Fear Is A Great Motivator

...as the Senate moves up the timetable on a bailout plan vote from Thursday to Wednesday evening.

The Senate plans to vote on the $700 billion bank rescue plan Wednesday evening - two days after the House failed to pass it.

The bill adds new provisions - including raising the FDIC insurance cap from $100,000 to $250,000 - and will be attached to an existing revenue bill that the House also rejected Monday, according to several Democratic leadership aides.

The vote is scheduled for after sundown, in observance of the Jewish holiday. Republican presidential nominee John McCain and Democratic nominee Barack Obama and his running mate Joe Biden confirmed that they would be present for the vote.

So, I expect another good day on Wall Street tomorrow as CEOs dream of all the phat lewt they'll get from this, not to mention being able to lie about how much the toxic trash they have is worth. Asian markets are up 1.5% or so in anticipation of the screwing to come.

McSame, Obama, Biden all expected to be there to vote yes, I would assume.

We'll see how this affects the LIBOR and the credit spreads in about 8 hours or so.

Marketing "Mark To Market"

One of the most important accounrting regulations the SEC imposed late last year was a return to companies having to value their assets at an actual price, not what companies thought the asset should be worth. The accounting practice, known as "mark to market" was imposed last November.

Needless to say, Wall Street hates it. It made banks have to assign a price to arcane assets like securitized mortgage bundles and CDOs and other debt instruments based on what price those instruments were currently trading at.

"Fair value" was defined by the SEC as selling price at the time, not "what the person selling it wanted the value to be." This was done in the wake of the Enron accounting scandals...and in typical Bush administration fashion took nearly five years to be implemented.

Now, since banks wanted to hold on to these instruments and not sell them, those who DID have to sell them sold them as a last resort at low low prices and if you bought them, that was what the arcane little securities product was worth. Banks hated selling them, but they were greedy enough to buy them and hope they went up in value, because they WERE buying low.

Problem is, the housing market went and died. This drove the value of these things down to "near freakin worthless" because, well, they WERE nearly freakin worthless. They kept losing value, too as the housing market continued to crash.

The banking lobby had a brilliant idea. "Change what fair value means so we can lie to the world about what these damn things are worth!" On the eve of the industry bailout, when everyone hates Wall Street. Seems like a losing proposition, right?

You'd be wrong.

In a meeting last week, lobbyists for the American Bankers Association and the Financial Services Roundtable urged the Securities and Exchange Commission to suspend or relax the accounting provision. A similar advocacy effort continues on Capitol Hill, where lawmakers are reconsidering efforts to aid the financial industry after the House yesterday failed to pass a recovery plan. That bill also would have forced a re-evaluation of the "mark to market" accounting rules.

The three-page joint statement today from the SEC and the Financial Accounting Standards Board does not do away with fair value accounting provisions altogether.

But it gives companies more leeway to employ estimates and their own judgment in many cases when they deem the market to be "disorderly" or seized by liquidity problems. It also gives companies room to determine whether the impaired value of their assets is no longer temporary, a conclusion that could trigger massive write-downs.

Regulators reminded companies today that in exchange for using more estimates and judgment, the need to disclose their methods to investors is all the more important. SEC officials sent letters reminding businesses of their obligations twice already this year, in March and September, after expressing concern that many financial institutions were using opaque measurements.

In other words, now financial companies can happily "estimate" how much these things are worth.

Which is how we got into this mess to begin with, because up until last November, banks were happily "estimating" how much these things were worth well in their favor, which is why banks had so many of these damn mortgage products in the first place.

Before the credit markets were locked up because nobody knew what these mortgage things were worth. NOW the credit markets will be locked up because everyone will assume other banks are lying about how strong the assets on their books really are.

That's a great improvement of course because if banks can lie about these assets, they have to keep less cash on hand to meet funding requirements, because more of a bank's assets can be counted as securitized mortgage products (which the bank is estimating).

So, less cash is needed, because everyone's lying about the reasons they can now have less cash on hand, even though the banks know they are lying and know they actually need that liquid cash even more than they did before, because NOW they can get caught with their pants down should they need to really need to buy something with that cash or sell anything vital...like those nifty phantom estimated assets that even LESS people are going to want to buy because NOW not only is the housing market STILL dropping but everyone now knows you're lying about how much the damn things are worth on top of it. After all, the people who you would want to sell these to are also lying about the value of their OWN securitized mortgage products they already have.

Sure, that'll make people want to loan that liquid cash out to people instead of hoarding it!

Brilliant!

Morons. We really do deserve this f'ckin crash.

MEOW! THUD! BOING!

Dead Cat Bounce SUPREEEEEEEEEEEME!

U.S. stocks jumped the most in six years as growing expectations that lawmakers will salvage a $700 billion bank-rescue package helped the Standard & Poor's 500 Index recover more than half of yesterday's 8.8 percent plunge.

JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. climbed more than 13 percent as Senate leaders vowed to resume work on the bailout plan this week after its rejection spurred the market's steepest decline in two decades. Hess Corp. and Schlumberger Ltd. added more than 5.8 percent as optimism about the plan helped oil rebound from a $10-a-barrel drop. All 10 industries in the S&P 500 advanced at least 1.3 percent.

``There is some renewed hope that Congress will come back and try to get the amended plan through,'' Robert Doll, who oversees $1.3 trillion as chief investment officer of global equities at BlackRock Inc. in Plainsboro, New Jersey, said in a Bloomberg Television interview. ``We have to restore confidence, we have to reduce fear, we have to get banks to lend money.''

The S&P 500 rose 58.34 points, or 5.3 percent, to 1,164.73, its biggest advance since July 2002. The Dow Jones Industrial Average jumped 485.21, or 4.7 percent, to 10,850.66 and earlier gained more than 500 points. The Nasdaq Composite Index added 5 percent to 2,082.33. More than four stocks climbed for each that fell on the New York Stock Exchange.

So, we won, right?

It's over?

Still, no.

Econo-Rapture

So you're probably thinking that with the GOP in disarray and the financial crisis pretty much proving that Bush-O-Nomics was the worst idea of all time, the Wingnutopshere would be full of gnashing and wailing.

Oh no, my friends. As Dan Riehl proves, you'd be wrong. (h/t Hilzoy)

More and people borrowed against equity they were, in effect, gambling they would have. Well, lo and behold, it isn't there. So does this cycle, this addiction ever end? Should Americans trust the very same people who first created, then abetted and eventually denied this problem to actually fix it? For heaven's sake, you should know better than that.

That even as they were cobbling together a plan they were looking to protect those same bad credit risks that have been benefiting all along should tell you all you need to know about where the liberal heads in control of Congress are really at. And don't kid yourself that this 700 billion dollars will be enough. As they show no real signs of curbing the types of behaviors that got us here in the first place, there's no reason to believe that problems won't continue to mount. And that just means transferring of wealth through increased taxation, again.

Now, frankly, Dan sounds like me here...so of course there's a catch.

How many generations forward must we mortgage to sustain a standard of living for too many people, one which they don't actually deserve?

Some of the alarmists out there might want to take a moment to consider all the ramifications here. It may sound harsh, but the Great Depression produced many things - one of them was called the Greatest Generation.

The great economic boom of the last few decades propped up by dubious credit has produced a generation or two that thinks enough is never enough and if one can't earn it, than you either borrow it, or the government in the form of hard working taxpayers should make sure you get yours in the end.

Ahh there we go! It's not REALLY government's fault. It's poor people's fault. So, let's burn society in the crucible of a financial meltdown and extract the tempered alloy consisting of the screams of the economically disadvantaged and the romance of America declaring war on the Nazi Islamofascist menace. We'll call it Wingnuttium! We'll build katanas and ninja shuriken and lightsabers out of it and sell them on eBay.

But in all seriousness, the social conservative wing of the GOP has just declared war on the Chamber of Commerce wing on the GOP, and there's going to be blood. As far as the first group is concerned, America is going to burn because God doesn't own all our bodies and minds (and the burning part is cool with them, it'll leave the Faithful behind) and the second group is convinced America's going to burn because the fruitcakes in the first group just don't understand that basic economics is a tool for beating down the poor and gaining political power and God has nothing to do with it.

Well, now that this little rift in the economy has ripped the GOP apart, it just remains to see which wing of the Wingnuts will take over the party and which wing will sit home in five weeks and not vote for anybody.

