The OTHER Big News Today

It's been an eventful day, but one blip that isn't making it to the top of the radar screen concerns the still-plummeting housing market. The Case-Schiller Index shows prices falling rapidly in March, and the market tracking the more adverse scenario seen in the Treasury's stress tests.

Prices keep falling for one major reason - foreclosures remain extremely high, and homebuyers are picking up those foreclosed homes first at fire-sale prices. We're seeing a new wave of foreclosures due to job loss and the economy, and even prime loans are no longer safe.

With many economists anticipating that the unemployment rate will rise into the double digits from its current 8.9 percent, foreclosures are expected to accelerate. That could exacerbate bank losses, adding pressure to the financial system and the broader economy.

“We’re about to have a big problem,” said Morris A. Davis, a real estate expert at the University of Wisconsin. “Foreclosures were bad last year? It’s going to get worse.”

Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.

“We’re right in the middle of this third wave, and it’s intensifying,” said Mark Zandi, chief economist at Moody’s Economy.com. “That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast.”

It's the big problem that was not solved by the relatively puny housing bill, stripped of the cram-down option. Since practically all of these loans were sold and tied up in mortgage-backed securities, in addition to just losing the value of the mortgage, new assets become toxic with each passing day. Considering that the last guy at Treasury, Hank Paulson, whose investment firm Goldman Sachs profited mightily from the MBS market, didn't even understand it, I hold out little hope for his successor to get a handle on it.

We're supposed to be dazzled by "green shoots" and see the economy returning to normal. Sorry, I still see a dying housing market, and that still threatens to bring down the whole system. Thanks to relatively strong policy responses, the event of a depression has probably been averted in most of the world. But we're going to be treading water for quite a while.

This New York Review of Books symposium, on a related theme, is a good read.

The Future Of TARP

The oversight panel led by Elizabeth Warren released another stinging report on the TARP bailout today, slamming the Treasury Department again for the complete lack of accountability in the program.

The recent refusal of certain private financial institutions to provide any accounting of how they are using taxpayer money undermines public confidence ... For Treasury to advance funds to these institutions without requiring more transparency further erodes the very confidence Treasury seeks to restore.

Among the many details in the report are the degree to which Emperor Paulson made virtually no effort to advocate on behalf of taxpayers and not banks, highlighted by this Bloomberg report:

Henry Paulson may be the most powerful manager of money in the world and he still couldn’t do for taxpayers with the $700 billion bailout of American banks what Warren Buffett did for his shareholders in investing in Goldman Sachs Group Inc.

The Treasury secretary has made 174 purchases of banks’ preferred shares that include certificates to buy stock at a later date. He invested $10 billion in Goldman Sachs in October, twice as much as Buffett did the month before, yet gained warrants worth one-fourth as much as the billionaire, according to data compiled by Bloomberg. The Goldman Sachs terms were repeated in most of the other bank bailouts.

Paulson said “he had to make it attractive to banks, which is code for ‘I’m going to give money away,’” said Joseph Stiglitz, who won a Nobel Prize in 2001 for his work on the economic value of information.

“The worst aspect of this is that they were designed not to do what they were supposed to do,” he said in a telephone interview from Paris Jan. 7. “In many ways, it’s not only a giveaway, but a giveaway that was designed not to work.” [...]

“If Paulson was still an employee of Goldman Sachs and he’d done this deal, he would have been fired,” he said.

It's important to note that whatever comes out of the stimulus package is not the only spending that the government will be employing. There is also the second half of the TARP funds, about $350 billion dollars. George Bush is trying to steal the rest but he's run out of time, and the Congress can basically block him from getting it. The next Treasury Secretary, Tim Geithner, says that he's overhauling the program (that would make three overhauls since September).

Geithner has been working night and day on the eighth floor of the transition team office in downtown Washington with Lawrence H. Summers and other senior economic advisers to hash out a new approach that would expand the program's aid to municipalities, small businesses, homeowners and other consumers. With lawmakers stewing over how Bush administration officials spent the first $350 billion, Geithner has little chance of winning congressional approval for the second half without retooling the program, the sources added [...]

The group has come to believe the program needs a fresh start after determining the Bush administration succeeded in providing a measure of stability for the financial system but failed to jump-start bank lending or stem foreclosures, three sources said, speaking on condition of anonymity because no announcement has been made.

