back in June when the stock was still trading in the 40s.

Jim Rogers has been short Lehman and other investment banks at least since August of last year!!! In fact, according to this article, he has been short the investment banks since the beginning of 2007. I have been listening to his interviews on Bloomberg for almost as long, and he has stated every time that he has been short every one of them, and if they go up in price, he will short some more.
Here is Rogers quote from October of last year: "Who knows how bad the balance sheets are, They took on gigantic amounts of bad paper."

Jeremy Grantham, who called out the truly first global bubble back in April of 2007 also warned in July of 2008 that "The Fed and the Treasury have moved to bail out large financial corporations under the smoke screen of a liquidity crisis. As is increasingly realized, it was not a liquidity crisis primarily, but a solvency crisis. Marked to market 6 months ago, Bear Stearns and Lehman were bankrupt as are Fannie and Freddie today. The bailouts are really providing what amounts to capital to insolvent firms as opposed to preventing the classic run on a bank as occurred in “It’s a Wonderful Life,” where a bank goes bust through no fault of its own. These bailouts permit a shameful lack of accountability for reckless behavior."

Go back to July 2003, when John Hussman, in his essay Freight Trains and Steep Curves wrote: "The major force shaping economic dynamics over the coming decade is likely to be an unwinding of the extreme leverage that individuals, businesses, and the U.S. itself (via its record current account deficit) have accumulated.
...... Many of these difficulties are well recognized, if not universally feared. What is not so obvious is the extent to which the U.S. economy and financial markets are betting on the continuation of unusually low short-term interest rates and a steep yield curve. This doesn't necessarily resolve into immediate risks, but it could profoundly affect the path that the economy and financial markets take during the next few years, by making the unwinding of debt much more abrupt."

That massive deleveraging of the financial system began ever so slowly last summer and has picked up steam this summer. The reason Lehman went bankrupt was not because some hedgies were shorting the Lehman stock. The reason Lehman went bankrupt was because people who have been doing the financial alchemy forgot that when you are leveraged 33 to 1, a simple 3% decline is your total investments can wipe your assets.

The United States calls itself a capitalist country, but it's regulators clearly don't know ABC of capitalism.

This is really shameful.

Barry Ritholtz is Shrill Again !

If you have been a reader of The Big Picture for as long as I have been, you would know that every now and then Barry can not take the endless spinning of data anymore. For the latest installment: No, New Homes Sales DID NOT Rise . . . or as I put it, Barry Ritholtz is getting shrill again! Previous editions can be found here and here.