I forsee pretty much the end of the Republican party as we know it. The Godboys think the Country Clubbers are apostates, and the Country Clubbers think the Godboys are morons. It's always been that way, but that was until the Country Clubbers sided with the Democrats in Operation Make Wall Street Rich Heh Heh Heh. Now the Godboys are pissed, and frankly they want to see the country go down in flames -- they figure it'll take a few million illegals, minorities, Muslims, gays, vegans and Democrats along with it when they get to use their guns on things. This makes them very, very happy...and horrifies the Country Club boys, because they'll be included in the "up against the wall the revolution comes" category.

The bad news is over on this side we'll have to adopt the Boss Tweed types and try to rehabilitate them into Blue Dog Democrats or something. Not looking forward to that, but it more or less worked for Andrew Sullivan and Joe Klein.

Who's In Charge Here, Anyway?

Above: Boehner, McSame and Preznitman direct the GOP caucus to vitctory.

So who's in charge of the Republican Party right now, anyway?

It's not Preznitman. He promised Armageddon if the bailout failed, and we're still here. Besides, the rest of the party hates him, he's at 26% approval, and the Dow closed lower yesterday then it was at when he took office 8 years ago. Bush doesn't exist as far as his own party is concerned. He's poison.

It's not McSame. He threw his weight behind getting the bailout passed as an opportunity to show his "leadership ability." Now he's floundering badly. Right now he looks like a lame duck Senator, not a Presidential candidate. Sarah Palin is a caribou around his neck and Obama is opening a wider and wider lead on him each day.

It's not John Boehner. Ohio's favorite crybaby looks like a complete idiot. He's been unable to fufill the basic House Minority Leader function -- arm-twisting for votes 101 -- and now word is that his total failure may cost him his position in the party leadership. He's seen as weak and ineffective now, and the sharks are already circling for his spot.

It's not Mitch McConnell. The GOP's Senate Minority Leader is in serious danger of losing his seat, much like Tom Daschle did for the Dems. He was locked in a dead tie with Democratic challenger Bruce Lunsford for his own Senate seat right now in Kentucky...and that was before he threw in his lot behind the bailout, unlike his fellow KY Republican Jim Bunning, who came out in strongest possible terms against it. Now McConnell's running scared.

So who is it? AG Mukasey has named a special prosecutor to go after Attorneygate. Condi's got her hands full with India's nuke deal and Pakistan's new President. Hank Paulson looks like a complete scrub right now. Nobody's in charge.

Obama on the other hand is large and in charge with concrete ways to improve the bailout.

dday has more over at Digby's, as does Chuck Todd.

My 17th Level Mutual Fund Manager Stops To Loot The Corpses

US markets have rebounded solidly in the Mother Of All Dead Cat Bounces.

A snapback in stocks wasn't unexpected as carnage on Wall Street often attracts bargain hunters, though questions remain about how investors will proceed. Without a bailout plan in place to absorb soured mortgage debt and other bad loans from banks' balance sheets, investors are wondering what might restore confidence in lending.

While stocks turned higher, moves in the credit markets were more ominous. The benchmark London Interbank Offered Rate, or LIBOR, that banks charge to lend to one another rose sharply Tuesday, making it more expensive and difficult for consumers and businesses to borrow money. In addition, credit card debt and more than half of adjustable-rate mortgages are tied to LIBOR, so an increase isn't welcome for many consumers.

LIBOR for 3-month dollar loans rose to 4.05 percent from 3.88 percent on Monday. LIBOR for 3-month euro loans, meanwhile, rose to 5.27 percent, from 5.22 percent Monday.

Many on Wall Street had expected the government's plan would help sweep away some of the fear and pessimism that has hobbled credit markets, which are where businesses turn to finance their day-to-day operations. The worry is now basic operations like making payroll will be difficult or perhaps impossible for some companies. Critics of the plan said, however, that it was too costly and wouldn't have done enough to jump-start lending.

Credit markets are still locked up and will remin locked up. If something isn't done to lower the LIBOR and soon, everything else will become academic.

Even worse, the source of every single one of these systemic problems can be traced back to the housing depression, which continues to rage on.

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.

The housing slump is at the center of the meltdown in financial markets as declining demand pushes down property values and causes foreclosures to mount. Banks will probably stiffen lending rules even more in coming months to limit losses, indicating residential real estate will keep contracting and consumer spending will continue to falter.

And if banks stiffen their lending rules because of more bad mortgage paper writedowns, the credit markets lock up even more.

As important as it is to break up the LIBOR lockup blood clot to prevent an economic heart attack, it's just as important if not more so to realize that the heart itself is the housing market, and that heart is diseased. A very expensive transplant of sorts may be needed, or at least major bypass surgery...and the patient's insurance is held by the Chinese, y'dig?

Obama To The Limit

Come...on...FDIC, now come on FDIC!(h/t AmericaBlog)

Today, Obama announced his support for increasing the FDIC limit to $250,000. This makes a lot of sense and shows that Obama gets it. People of all ages are worried about what is happening with their bank accounts and the old amount is not enough to provide confidence.

This is a good idea if you believe consumer confidence in preventing retail bank runs now is more important than taxpayers being on the hook for the already dwindling FDIC deposit insurance fund later. Retail bank runs are what killed IndyMac and WaMu.

Unfortunately, the real bank runs are already taking place beneath the surface. Foreign banks are taking their funds out of US banks in order to limit exposure. That is a far more fatal blow to the balance sheets of banks than consumers removing deposits.

While this is a good second or third move for Obama to call for, priority #1 is to unlock the credit mess. I'm beginning to think only a massive, coordinated emergency rate cut worldwide will do it. After that, a number of additional actions will have to be taken. But Obama's at least pointing in the right direction on this.

Clearly When Holding 20 You Should Yell "Hit Me"

That's the John Sidney McSame III way, dammit.

John McCain made the morning show rounds today. On Fox they were virtually begging him to "suspend" his campaign again in the wake of the bailout failure yesterday on the Hill. You know, since it worked out so well the first time. McCain's answer: He just might suspend again.

Calling time out because you look like an idiot on the Failout: my friends, that's leadership we can have a good, long, derisive laugh at.

What's The Deal?

Well, the narrative shaping up this morning is this. Asia tanked 4% this morning, but Euro stocks are mixed. US futures are up about 2 percent, shaping up to be a decent day. It's cleaning up after the hurricane, and things will probably be pretty good today after yesterday's hideous losses.

So, like lancing a boil, it's over now, right? Lot of pain but you bandage it up and it heals, right?

Not hardly. Banks are still terrified to lend to each other. The LIBOR vaulted to 6.88 at one point, but still well over 5%. Banks are hoarding cash and reducing or pulling entire lines of business credit just to maintain operating capital. Here's the thing however: the companies they provide credit to also need that money just to provide THEM with operating capital.

Fairly quickly I would wager, the lockup in the credit market must be broken or you're going to see major world businesses say "We have to shut down some operations for a bit." We're talking things like "inability to meet payroll requirements" and whatnot. That's how serious this is. The first major news stories break about that, and panic doesn't begin to describe it.

It'll only get worse should Asia and Europe take their money out of US banks and go home. There's ample evidence they are doing that right now. If this keeps up, US banks will have no choice but to pull credit back to stay open, and the businesses that depend on that credit will have to find it elsewhere at usurious rates.

Bad things will happen after that. We're watching the credit markets die in real time. Pretty soon we're going to get to the "call in your debt" phase of the market lockup, and THEN things get really, really bad for America.

I am still not convinced any sort of bailout is going to help. The Fed threw $600+ billion at the credit markets yesterday, and it did nothing. A $700 billion bailout isn't going to do a damn thing for the credit markets. I expect emergency measures to be taken in the next few days or weeks.

But let's remember what this bailout was: a terrible bill that was designed in secrecy, rushed, and defeated because the House GOP was terrified of the Dems getting a monstrous margin in the next House. The talk radio noise machine killed this bill, folks. Even worse, the bill wouldn't have worked and it was a sweetheart deal for the banks and for Wall Street. Enough sheer voter outrage ended it...for now.

But some action is needed. We're facing anarchy here: not tomorrow, but very soon. Unless the credit market Gordian knot is sliced open, we're talking about mass layoffs and shuttered businesses across the country and the world. By Election Day for example, we'd be looking at the worst periods of stagflation. It's that serious.

I'm hearing noises about a massive Fed rate cut here, for starters. But that'll be it. That's the last bullet in that gun. After that, it's hyper-inflation.

StupidiNews!