Geithner has no choice, without an overhaul he won't get the money. Barney Frank basically called for a revision along similar lines today.

As Josh Marshall notes, this turns TARP into something approaching stimulus - limiting foreclosures will have a tangible effect on the economy and consumer confidence. I'm just happy that we may not be wasting another $350 billion come January 20.

Stealing 'Til 11:59AM January 20

At first, I considered the shift in the TARP program from the deeply flawed "trash for cash" scheme to partial nationalization to be a good thing. Treasury wasn't getting the optimal price for the exchange, but it certainly had a better chance for success. Now we learn that the whole "feint left, move right" maneuver was designed to allow financial firms to escape executive pay limits:

Congress wanted to guarantee that the $700 billion financial bailout would limit the eye-popping pay of Wall Street executives, so lawmakers included a mechanism for reviewing executive compensation and penalizing firms that break the rules.

But at the last minute, the Bush administration insisted on a one-sentence change to the provision, congressional aides said. The change stipulated that the penalty would apply only to firms that received bailout funds by selling troubled assets to the government in an auction, which was the way the Treasury Department had said it planned to use the money.

Now, however, the small change looks more like a giant loophole, according to lawmakers and legal experts. In a reversal, the Bush administration has not used auctions for any of the $335 billion committed so far from the rescue package, nor does it plan to use them in the future. Lawmakers and legal experts say the change has effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives.

Wow. And there are strong hints that Emperor Paulson was planning on using this loophole all along:

Meanwhile, Paulson repeatedly told lawmakers that he did not plan to use bailout funds to inject capital directly into financial institutions. Privately, however, his staff was developing plans to do just that, Paulson acknowledged in an interview.

As usual, you cannot expect government "oversight" with the input of business interests to serve the public. What there needs to be is more activism in shareholder meetings and in the public sphere, to make it completely toxic for a firm that accepted TARP money to offer these generous pay packages. That may sound like nothing, but it's what has turned AIG into a pariah. At the end of the day, these companies still have to do a little business with the public, so damaging their public profile seems to me to be the way to go. Certainly this Treasury Department is thoroughly uninterested in what TARP money recipients are doing with their cash. And it's pretty clear that Congress wanted little more than a fig leaf in the bill about executive compensation to prove that they "cared" about the issue. Read this article about Chuck Schumer and you'd know that we have a bipartisan problem.

What both parties know is that the optics of fat bonuses and CEO pay for any company who got a handout from the government is poison. Time to take it to the board meetings.

Schmucks At The Helm

At the rate we're going, we'll be lucky if the White House isn't in the middle of foreclosure by January 20th. Emperor Paulson and his merry band of geniuses are making the same bad bets with taxpayer money as the investment banks did to get us here in the first place.

Stock intended to eventually earn taxpayers a profit as part of the Bush administration's massive bank bailout has lost a third of its value — about $9 billion — in barely one month, according to an Associated Press analysis. Shares in virtually every bank that received federal money have remained below the prices the government negotiated.

Stocks dropped again Friday after the government reported a larger-than-expected number of job losses in November, but a top Treasury Department official told the Mortgage Bankers Association that the tax dollars are being invested in "very high-quality institutions of all sizes."

"We're not day traders, and we're not looking for a return tomorrow" said Neel Kashkari, the director of Treasury's Office of Financial Stability, which oversees the $700 billion financial rescue fund. "Over time, we believe the taxpayers will be protected and have a return on their investment."

That would be more reassuring if I believed you had the first clue what you were doing, Neel (also if your name wasn't "Neel"). I mean, this latest plan to reinflate the housing bubble in a desperate attempt to get out of the Treasury Department alive is completely absurd.

Treasury Secretary Henry Paulson is considering a new plan to reduce mortgage rates in another bid to revive the U.S. housing market, a government official said.

The Treasury, which already has a program to buy mortgage- backed securities issued by Fannie Mae and Freddie Mac, could step up those purchases to drive down interest rates on some loans to 4.5 percent, the official said on condition of anonymity. The plan is preliminary and could change.

Note the words "some loans". Anyone that would qualify for these rates would not need the rate reduction, and there's no indication that those rates would be fixed. What's more, this would not apply to those who are upside down in their homes and looking to restructure their payments. While some homeowners have been able to refinance, in the main that is largely not those homeowners at risk, which is why you're seeing defaults at stratospheric levels, something like 10% of the market. And anyway, this just prolongs the inevitable. Running the US economy on home-buying is unsustainable. Houses are in most cases still overvalued.

