BLOOD ON WALL STREET
September 25, 2008
Then the President said
"This sucker could go down."
THE PRESIDENT's stately pitch for the Paulson Plan didn't quite come off. With candidates McCain and Obama in attendance, rebellious House GOPhers started throwing chairs.
"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.
From the same New York Times piece:
In the Roosevelt Room after the session, the Treasury secretary, Henry M. Paulson Jr., literally bent down on one knee as he pleaded with Nancy Pelosi, the House Speaker, not to "blow it up" by withdrawing her party's support for the package over what Ms. Pelosi derided as a Republican betrayal.
"I didn't know you were Catholic," Ms. Pelosi said, a wry reference to Mr. Paulson's kneeling, according to someone who observed the exchange.
She went on: "It's not me blowing this up, it's the Republicans."
Mr. Paulson sighed. "I know. I know."
Sen. Chris Dodd, the top Democrat on the Senate Banking Committee, said Thursday that the bipartisan meeting with President Bush ... was nothing short of a disaster.
In an interview on the CNN cable news network, Dodd described a meeting in which Democrats were blindsided by a new core mortgage proposal from House Republicans, with the tacit backing of Republican presidential candidate John McCain.
"I am not going to sign on to something I just saw this afternoon." ... The whole meeting "looked like a rescue plan for John McCain," Dodd said.
He said he was simply going to pretend that the meeting had never happened.
Earlier in the day, Bill Gross of big bond house PIMCO, everybody's favorite bond genius and a swell guy, had told the telescreen that the Paulson Plan was a good idea but that $700 billion was insufficiently ambitious: it'll take $1.2 trillion to get the train back on the track.
Big diff. A magus in Japan (which went into deflationary depression about the time the Soviet Union went into receivership) says $5 trillion, and this Swiss agrees.
Gentle Bill also said that due to the interlaced trillions and trillions of counterparty obligations in the universe of decayed derivative securities (familiar worry), the Fed would have to expand its role to function as a "clearinghouse" where the huddled masses of CFOs yearning to be flat can bring their broken deals to get settled up cash (?) on the barrelhead.
Boatloads and boatloads ...!
Then, after the bell, as Ms Pelosi threw a bowl of cubed cantelope at John Boehner, the FDIC seized Washington Mutual, the largest Savings & Loan, $307 billion in assets -- the biggest bank failure in US history -- and
then immediately sold all those savings accounts for $1.9 bils to JPMorgan Chase (which earlier this year had consumed Bear Stearns in piratical fashion and with a $29 billion loss cushion courtesy of taxpayers).
So WaMu the killer S&L was indeed too big to fail. Too big, that is, for the FDIC to handle. And CNN reports that the CEO, as befits a titan:
could walk away with more than $18 million in salary, bonuses and severance after less than three weeks on the job, according to the terms of his employment agreement.
Recall that in the meltdown of 1907 it was Mr Pott-- uh JP Morgan himself who stepped in with a few pals to calm the markets and corner en passant the American banking system.
Meanwhile, back at the White House:
"We don't get to run this experiment very often," said Darrell Duffie [in the Washington Post], a professor of finance at Stanford University.
"How would you like it if I told you the probability of a Great Depression were only 10 percent? Looking at even a small probability of something calamitous is not that appetizing."
At the same time, there is zero political gain in voting for a huge bank bailout as demanded by President Bush, however modified to protect taxpayers and require oversight.
With liberal activists organizing protests and conservative activists denouncing the advent of American socialism, the safest place to be is to vote no while the rescue is approved with votes from someone else.
"There is no upside for voting for a bill like this," said a pained-looking Sen. Bob Corker, a Tennessee Republican working with Democrats to craft a plan.
The provocative proposal offered by the rebellious GOPhers nixed notions of buying the wounded mortgage bonds from the banks, suggesting instead federally guaranteed mortgage insurance.
Gee, maybe that combined with my price controls ...
Finally, economists warn of another dawning crisis: the collapse of
the anti-Bush merchandise sector.
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