• The Grey Wolf is back on the endangered species list.
• Markets are set to rebound this morning as bargain hunters step in...for now.
• A new bill aims to stop arbitrary government searches on laptops.
• What happens to Charlotte's economy with no Wachovia?
• Could algae power cars in a few years?

Village Implosion

The Village is outraged at the Failout. Just livid, beyond angry. They thought they had the ultimate bipartisan bill here, and instead it turned into a revolt by the dirty bourgeois masses to block this BI-PARTISAN BILL.

On the news shows tonight the Village is decimating Congress. On Hardball, Tweety is yelling at Republican Rep. Darrel Issa that Congress failed the American people here, and that McSame looks like a complete idiot now (which is the real problem, because if Obama runs away with this election, the Village has no clout to shape the narrative, and they HATE that.)

It's crazy. The Village is basically going WHAT THE HELL ARE YOU MORONS DOING?!?! (a 777 point drop in the Dow will do that.)

If the people hate the bill, and the bill fails, isn't that the will of the people? Not since the Village doesn't give a damn about the people...what do THEY matter? WE liked the Failout bill. WE wanted our stocks to go up. YOU guys screwed it up.

So the Village is going to kill them.

The Bailout Is Dead

...and on fire, and stabbed. It's official, defeated in the House.

U.S. lawmakers rejected a $700 billion bailout plan for the financial industry in a shock vote that sent global markets sliding as the world credit crisis claimed more banks.

By a vote of 228-to-205 the House of Representatives rejected a compromise plan that would have allowed the Treasury Department to buy up toxic debt from struggling banks.

The plan's defeat sent U.S. stocks down sharply, with the Dow Jones industrial average briefly falling more than 700 points, its biggest intraday drop ever.

Shares had already been under pressure following sharp declines in Asian and European shares on fears the crisis was spreading. Global money markets remained frozen, even as central banks poured in cash in an attempt to boost liquidity.

At least for now the bailout is dead. Dow's off over 500. NASDAQ and S&P 500 are both down 6% and falling.

The Crash of '08 is here, and here there be dragons. We're off the map, kids.

Now the fun really begins.

Meanwhile, the Fed is pumping billions into the credit markets and not waiting for Congress to finish with the blaming and the hate and the stabbing and the fire.

Under one new step, the Fed will boost the amount of 84-day cash loans available to U.S. banks. The Fed is increasing the amount to $75 billion, up from the current $25 billion starting on Oct. 6. Banks bid on a slice of the loans at an auction.

That move will triple the supply of 84-day loans to $225 billion, from $75 billion, the Fed said.

Meanwhile, the Fed will continue to make $75 billion worth of shorter, 28-day loans available to banks.

All told, the total amount of cash loans -- 84-day and 28-day -- available to banks will double to $300 billion from $150 billion, the Fed said.

Moreover, the Fed made an extra $330 billion available to other central banks. That boosted to $620 billion the total amount available to the central bank through currency "swap" arrangements, where dollars are traded for their currencies. That total is up from $290 billion previously being made available through such arrangements.

And it's doing NOTHING. The LIBOR is at 5.24%, TED Spread at 3.37%. It's over. Hopefully the pain this causes will be an excellent motivator to come up with a REAL PLAN THAT WILL WORK.

Having said that, the GOP leadership is not blaming the GOP rank and file, they are blaming...Nancy Pelosi! (She was mean.) This keeps getting better.

Bloodbath: The Lossification 2 The Revenge

Financial stocks, particularly regional banks, are utterly tanking right now, particularly Ohio banks. Fifth Third, National City, Key Bank, and out in California FirstFed Financial all having a really, really bad day. FDIC can process and sell these banks off, they're not large enough to pose any kind of threat to the economy.

Just, you know, my job.

[UPDATE] House GOP buried the bailout. Dow off 700 just after the vote, now off 450 or so. It's chaos.

"Now what?", the universe asked, breathlessly.

"I don't have a clue," the universe replied.

GO HOUSE REPUBLICANS! (Damn, that feels weird.)

Sandbag Job Redux

Obama's expected to go Wednesday to vote on the Bailout. McSame? If his "schedule allows it" sure. Maybe. We don't know.

Democratic presidential nominee Barack Obama plans to return to the Senate this week so he can vote for the Wall Street bailout package.

The Illinois senator is expected to support the plan, but hasn't committed yet since he's still examining the details. The $700 billion compromise legislation is up for a vote Monday in the House, with the Senate vote expected as early as Wednesday.

A spokesman for John McCain said the Republican nominee plans to be in Washington and hopes he'll be able to vote, depending on the schedule.

And if McSame gets away with this, as in the Democrats let him get away with this, then he deserves to win, and Obama deserves to lose.

Oh Please Please Please Do This

Bill Kristol on how McSame can pull off a miracle: FREE SARAH PALIN!

With respect to his campaign, McCain needs to liberate his running mate from the former Bush aides brought in to handle her — aides who seem to have succeeded in importing to the Palin campaign the trademark defensive crouch of the Bush White House. McCain picked Sarah Palin in part because she’s a talented politician and communicator. He needs to free her to use her political talents and to communicate in her own voice.

I’m told McCain recently expressed unhappiness with his staff’s handling of Palin. On Sunday he dispatched his top aides Steve Schmidt and Rick Davis to join Palin in Philadelphia. They’re supposed to liberate Palin to go on the offensive as a combative conservative in the vice-presidential debate on Thursday.

That debate is important. McCain took a risk in choosing Palin. If she does poorly, it will reflect badly on his judgment. If she does well, it will be a shot in the arm for his campaign.

In the debate, Palin has to dispatch quickly any queries about herself, and confidently assert that of course she’s qualified to be vice president. She should spend her time making the case for McCain and, more important, the case against Obama. As one shrewd McCain supporter told me, “Every minute she spends not telling the American people something that makes them less well disposed to Obama is a minute wasted.”

OH GOD YES. Let's have America see more of unscripted, uncontrolled Sarah Palin. Let it all hang out Thursday. I mean the McSame camp is already telling VP debate moderator Gwen Ifill how to do her job, so it's not like they come across as completely terrified of this and the end of the McSame campaign should she totally foul this up.

So please, let's see more Palin out there. Daily. Reminding us of McSame's better judgment. And when THAT falls on its face, let's remind people of the people who said McSame's judgment was GOOD.

We Can't Go In There, It's Too Perilous

The Justice Department's Inspector General's office has released its report on US Attorneygate, and has concluded that due to nobody saying a damn thing, a dreaded special prosecutor is needed to get to the bottom of the case. (h/t TPM Muckracker)

Late update: The report also describes the stonewalling the investigation received in trying to gather information on the removals. Specifically, it mentions a "fact memo" created for Alberto Gonzales by the DOJ's Office of Legal Counsel, which outlined the events chronologically, using a draft written by Michael Scudder, associate White House Counsel. Investigators were refused the timeline by the OLC who claimed they were ordered not to release it by the White House Counsel's office.

This just keeps getting worse. Will an Obama administration follow up on this?

[UPDATE] Could it be Mukasey actually doing his job?

The Bush-Pelosi-Reid-Obama Bailout Bill

Over the weekend the narrative is shaping up that the Bush-Pelosi-Reid-Obama Bailout Bill has Bush and the Democrats on one side and the Heroic House GOP Resistance on the other. Once again the Democrats have walked right into the goddamn exhaust intake of the jet engine, and they're going to get shredded.

So now, any time Obama wants to do anything, the GOP will say "TAX AND SPEND LIBERAL! HE BAILED OUT WALL STREET! MORE SOCIALISM!" and will Heroically Resist.

If the GOP sucessfully hangs this around the necks of Pelosi, Reid, Bush and Obama then there is nothing Obama will be able to do. The GOP will just say BAILOUT and block it and the Bush Dog Democrats (they'll still be around) will join them.

Digby has more.

The argument over this bailout is going to be with us for a long time to come and unless Democrats play this right, they are going to wind up holding the bag. The "populist Republican" meme is alredy out there and starting to take hold. They've bet on this economy getting very bad and being able to blame the hated Bush and Clinton for causing it and then blame the Democrats for throwing money at the problem and failing to solve it.

Why would the Democrats let them do that?

Right now I'm watching Pelosi and Reid, Frank and Dodd stand there all by themselves taking "credit" for this bill. They are handing out plaudits to all the others who "helped" them get it done like members of "the Hills" at the MTV awards.

The optics are all wrong. If they really feel they have to do this thing each one of them should have a Republican under each arm every time they make an announcement.