(By the way, I'm also very concerned that Treasury Secretary nominee Tim Geithner, who's been in on a lot of the decisions made by Paulson and others, may be trying to force out Sheila Bair, practically the only person in the government who's focusing on the foreclosure side of the equation. The article contains a bit of hearsay, but I hope it's wrong and Bair is retained at the FDIC.)

Thankfully, some members of Congress are figuring out that Paulson and his cadres don't know what the hell they're doing and need to be swiftly separated from any future taxpayer funds:

Dec. 4 (Bloomberg) -- Senate Banking Committee Chairman Christopher Dodd said he opposes giving the Bush administration the second half of the $700 billion financial rescue plan, joining Republicans upset with how it is being managed.

“I would be a very hard person to convince that this crowd deserves to have their hands on the next $350 billion,” Dodd, a Connecticut Democrat, told reporters today in Washington after a hearing on whether automakers should get government aid. “I am through with giving this crowd money to play with.”

Good. There are about 299,999,999 million other people I could think of that would manage this bailout money better. Instead of rebuilding the same failed institutions and putting no new restrictions on them, we need to restore competition to the marketplace, break up the concentrations of financial sector wealth, significantly reduce the leverage that these behemoths take on, and never again get ourselves in a situation where companies are too big to fail. We're in this mess because the financial industry was allowed to play all kinds of games with our collective future. Now the Treasury Department is doing virtually the same thing in restoring them.

We have to break this cycle.

Can't Anyone Here Play This Game?

Conservative policies don't work in a crisis. They work for robbery. Therefore, it shouldn't surprise anyone that the Treasury Department has been flailing from side to side in response to the financial meltdown.

The head of a new Congressional panel set up to monitor the gigantic federal bailout says the government still does not seem to have a coherent strategy for easing the financial crisis, despite the billions it has already spent in that effort.

Elizabeth Warren, the chairwoman of the oversight panel, said in an interview Monday that the government instead seemed to be lurching from one tactic to the next without clarifying how each step fits into an overall plan.

“You can’t just say, ‘Credit isn’t moving through the system,’ ” she said in her first public comments since being named to the panel. “You have to ask why.”

If the answer is that banks do not have money to lend, it would make sense to push capital into their hands, as the Treasury has been doing over the last two months, she continued. But if the answer is that their potential borrowers are getting less creditworthy with each passing day, “pouring money into banks isn’t going to fix that problem,” she said.

The GAO is similarly puzzled by the grand design here, releasing a report yesterday with a number of disturbing conclusions that TPM Muckraker recounted, including:

• Banks don't have to tell Treasury how they're spending the bailout money
• There's no monitoring of conflicts of interest between Treasury and the recipients of bailout money
• Treasury wants to let banks enforce executive pay limits themselves

And on top of all this, Emperor Paulson might ask for the second $350 billion from the Congress before the new Administration comes in, in an effort to steal manage the problem even more.

There's no way Paulson should be allowed another dime, given past performance.

OK, We'll Stop Printing Money Now

The White House is saying that they may not use all of the bailout money before January 20 and that they will offer about $350 billion of it to President-elect Obama, in a magnanimous gesture, for him to use it as he sees fit. How gracious! The Bush Administration has only drawn $4 TRILLION dollars out of the Treasury and they're letting Obama handle the rest!

Given the speed at which the federal government is throwing money at the financial crisis, the average taxpayer, never mind member of Congress, might not be faulted for losing track.

CNBC, however, has been paying very close attention and keeping a running tally of actual spending as well as the commitments involved.

Try $4.28 trillion dollars. That's $4,284,500,000,000 and more than what was spent on WW II, if adjusted for inflation, based on our computations from a variety of estimates and sources.

Not only is it a astronomical amount of money, it's a complicated cocktail of budgeted dollars, actual spending, guarantees, loans, swaps and other market mechanisms by the Federal Reserve, the Treasury and other offices of government taken over roughly the last year, based on government data and new releases. Strictly speaking, not every cent is directed a result of what's called the financial crisis, but it arguably related to it.

There's a chart at the link if you want to see for yourself everything you've bought this year. By the way it hasn't done the trick yet.

