BREAKING: Wall Street Mega-Merger!!!

BREAKING NEWS! Mega Merger on Wall Street just announced!!!

In a surprise move, a slew of Wall Street firms brought together by the Fed and the US Treasury Department originally to discuss bailing out Lehman Brothers, decided to merge with each other instead.

The new entity, which Wall Street sources said was to be called CitiLehmanUnitedBearStearnsJPMorganGoldmanSachsAIGMerrillWaMu - FannieFreddieUnionCountrywideKravitz, will trade on the Exchanges under the shortened acronym, CLUSTERF*CK.

"I am pleased that a result of our discussions this weekend has been the formation of one, new, combined and formidable world class investment bank," said US Treasury Secretary Hank Paulson

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Analysts said the new mega-investment bank would have a net asset value, after writedowns, of $2.48.

Comments

Chaos on Wall Street

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Special Session breaks down

An extremely rare Sunday afternoon Wall Street trading session, held with the intention of reducing systemic risk posed by a potential bankruptcy by Lehman brothers, descended into chaos, said one participant.

Organized by ISDA, the International Swaps and Derivatives Association, the session was done via a massive conference call involving dozens of firms from all over the world. "Yelling and screaming," occurred in the session, said one participant, with many participants unaware of the rules. More importantly, what little pricing did occur in the session shows a dramatic increase in the concerns about the health of Wall Street.

I got a bad feeling

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I just heard that these asshats created new mathematical models where they had 40 dollars in loan for 1 dollar in deposits, claiming this was going from history.

Now I'm good at math. I'm sure I can come up with a mathematical model which will show you the laws of supply and demand will simply diverge and I can surely create a mathematical model which shows one can create fictional money, not a problem, and be fine.

O boy, tomorrow's gonna be fun ....

n/t

Dr. Doom

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is talking about a run on investment firms. I think we may see the biggest one day stock market drop in history.

I don't think the stock market will crash

Although the financial sector may get vaporized.

There is no reason for Sears or JCPenney or Pep Boys or Starbucks or Apple to crash. Remember my diary from a couple of months ago entitled "Neutron Bomb over Wall Street"? Well, that neutron bomb just exploded.

A New Mathematical Risk Model - FUBAR

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FUBAR is a new mathematical model, based on vector calculus and non-linear differential equations, along with vector spaces as in way out of the stratosphere....which shows very clearly one can blow smoke and still have their head up their ass.

Book not available yet

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But the title says we must read it and review it.

Bailout Nation! How Easy Money Corrupted Wall Street and Shook the World Economy.

The dollar is tanking too.

Yahoo finance, their front page looks like spin city. Oh, they have come up with a plan to reassure the markets.

Interim rule

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Credit slips (see middle column) has jumped on something I thought was funky also, a hastily Fed issued interim rule:

Professor Anna Gelpern at Rutgers-Newark notes a scary change in Federal Reserve policy: the Fed just adopted an interim final rule (was there a notice and comment period?) that allows "all insured depository institutions to provide liquidity to their affiliates for assets typically funded in the tri-party repo market."

To put it in less abstruse language, the Fed is allowing insured banks to take equities (supposedly investment grade, as if that had meaning now) as collateral. So insured banks now take on their affiliates junk equity holdings as collateral and if things go badly...the FDIC insurance fund (and ultimately the taxpayers) are on the hook. I'm guessing that this means all of the bum MBS floating around insured banks' affiliates are going to go into the collateral pile. Not every bailout has to make the front page of the Times, but that's what this temporary Fed rule is...a contingent bailout

observation

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Has anyone noticed of such a major crisis that during this entire general election season, it's all barely been mentioned? Isn't that pathetic? We might hear a few token phrases, that's about it.

I've noticed

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The candidates are going to ignore it as long as possible. The first one that proposes anything will be attacked.

Freeze on Foreclosures

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You're right. Hillary took it on and was viciously attacked, but I found that impressive that she did talk about it.

That remark is more telling than you might think

The politicians aren't talking about this "major crisis" exactly because so far it has been contained to Wall Street, and hasn't significantly impacted Main Street.

The GOP talks about "drill, drill" because $4/gallon gas impacts Main Street. The Dems are talking about a "second stimulus package" because inflation in the face of stagnating wages impacts Main Street.

If every single Wall Street investment house went belly up by tomorrow (which actually might not be that much of a hyperbole, come to think of it ...), would Main Street care? So long as their IRAs and mutual funds were safe, probably not.

foreclosures

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That's on main street and neither of them have barely mentioned it. Then....401ks.

First Stimulus Didn't Work - Follow Keynes 1933 Advice to FDR

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Keynes told FDR in 1933 to borrow and expand the deficit to 12 percent of GDP. The 1934 spending was $3.4Fillion in a $39Billion Economy - the extra spending was $1.7Billion - a 50 per cent increase in the budget but 4 percent of GDP.

We probably need a similar size stimulus now to stop the meltdown. Any thoughts on the size of the stimulus?

FDR wrote about Keynes in a letter that 'I didn't understand one thing that man said.'

Burton Leed