Boehner and Blunt aren't going to do a damn thing to get votes. They are going to force the Dems to vote for this and hang themselves in the House. They figure they have the people on their side in a populist revolt and they are correct. Some folks that I normally would think would be able to see the trap aren't noticing it at all and the Dems are about to get squashed.

The House GOP knows that whoever's in power is going to be an extremely unpopular President because of the economic meltdown, and they'll will be running away from them the whole time, McCain or Obama. There will be Congressional hell to pay come 36 days for any House member who votes for this. I see it. The GOP sees it. The Dems? The Dems think they'll still be in control of the House come January.

If the House GOP hangs this on their necks, they very well may not be come January. Anyone who votes for this bailout is not safe in the House, and the people are seeing the GOP "fight the bailout". This is a game-changer vote. You'd better believe 4 weeks of "Bob Democrat voted for the Wall Street bailout, SHAME ON HIM" ads leading up to November 4th are going to be the end of Bob Democrat's congressional career.

I'd vote against my Senators and Reps if they did that. Of course, this being Northern Kentucky, they're all GOP anyway. But if they were Democrats, I'd have to vote em out. This bailout is hideous. Congress is greatly underestimating how much anger is out there in the electorate this year. They are looking for bums to throw out regardless of party.

And once again the House GOP caucus is playing 2-4 moves down the chessboard in preparation for manuvering against the next administration. The Dems meanwhile are still playing Parcheesi with Bush.

Another Bank Down

...and this time it's Wachovia.

The government says Citigroup will acquire the banking operations of Wachovia in a deal facilitated by the Federal Deposit Insurance Corp.

The FDIC says Wachovia didn't fail, and that all depositors are protected and there will be no cost to the Deposit Insurance Fund.

The sale of Wachovia comes just days after the government's seizure of Seattle-based Washington Mutual Inc. -- the largest bank failure in U.S. history.

Wachovia has been among the banks hardest hit by the ongoing crisis in the mortgage market. Its current problems stem largely from its acquisition of mortgage lender Golden West Financial Corp. in 2006 for roughly $25 billion at the height of the nation's housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of Pick-A-Payment loans, Golden West's specialty, which let borrowers skip some payments.

No failure, straight buyout. Massive Consolidation(tm) continues.

Global No-Confidence Vote: Full Circle

This series of posts started back in January with the title "Global No-Confidence Vote For Bush-O-Nomics" because at the time, the global response to the announcement of the financial stimulus package was just that: A global vote of No Confidence. Asian and European stock markets plummeted and continued to fall for the entire year so far.

Everything since then has been No Confidence. Every time the US tries something else, the global markets aren't convinced they are going to work. They've been right so far: the economic stimulus package, Bear Stearns bailout, rate cuts over the summer, and now the last two weeks leading up to the bailout bill have all failed.

So what does Asia and Europe think about The Big Big Bailout?

Guess.

No Confidence.

Stocks tumbled in Europe and Asia and U.S. index futures retreated as bank bailouts accelerated and the $700 billion plan to rescue American financial institutions failed to unlock money markets.

Dexia SA sank 24 percent after the governments of Belgium, the Netherlands and Luxembourg were forced to rescue Fortis and the U.K. seized Bradford & Bingley Plc. Hypo Real Estate Holding AG slumped 62 percent as the German government and a group of private banks provided a 35 billion-euro ($50 billion) guarantee for the commercial-property lender. Westpac Banking Corp. of Australia slid 3.5 percent. Wachovia Corp. declined 21 percent in Germany on increasing speculation the sixth-largest U.S. bank by assets may be forced to seek a buyer or mortgage partner.

Europe's Dow Jones Stoxx 600 Index lost 3.1 percent to 257.79 at 11:24 a.m. in London. Futures on the Standard & Poor's 500 Index dropped 1.7 percent following the measure's steepest weekly slump since May. The MSCI Asia Pacific Index slid 2.7 percent today.

``There's more pain to come,'' said Andy Lynch, who manages about $3 billion at Schroder Investment Management Ltd. in London. ``People knew the bailout was going to happen. Now it's back to the same-old, same-old of capital writedowns and weekend bailouts. Earnings estimates for next year still are too high.''

Credit losses at UBS AG, along with profit declines at technology companies such as Ericsson AB, helped send earnings lower at 153 of the 332 members of the Stoxx 600 tracked by Bloomberg that reported quarterly results since the beginning of July. More than 40 percent of the Stoxx 600's companies trailed Wall Street's estimates, Bloomberg data show.

Above all there are two forces at work here: insolvency and psychology. The bailout fails to address either one of these two problems. The world has moved on and has rendered judgment on the situation in America. That judgment is "We have to look out for ourselves now. We don't have the resources to spare to help America any more. They will have to take care of themselves, just like we have to do now."

Europe in particular has far too many problems with its own failing banks to deal with ours.

European governments stepped in to rescue Bradford & Bingley Plc, Fortis, and Hypo Real Estate Holding AG as tremors from the U.S. credit crisis reverberated around the world.

The U.K. Treasury seized Bradford & Bingley, Britain's biggest lender to landlords, while governments in Belgium, the Netherlands and Luxembourg threw an 11.2 billion-euro ($16.3 billion) lifeline to Fortis. Germany guaranteed a loan to Hypo.

The interventions exposed how fallout from the crisis that drove Lehman Brothers Holdings Inc. into bankruptcy and prompted a $700 billion U.S. bank-rescue package has gone global. It also added urgency to negotiations among European policy makers as to how they deal with banking collapses.

``The precarious global environment means the weakest links in Europe are now falling,'' said Mamoun Tazi, an analyst at MF Global Securities Ltd. in London. ``If banks continue not to lend to each other we'll see more failures.''

Shares of Dexia SA, a lender based in both Brussels and Paris, fell as much as 33 percent trading after Le Figaro said the world's biggest lender to local governments may soon announce a plan to raise capital. Iceland agreed to buy 75 percent in Glitnir Bank hf, the island nation's third-largest bank by market value, for 600 million euros.

European equities and U.S. stock-index futures fell today. Euro-area economic confidence dropped this month to the lowest since the aftermath of the Sept. 11 attacks amid concern that the U.S. plan will fail to stem the crisis. The pound tumbled the most against the dollar in 15 years and the euro slid.

That rate that banks charge each other, the London Interbank Overnight Rate, or LIBOR, remains in record high territory this morning. Banks are still afraid to lend money to one another, because they're all terrified. They have no confidence in their own books. They have no confidence in the books of other banks. And they are wondering if they are next. Europe and Asia injected a fresh round of money into the system this weekend. It has done NOTHING. Liquidity is NOT the problem...it is the symptom of a much worse problem, insolvency. Europe and Asia have caught our Bank Flu. They played the same games we did. Now they are falling too, all over the continent.

Despite a bailout deal reached last night, Europe and Asia just don't care anymore. They have their own problems to deal with thanks to us. They don't have time to worry about the US right now.

They will not help us now. Nobody will.

We're on our own. The outlook this morning is very very grim.

Wall Street looked set to plunge on Monday, taking its cue from Asian and European stocks markets, as Congress is expected to vote on a bailout package but fears engulf world markets.

Doubts about the health of the world financial sector are increasing as two European banks were nationalized in two days and central banks threw money at banks trying to persuade them to lend to each other.

The bailout is not working. Despite a deal being reached, the jury is back in this week:

No Confidence. Literally, no confidence to lend, no confidence that they will be paid back, no confidence that assets are worth what they are worth, and no confidence that the US can lead the world out of the coming global recession.

And now, the pain, the real pain, begins. This week is going to be bloody.

And so will next week.

And most likely the week after that. I imagine we'll see and emergency rate cut or two again. That too will not help.

No Confidence. No parachute when we land. No view of where the bottom is. No magical solution to fix it.

We've come full circle from January. In January when the world gave Bush-O-Nomics the vote of No Confidence, we still had options. Those options have not worked other than to buy us time.

Nine months later we're in the same spot...facing a global no-confidence cascade, a systemic meltdown...and we're all out of options now.

Other than to watch the wagon go over the cliff.

More than ever...

Be prepared.

Cross-posted at the Frog Pond.

StupidiNews!

• Hurricane Kyle smashes into Nova Scotia.
• A mosque in Dayton was attacked over the weekend with a "chemical irritant."
• More Americans are on food stamps than ever before, and it's not enough.
• A pair of toy night goggles for $80 works surprisingly well.
• The Florida Marlins end the New York Mets' season once again.

Crunch Time

House GOP leaders are mulling the bailout over. They have been for 2 hours.

It's unknown at this hour if the votes are there. The GOP rank and file just isn't buying this right now. We may not know until tomorrow when the vote is taken. Democrats are saying they will not walk off the cliff without the GOP votes.

Anyone who votes for this bill is going to lose 10 points in the polls. For a lot of the House, that will cost them their jobs on both sides as it should.

We'll see.

A Roubini Primer

I've been talking about economist Dr. Nouriel Roubini for quite some time now. I've been reading his website since early last year, and as more and more of his dire predictions have come true I've been posting about the basics behind the economic disaster we're now facing. He's a former Clinton-era Treasury Department economist turned academic who warned the world about the US housing depression back in 2004. Making a career of studying the characteristics of collapsing emerging markets, he noticed the same warning signs in the US economy.

He presented his findings to the economic world in early 2006. He was ignored then.

He is no longer ignored now. Digby has an excellent post on Roubini and his history and his take on the bailout...and how the Bushies have ignored him totally.

If that's true, then this plan will end up being an economic Iraq. And just as people who said "No Blood For Oil" were told to sit down and shut up or risk having the boogeyman use drone planes to create mushroom clouds in shopping malls, those who are saying today, "no bail out for the rich" are similarly being told that the global economy will suffer a nuclear meltdown if the government doesn't spend this enormous amount of money. And just like then, this all happened in the few short weeks between September and November in a major election year.

We don't know if there are financial WMDs out there. Certainly, enough people think there are that you can't dismiss it. But when the experts who have been predicting the WMD say that the plan to rid the world of them is fatally flawed and won't cure the problem, then they should be listened to. And unfortunately, that won't happen. We're listening to the usual suspects who have always been wrong about everything. And the results are likely to as good as they always are.

I'm not expert in these matters, but the more I read, the less I'm sanguine that this huge giveaway is designed to do anything but constrict the next president from being able to successfully intervene in the recession. The money will be gone, the problem will be growing and there will be fewer tools available to adequately stimulate the economy.

Read the whole thing.

The Calls Are Getting Louder

...for Sarah Palin to resign from McSame's ticket.

Will someone please put Sarah Palin out of her agony? Is it too much to ask that she come to realize that she wants, in that wonderful phrase in American politics, "to spend more time with her family"? Having stayed in purdah for weeks, she finally agreed to a third interview. CBS's Katie Couric questioned her in her trademark sympathetic style. It didn't help. When asked how living in the state closest to Russia gave her foreign-policy experience, Palin responded thus:

"It's very important when you consider even national-security issues with Russia as Putin rears his head and comes into the airspace of the United States of America. Where—where do they go? It's Alaska. It's just right over the border. It is from Alaska that we send those out to make sure that an eye is being kept on this very powerful nation, Russia, because they are right there. They are right next to—to our state."

That's Newsweek's Fareed Zakaria taking her apart. It gets worse.

Can we now admit the obvious? Sarah Palin is utterly unqualified to be vice president. She is a feisty, charismatic politician who has done some good things in Alaska. But she has never spent a day thinking about any important national or international issue, and this is a hell of a time to start. The next administration is going to face a set of challenges unlike any in recent memory. There is an ongoing military operation in Iraq that still costs $10 billion a month, a war against the Taliban in Afghanistan and Pakistan that is not going well and is not easily fixed. Iran, Russia and Venezuela present tough strategic challenges.

I honestly think she'll resign before Thursday's debate. She has to or McSame loses in a landslide. They have to know that Biden won't defeat her, she'll simply defeat herself.

I give her until Tuesday, maybe Wednesday at the latest. But if she's not off the ticket by then, Obama wins in a wipeout. Believe me, the McSame team is making calls right now to line up a successor. She will give family reasons: Trig's health, her daughter's pregnancy, Troopergate, a sick moose somewhere near Nome, I have no clue what it'll be but more than ever I believe she's off the ticket. It's a question of days now. The media is in open revolt against her. Palin is under total lockdown now, they've turned on her and Palin's numbers have dropped precipitously after those interviews, especially the Katie Couric one.

But voters are now apparently having doubts. A CNN/Opinion Research Corp. survey released yesterday found that while 47 percent of likely voters believed that Palin had the personality and leadership qualities a president should have, 49 percent said she didn't.

Compare that with her Democratic counterpart Joe Biden: 55 percent said he had the necessary qualities, while only 39 percent said he did not. Both Barack Obama and John McCain had 62 percent of voters believing they have what it takes to be president.

It's time to start seriously gaming ahead here on who McSame would get to replace her.

My money's still on Lieberman.

Under The Radar

Oh, and while we were busy Saturday, Congress quietly passed a $630 billion omnibus spending bill that includes that $25 billion for the big 3 automakers, among other things.

Congress on Saturday agreed to finance a $25 billion loan package to help troubled auto makers as part of a mammoth spending bill that will keep the government running until early March 2009.

The U.S. Senate approved the more than $630 billion spending bill 78-12. The bill was needed to finance defense, education, farm, health, foreign aid and other government programs after the current fiscal year expires on Sept. 30.

The House passed the legislation earlier this week and it now heads to the White House for President Bush's signature.

Congress passed the bill as lawmakers continued negotiations on a $700 billion bailout for Wall Street that lawmakers say is needed to free up credit markets and avert a steep economic downturn.

The spending legislation allows a ban on offshore drilling to expire on Sept. 30. Democrats had hope to extend the ban, but did not have the votes in the face of stiff opposition from Republicans.

The bill sets aside $7.5 billion in taxpayer funds needed to guarantee $25 billion in low-interest loans to help struggling General Motors , Ford Motor and Chrysler produce more fuel-efficient cars and trucks.

Congress rushed to pass the massive spending bill before the new fiscal year begins Oct. 1 because lawmakers failed to approve any of the 12 spending bills Congress needs to act on every year to fund the government operating.

So, you can add all this to the pyre too. While America is slowly roasting alive over the smell of pork, it's time to start asking yourself what you need to cut in your life.

Get your things in order, folks. You don't want to have debt in the months ahead.

Weekend Wheeling And Dealing

Once again everyone's saying there will be a deal by tonight and even a vote, but that deal won't include any help for homeowners.

House Democrats say the idea of letting judges rewrite mortgages to help bankrupt homeowners avoid foreclosure won't be a part of the $700 billion financial industry bailout.

Speaker Nancy Pelosi, D-Calif., told Democrats at a closed-door meeting Friday evening the provision would be a deal-breaker for Republicans who she has said must deliver substantial votes for the rescue plan. That's according to several lawmakers who attended the session.

Democratic presidential nominee Barack Obama had said earlier that the measure didn't belong in the bailout.

Nor did I expect that measure to pass; it depended on the Democrats, you know, not folding.

Washington Post this morning has more.

A senior administration official, who requested anonymity to speak freely about the plan, said both sides had made significant concessions to achieve compromise. The Bush administration has agreed to accept a number of Democratic demands, including:

· The money would be dispersed in segments, with Paulson receiving $250 billion immediately, $100 billion upon White House certification of its necessity and the final $350 billion only after Congress has been given 15 days to object.

· Firms participating in the bailout would be required to grant the government warrants to obtain nonvoting shares of stock, so taxpayers can benefit if the companies return to profitability.

· Firms taking advantage of the bailout would be required to limit compensation for senior executives, with especially severe limits on "golden parachutes" at failing firms. The compensation limits will be enacted primarily, but not solely, through the tax code by reducing tax deductions for firms that pay executives more than $400,000 a year.

The administration also agreed to Democratic demands that the financial services industry should help pay for the program. Under the agreement, the president would be required to propose a fee on the industry if the government has not recovered its money through sales of the assets within five years.

Democrats also made a number of concessions, abandoning demands that bankruptcy judges be empowered to modify home mortgages on primary residences for people in foreclosure. They also agreed not to dedicate a portion of any profits from the bailout program to an affordable housing fund that Republicans claimed would primarily assist social service organizations that support the Democratic Party, the official said.

Meanwhile, House Republicans won a major victory, persuading negotiators to include a provision that would require the Treasury Department to create a federal insurance program that would guarantee banks and other firms against loss from any troubled asset, the official said.

Again, those last two paragraphs are the ones that bother the hell out of me. They are the GOP's doings and they are terrible. What do they mean to you and me?

1. No direct help for homeowners in this bill. More people will lose their homes and will continue to lose their homes as real estate prices plummet.
2. The "insurance program" now puts taxpayers on the hook for the loss of "any troubled asset" on the books. We just nationalized the losses on the financial sector and privatized the profits. And with dropping housing prices and dropping commercial and industrial real estate prices, that's going to be a tremendous amount of losses the American taxpayer is going to be on the hook for.
3. When the losses do pile up and the government has to make good on the insurance, the only way out is hyper-inflation and the death of the dollar.

This is horrendous, folks. Please, please somebody stop this bill.

[UPDATE] That physically ill feeling is back. From the NY Times article:

A senior administration official who participated in the talks said the deal was effectively done. “I know of no unresolved open issues for principals,” the official said.

In announcing a tentative agreement, lawmakers and the administration achieved their goal of sending a reassuring message ahead of Monday’s opening of the Asian financial markets.

Lawmakers, especially in the House, are also eager to adjourn and return home for the fall campaign season.

Among the last sticking points was an unexpected and bitter fight over how to pay for any losses that taxpayers may experience after distressed debt has been purchased and resold.

Democrats had pushed for a fee on securities transactions, essentially a tax on financial firms, saying it was fitting that they contribute to the cost.

In the end, lawmakers and the administration opted to leave the decision to the next president, who must present a proposal to Congress to pay for any losses.

Officials said they had also agreed to include a proposal by House Republicans that gives the Treasury secretary an additional option of issuing government insurance for troubled financial instruments as a way of reducing the amount of taxpayer money spent up front on the rescue effort.

We're about to be on the hook for trillions. Wall Street will be fine. That insurance will protect them. The American Taxpayer? Nobody's protecting them.

WE ARE ALL SCREWED.

sigh.

"Makes 1929 Look Like A Walk In The Park"

The UK Telegraph is reporting that Washington officials are terrified that a collapse in a bailout deal could lead to a 3,000-4,000 point loss on the Dow next week.

Officials close to Paulson are privately painting a far bleaker portrait of the fragility of the global economy than that advanced by President George W Bush in his televised address last week.

One Republican said that the message from government officials is that “the economy is dropping into the john.” He added: “We could see falls of 3,000 or 4,000 points on the Dow [the New York market that currently trades at around 11,000]. That could happen in just a couple of days.

“What’s being put around behind the scenes is that we’re looking at 1930s stuff. We’re looking at catastrophe, huge, amazing catastrophe. Everybody is extraordinarily scared. It’s going to be really, really nasty.”

If the situation is that bad, how come we were lied to? Oh yes...GOP in charge. Never mind. If there's no deal by Sunday evening when Asian markets open, it could be the end. Preznitman used his weekly radio address to tell America to suck it up and deal with the bailout.

"Many Americans are anxious about their finances and their future," Bush said in his weekly radio address. "I know many of you listening this morning are frustrated with the situation.

"You make sacrifices every day to meet your mortgage payments and keep up with your bills. When the government asks you to pay for mistakes on Wall Street, it does not seem fair. And I understand that.

"And if it were possible to let every irresponsible firm on Wall Street fail without affecting you and your family, I would do it. But that is not possible," Bush said, warning: "The failure of the financial system would mean financial hardship for many of you."

As lawmakers in Congress negotiated details of a final rescue plan amid turmoil on global markets, Bush argued that a collapsed financial sector would mean less credit, fewer new businesses and fewer jobs.

"And that would put our economy on the path toward a deep and painful recession," he argued.

I got news for you George, we're already there.

I don't think the bailout is going to help, honestly. We're being told of dire consequences if the bailout doesn't happen. My fear is the bailout happens and we plunge into a recession or depression anyway.

Remember, one month ago the economy was sound. America was fine. The Bush Boom was the most underreported story in America. These guys have been lying to us for years now. They're lying to us now. The bailout is there to give the CEO's and fat cats enough time to get to their lifeboats before the crash.

It's too late for most of us. Far, far too late. What happens if the bailout passes and we still crash?

Dow 8,000 may be generous.

Do We Need The Bailout?

It's a valid question. There are two schools of thought on it.

The first school is that government intervention in the market brought about this disaster in the first place. From a strictly Libertarian point of view, the successive bailouts and intervention by the Fed only delayed what in and of itself is an unsustainable system. America is basically far past bankrupt at this point and has only been operating by the power of an increasingly arcane system of smoke and mirrors and the Chinese and Saudis buying up our debt, since it was such an awfully good deal for them. Not anymore. We're tapped out, our neighbors are tapped out. We've got no fuel in the tank.

We're to the point now where the first school, myself included, say that paying the piper now is better than later. If we let the chips fall and manage the collapse, we might be able to dig ourselves out in a number of years. No bailout now, take the pain, recover from it. If there's a bailout, the collapse that will result from the cure (hyperinflation) will be fatal. The bailout itself is fatal for America.

The second school believes the first paragraph, but argues that the bailout is necessary now or that the whole house of cards comes down in a systemic collapse without it. In other words, bailout now, or the game ends. The lack of bailout is fatal for America.

This is not the discussion we're having in Washington right now. It's the debate we should of had last night but didn't.

One side says the bailout will kill us. The other side says the lack of bailout will kill us.

Who is right?

Shouldn't we be asking that this election?

Debate Deblogging: Morning After

CNN is saying Obama won the debate, most folks are of the mindset that it was a draw among male viewers, but Obama won handily among female ones.

Fifty-one percent of those polled thought Obama did the better job in Friday night's debate, while 38 percent said John McCain did better.

Men were nearly evenly split between the two candidates, with 46 percent giving the win to McCain and 43 percent to Obama. But women voters tended to give Obama higher marks, with 59 percent calling him the night's winner, while just 31 percent said McCain won.

"It can be reasonably concluded, especially after accounting for the slight Democratic bias in the survey, that we witnessed a tie in Mississippi tonight," CNN Senior Political Researcher Alan Silverleib said. "But given the direction of the campaign over the last couple of weeks, a tie translates to a win for Obama."

CBS had similar numbers as well.

Uncommitted voters said Obama won the debate against Republican John McCain, and more of those voters improved their opinion of the Democrat. But while 66 percent think Obama would make the right decisions about the economy, 56 percent think McCain would do so about Iraq.

Immediately after the debate, CBS News interviewed a nationally representative sample of nearly 500 debate watchers assembled by Knowledge Networks who were "uncommitted voters" - voters who are either undecided about who to vote for or who say they could still change their minds. Thirty-nine percent of these uncommitted debate watchers said Obama won the debate. Twenty-four percent said McCain won, and another 37 percent thought it was a tie.

This is where John McSame should have won hands down, Foreign Policy. He didn't. He didn't come close to delivering the knockout blow he had to have. Obama got some excellent counterattacks in and held his own. McSame came across as Cranky Old Man, not Elder Statesman.

Obama got the tie/slight win he needed here, which is far better than I thought was going to happen, I figured it would be "McSame won, Obama didn't knock him out, he has the momentum now." He doesn't. McCain had to have a KO here to get back in this. Instead I'm betting he lost ground here.

Now everyone is waiting for the bloodbath that will be Thursday nigh's debate between Joltin' Joey and Sister Sarah. I still say this one gets canceled. There is no way Palin can be allowed on live national television against Biden.

All Joey has to do is show up.

Global No Confidence Vote: Running On Empty

The story that nobody is talking about this weekend nationally should be making your head spin and your heart flutter.

Gas lines are back in America. And the thing is, they may be here to stay for quite some time.

While Congress and Bush administration officials have been working to complete a bailout plan and stem the financial contagion on Wall Street, a different kind of economic crisis emerged across the South this week: A severe, hurricane-related gasoline shortage has curtailed trucking from Atlanta to Asheville, N.C., and created a wave of panic buying among motorists.

The return of gas lines has largely flown under the radar of politicians who are usually keenly attuned, because their constituents are, to what's going on at the pump. But more of the Capitol gang should be paying attention to this.

That's because nationwide our gasoline inventory is shockingly low. Liquidity must be restored soon to this market, or we could be facing a crippling run on the gasoline bank. And if you think Americans are outraged about Wall Street, wait until their Main Street grocery store doesn't get the bread and milk delivery for a week or two.

I have family in Western NC. I can tell you that these gas shortages for the last two weeks are very real, and that these shortages are going to be way more common in the future for a number of reasons.

No slack in the system. America works these days on the Just-In-Time delivery principle. Supply routes for everything you buy are computerized and calculated to arrive "just in time" to restock supply. Warehousing stock for long periods of time wastes money. If a product is sitting in a warehouse when it could be on a store shelf or in your shopping cart, the company selling that product is losing money on it.

The stores where you live are sent what the corporations think they will sell each week and no more. This goes for groceries, electronics, sports equipment, guitars, beauty products, fast food hamburger patties and this includes gasoline as well.

Ike hit the system for the Southeast US. The Colonial Pipeline is what provides gasoline for the interior regions of the South and Mid-Atlantic: northern Alabama, northern Georgia, eastern Tennessee, upstate South Carolina and western North Carolina, as well as parts of eastern Virginia, Maryland, and even Delaware and western New Jersey are all served by this pipeline.

But the Just-In-Time system has no slack in other parts of the country right now, because inventories are so low. They are that low because storing gasoline is expensive. Wringing out slack saves refiners and gas stations money.

We had a hurricane shut down the Colonial Pipeline at the same time gasoline inventories were at 50 year lows. Result: Just in time is not in time. Shortages will continue in the South for the foreseeable future.

Now here's the real problem. Everything else in just-in-time delivery works on gasoline. Shortages on gas mean delivery interruptions for everybody else. Delivery interruptions means stores are having either sit on supply because customers can't get to the store to buy it, or that stores have shortages because of no deliveries on time. These refineries create diesel fuel too. Trucks have to have it or they stop. No diesel, no delivery.

This leads to panic buying where there are shortages. What you're seeing in cities like Charlotte, Hickory, and Asheville in North Carolina right now could end up getting a whole lot worse very very quickly as fuel shortages may very well become shortages of everything else.

No fuel means no deliveries of other just in time items...like electronics, shampoo, car parts, fertilizer, oh and things like, I dunno, food.

No gas. No fuel to truck food in. No food.

There's a cheerful thought. Panic buying of gas leads to shortages of everything else across the board, including food.

Now imagine that hitting where you live. Grocery stores start running out of food because there are no deliveries...leading to panic buying of groceries in your neighborhood.

How long would you last not being able to buy food right now? There are food shortages across the world right now, water as well. Just-in-time delivery, plus a rotting American infrastructure, plus commodity shortages around the world...that equals catastrophe for urbanized areas of the world.

If even one of these crucial links in the chain drops out, disruptions across the entire system result.

Systemic disruptions can lead to the crash of the entire system. As megacorporations grow fat off of wringing out the slack in the system, Americans grow increasingly dependent on the system just to survive.

And if the system does crash, then what? You're betting on the Federal government, this government, OUR government, to save you?

Good luck on that. What do you think would happen where you lived if there was no gasoline and no diesel within a full tank's drive of your house for a period of seven days? What would happen, honestly?

System crash.

We're seeing chaos in that part of the country. I'm pretty scared, my parents and brother live there. They're doing alright according to Dad, but those gas shortages are beginning to take their toll. Lines are bad. People are cutting way back on activities now. They're having to miss work and school. Another couple of weeks of this and things could be bad.

Very bad. The refineries are still down. No slack to help from other parts of the country. One real good weekend of panic buying could really cause serious problems.

When Barack Obama says that our economy is a national security issue, this is what I think it means. I hope he understands the issue. The Bush administration's entrenched corporate culture of greed, deregulation of industries and allowing them to police themselves, removal of consumer protections because they are "expensive regulatory barriers" and PROFIT PROFIT PROFIT has led directly to this situation.

Because we're going to see a lot more of this as the economy continues to tank. We don't have the money for infrastructure. We're almost $11 trillion in the hole now. We spent that money on Iraq and Afghanistan and Wall Street, not fixing and future-proofing our most basic infrastructure systems.

We privatized them instead. Look how that turned out. Disaster capitalism at its finest. And we're going to be in for a lot more of it in the future before we're forced to try to salvage a system on the brink of collapse.

What happens when the systems we rely on to kick in when the primary systems are down, are also down?

System crash. I've been talking about an economic system crash for months now. We're seeing that happen. But there are many, many other systems, and wringing every drop of blood out of them for PROFIT PROFIT PROFIT always PROFIT has left those systems just as vulnerable.

And all those systems are interconnected. They affect each other. If one goes down, they take the others with it. We live in a systemic, interconnected world. All those systems have to work.

Now realize Bush has been in charge of watching those systems for eight years. McSame and Palin and the GOP want to continue that same philosophy.

Scared yet? I am. You need to be too. It needs to scare you into action.

Be prepared.

Cross-posted at the Frog Pond.

StupidiNews, Weekend Edition

• Actor Paul Newman has died of cancer at age 83.
• Major House GOP opposition to the bailout plan remains.
• Palin aides pulling a no-show for subpoenas could be found in contempt.
• Condi Rice has quietly admitted to Bush administration torture discussions in 2002-03.
• Both lefty and righty political blogs are asking for last night's debate footage to be made public domain.

Debate Deblogging

9:07. Question 1, the bailout. Barry looks rushed. John looks cool. John scores with props to Teddy Kennedy. Barry saying we gotta intervene. McSame, I warned about all that too, Ike story. Both seem to be agreeing on voting for it. Johnny doubling down on Chris Cox.

Obama hits back. Responsibility not just during a crisis. Jim trying to get them to talk to EACH OTHER. McSame counter, American worker is best.

Wash.

9:14 Question 2, how do you fix this. McSame: fix spending. HELLO, $700 BILLION BAILOUT YOU TWIT. Obama. 18 billion in earmarks, McSame wants $300 billion in tax cuts for Wall Street. Nice. Very nice.

McSame throwing out spending numbers. Now they are going after each other FINALLY on tax cuts versus spending. Go Jim.

Obama hits back on loopholes and healthcare. McSame saying HAHAH ENERGY BILL PWNED FAIR TAX FAIR TAX FAIR TAX

Ugh. This is kinda boring so far, but Obama wins this one.

9:26 Question 3: What are you giving up to pay for this bailout? Obama first...not energy plan and health care, or infrastructure or college costs. Obama's not answering this question. McSame is winning this question with specific examples of what needs to be cut: ethanol subsidies and defense pork.

Lehrer points out neither are cutting stuff as a result of the bailout or neither one is answering the question. McSame proposes spending freeze on everything but defense. Barry brings up Iraq.

Lehrer tries another tack. Obama finally admits to having to make tough decisions. McSame brings up HillaryCare. Spending blah blah.

Obama FINALLY sticks McSame on voting for Bush budgets. McSame NOPE I FOUGHT BUSH ON EVERYTHING MAVERICK SARAH PALIN.

McSame wins.

9:39 Question 4 What are the lessons on Iraq? McSame: Well, Petraeus means we won. SURGE VICTORY YEAH TEAM. Obama: Umm...Afghanistan? Osama? Remember them? $1 trillion dollar spent there? 4,000 dead? 30,000 wounded? Eye off the ball? Sound familiar?

McSame SURGE SURGE SURGE FLIP FLOP I CAN'T HEAR YOU PETRAEUS. Obama: Yeah, well...okay. But 2003-2007 YOU WERE WRONG JOHN ON EVERYTHING ELSE. McSame: I went to Iraq! We're winning there!

Obama: And we're not in Afghanistan, and we're losing there. Obama wins.

9:50 Question 5 More troops to Afghanistan? Obama: Hell yes. Here's my specifics. 2 brigades. Iraq was a strategic mistake. Afghanistan is the real deal oh yeah and Pakistan too, how's that money we spent there? McSame: I won't leave Afghanistan hanging like Reagan did. Boy I can't believe Obama wants to go into Pakistan, you can't say that out loud.

Obama: Yeah, mr bomb bomb bomb bomb bomb Iran. Oh and we're already repeated the mistakes in Pakistan since we made in Iraq.

McSame Pakistan's a failed state. Oh, REAGAN STORY I STOPPED REAGAN IN LEBANON. Umm...but I voted for Bosnia and Gulf War I and Kosovo and Somalia. I have a record of voting for wars, so you can count on me. We gotta win in Iraq now I DON'T WANT DEFEAT VIETNAM I WAS A POW.

Obama Fighting bracelet stories now. OK but shut it, Afghanistan remember that? Osama? Hello? Taliban? Take it seriously? McSame: I've been there, so I win.

Another wash.

10:03 Question 6. Iran. McSame, Iran is existential threat to Israel. Screw the UN and Russia. League of Democracies. THEY WILL NOOK EVERYBODY IEDs IN IRAQ SECRET TERRORISTS. Obama: Iraq war made Iran stronger. We're not containing them, also threat to Israel. Tougher sanctions, must cooperate with Russia and China and UN. Diplomacy with Iran.

McSame butchers Ahmedinejad. Pre-conditions. Nope, won't talk to them unless they agree with everything we want first. Nixon and Reagan, statesmen.

Obama: Let's talk about this. We have to talk to people. We cut off talks with North Korea and they went crazy. SPAIN! ZAPPO.

McSame: I don't have a seal yet. Heh. Nope. Can't legitimize evil. Can't talk to evil. "Oh please." Nice zinger. McSame does win this one.

10:16 Question 7 Russia. Obama: We have to confirm and support NATO members and stop Russia. McSame: He doesn't understand like I do. But I'll say the same thing. I went there, I win, here's a story about Putin.

Neither side is brining up Georgia attacked first. Obama says we have get more energy, clean energy, solar, nuclear. McSame is snickering. Obama hammers him on his clean energy. McSame's response is dumb. Obama wins.

Last question. Another 9/11? McSame: Much less, we're safer but not safe I HAVE A LONG RECORD HERE'S ANOTHER STORY Better intel agencies we won't "torture ever again." WAIT WHAT? Wait ever AGAIN? BARRY HIT HIM ON THAT! I made government bigger long way to go.

Obama: Safer in some ways. Not hitting him on that. AQ is still out there. How we are viewed helps us. We are less respected. That needs to change. Praising him on torture issue?

McSame: WE CAN'T FAIL IN IRAQ OBAMA DEFEAT WE'LL LOSE DEFEAT DEFEAT

Obama: No Bin Laden. China has $1 trillion of our debt, we've been ignoring China and stuff, busy in Iraq, back to Iraq's effect on economy. Economy is a national security issue, VERY GOOD.

McSame: Gosh Obama is stubborn and wrong, unlike me. Obama is Bush. I love veterans. I have background.

Obama: My dad was an immigrant! But now he wouldn't want to come here.

McSame POW POW POW POW POW God Bless America.

Obama wins.

Final score Obama 4, McSame 2, 2 ties. Obama wins.

The Weekend Waltz

So now the Dance of the Honeybees begins this weekend around who gets Wachovia's honeypot, and who gets to deal with all the stingers.

Wachovia has begun preliminary talks with Citigroup about a potential merger, people briefed on the matter said Friday.

Feelers have also been extended between Wachovia and Wells Fargo and Spain’s Banco Santander, these people said.

These talks are early, however, and no deal may emerge from them, these people said.

Wachovia , the big bank headquartered in Charlotte, has been under increasing pressure in recent weeks amid the turmoil gripping the banking sector. It took additional fire on Friday after JPMorgan Chase acquired virtually all of Washington Mutual, until Thursday evening the nation’s largest savings and loan, in a government-brokered sale.

After hours trading finds Wachovia down to 8.75 or so. I'm fairly sure a deal will be made for it by Sunday night.

On the other hand, National Ciy has been languishing in the $4-6 a share range for four months now, and now it's under $4. Nobody's even bothered with the company. What's killing them is that the company has lost billions in deposits since July, the same scenario that has killed WaMu and IndyMac. Eventually it's going to get to the same point where those banks are: Deposits on hand are going to be too low to operate, and the FDIC will step in and turn out the lights.

The trick is who is going to want to buy a bank in the very economically troubled state of Ohio right now? WaMu at least had branches all over the country. National City is mostly in Ohio, Florida, and Michigan...not a real good place to be a mortgage bank in 2008. They've been in prime buyout position for months now and nobody's cared to even sniff at the corpse.

I smell an FDIC deal, and I smell one soon. Question is who's the buyer? If there's not one found, it's going to be IndyMac all over again, and much worse. Nobody's even bothered to look at picking it up. The FDIC may have to dismantle it.

And that's going to be bad. I was wrong about WaMu (so far) because JPMorgan Chase has solidly offered that it's business as usual, it's a takeover, not a failure. So far the public is buying it. National City will not go nearly that cleanly when it dies.

Cartoon Of The Moment

As always, Daryl Cagle.

Made Of Win And Awesome

is this.

When Is A Wall Street Bailout Not A Bailout?

When it's a couple trillion dollars of "insurance".

What do House Republicans want? A senior House Republican gave me and some other reporters a look yesterday at what a working group headed by Assistant Minority Whip Eric Cantor is demanding. The senior House Republican (hereinafter SHR) has what sounded to me like an ingenious approach. He cited Ginnie Mae loans to low-income borrowers, which the government can insure. He proposed that the government (presumably through the entity envisioned by the Paulson plan) offer to sell insurance to financial institutions that hold mortgage-backed securities (hereinafter MBS). Premiums would be determined by the rates of foreclosure on each class of securities so far. Under this plan, the government would be taking in money, not paying it out. Of course, if the premiums are not enough to cover losses, the government might eventually take losses, as it did when the savings and loan industry collapsed. But losses don't seem inevitable and in any case will mostly occur in out-years, not now.

Lemme 'splain this to ya.

What Eric Cantor and the House GOP want to do with their See It's Totally Like Magical Lightsaber-Throwing Jedi Ninja Riding Cyborg Fire-Breathing Velociraptors Plan, Dude here is this:

1. Wall Street companies get to buy insurance against blowing the hell up.
2. Taxes are lowered and regulations are relaxed so that companies will have the money to pay the premiums.
3. If the company blows up, they get a crapload of taxpayer money only it's not called that. They actually MAKE money.
4. If the company does not blow up, they still make money because they can write off the premiums, AND since the GOP lowered taxes to free up the money for the premiums in the first place, they STILL make money.
5. The only people who do NOT make money are the taxpayers, especially since hey, all these companies are going to blow up anyway.

Great plan, huh?

So I asked the SHR whether a commitment by Paulson to consider an insurance program would be enough to win over a significant number of House Republicans. He said that a hazy commitment would not be enough, with the implication that the bill would still seem to House Republicans to be a Wall Street bailout with the implication that the government would be shelling out $700 billion of taxpayer money. I followed up by asking whether House Republicans would go along if Paulson pledged to use authority in the statute to set up an insurance program within a month of passage. "That would go far toward convincing [Republican] members," the SHR said. In other words, the insurance option may be the way to save this legislation.

...and then McSame takes credit for it and says "My friends, that's bullshit we can believe in."

It's all about the packaging. Calling Dems: Smash this in the chops, please.

Headlines Zandar Does Not Want To See In Reuters News Widget Over There

"U.S. military says Pakistan not targeting U.S. troops".

They're just hitting them with bullets and fire and explosions on accident. You know, like we've been doing to Iraqis and Afghans for the last sixty-six months.

It's Even Worse Than We Thought Part 4: The Worsening

Sarah Palin, squeaky clean gubment reformer? Meet reality of public records.

ABOUT THOSE TAX RETURNS.... Remember, she's on the ticket because she's a "reformer."

Alaska Gov. Sarah Palin, who has made a crackdown on gift-giving to state officials a centerpiece of her ethics reform agenda, has accepted gifts valued at $25,367 from industry executives, municipalities and a cultural center whose board includes officials from some of the largest mining interests in the state, a review of state records shows.

The 41 gifts Palin accepted during her 20 months as governor include honorific tributes, expensive artwork and free travel for a family member. They also include more than $2,500 in personal items from Calista, a large Alaska native corporation with a variety of pending state regulatory and budgetary issues, and a gold-nugget pin valued at $1,200 from the city of Nome, which lobbies on municipal, local and capital budget matters, documents show.

It prompted Mark Kleiman to ask a good question: "When are we going to see Sarah Palin's tax returns?"

Obama and Biden have released their tax returns, and McCain kinda sorta did the same. So, when will Palin -- who recently emphasized the importance of transparency and accountability in government -- follow suit?

After the election. In 2012. Duh.

In Which Zandar Answers Burning Questions

Josh Marshall asks:

John McCain is saying that now that he's gotten the bailout negotiations back on track he can resume his campaign and show up tonight at the debate. But every news report I'm seeing says they were moving along smoothly until John McCain showed up and they fell apart.

Who can help me here?

Oooh oooh pick me!

Ahem.

MAVERICK MAVERICK OBAMA IS A SCARY REZKO BLACK MAN BLOOGITY BA-BLOOGITY MUSLIMS CAUSE REZKO BANK FAILURES REZKO REZKO REZKO WEATHERMEN UNDERGROUND MY FRIENDS MAVERICKS CAN'T BLINK AT REZKO REZKO DAMMIT I'M A POW.

Sorry no more questions at this time. Thank you and God Bless America.