I think at this point, stripping Henry Paulson of his authority to spend more cash, with Ben Bernanke thrown in for good measure, isn't an option but a duty. And Chuck Grassley's call for the newly minted oversight board to investigate conflicts of interest among all the Goldman Sachs execs serving as the ladlers of corporate cash during the bailout is absolutely warranted. However, this oversight is coming at the END of the process, not the beginning. With four trillion already passed out, it's not like putting the brakes on the giveaways is going to make much of a difference today. This is not to say we shouldn't be investigating and scrutinizing what amounts to theft, as well as building a new regulatory structure for the future (yes, listen to Eliot Spitzer on this one - setting aside his personal life he's probably the most knowledgeable person in America about what needs to be done).

And there's, of course, a double-edged sword to all the newfound vigor on the right, from Grassley and James Inhofe and others, to watch the Treasury Department, after leaving the barn door open to the tune of four trillion. This is but a prelude to the wave of fiscal austerity that we're going to be hearing 24-7 from those who will claim we just can't afford health care and investments in alternative energy and infrastructure and early childhood education. We actually need some immediate relief right now, for state and local governments and the unemployed, and my concern is that this retrospective shock at the bailout price tag from Republicans will be used as an excuse to deny that, sending us into the downward spiral we saw in 1930 and 1931, when too much dithering and not enough action created an even bigger economic hole.

Emperor Paulson: "Got Any Ideas?"

So the Troubled Asset Relief Program will now not provide relief for troubled assets. If we didn't pass it, the world was going to end, but a couple months out from passage, it's not going to be used for its purpose.

WASHINGTON -- Secretary Henry Paulson said the Treasury has put a plan to purchases of illiquid mortgage-related assets on hold.

Meanwhile, the Treasury Department, signaling a new phase in its $700 billion financial-rescue plan, is considering requiring that firms seeking future government money raise private capital in order to qualify for public assistance, according to people familiar with the matter.

The move isn't expected to apply to the existing $250 billion capital-purchase program, which is already injecting money into banks. But Treasury is considering attaching such conditions to any of its future capital investments, these people said.

"We are carefully evaluating programs which would further leverage the impact of a TARP investment by attracting private capital, potentially through matching investments," Treasury Secretary Henry Paulson said in a broad speech on the Troubled Asset Relief Program, known as TARP, the global credit crunch and the government's recent steps to address the financial meltdown. "In developing a potential matching program; broadening access in this way would bring both benefits and challenges."

I don't have much of a problem with requiring public capital for companies that want assistance - in a sense they have to prove their worthiness as a business, although the prospect of assistance is probably enough to entice the capital in the first place, which means a lower funding burden for the government, but not some major hurdle for the corporation.

But what should be very frightening to everyone is that Paulson can completely reverse the terms of the TARP program, without any check on his power or Congressional input whatsoever. His remarks today suggest that he's playing piñata with the greater economy, just whacking at it from every angle in an untargeted fashion. We're only a couple months out from the initial plan, and now we have one that's completely different. Meanwhile, the dithering is costing investors trillions and increasing uncertainty.

If I'm Barack Obama interviewing potential candidates for Treasury Secretary, my first question would be, "Can you start Monday?"

Smash and Grab Job

Kevin Drum is uneasy about the terms that Emperor Paulson used to nationalize the banks - particularly, how quickly the bank CEOs accepted them.

A final deal between regulators was hashed out in Mr. Paulson's office Sunday afternoon....The top bankers were then told to show up for a meeting Monday at 3 p.m., but were given few details. Expecting an uproar over the plan, government officials secretly planned to break off the first meeting, giving CEOs time to vent, talk to their boards, clear their heads, and reconvene at 6:30 p.m.

In Mr. Paulson's call with Morgan Stanley's Mr. Mack, the CEO asked the Treasury secretary the reason for the meeting, according to people familiar with the matter. Mr. Paulson responded, according to a person familiar with the matter: "Come on down, we'll tell everyone at the same time," adding, "I think you'll be pleased."

....U.S. officials argued the plan represented a good deal for the banks: The government would be buying preferred shares, and thus wouldn't dilute their common shareholders. And the banks would pay a relatively modest 5% in annual dividend payments.

The meeting ended at about 4 p.m. By 6:30 p.m., all of the [term sheets] had been turned in and signed by the CEOs. No second meeting was held.

Of course not, because the banks got everything they wanted - no-strings money, no voting shares for the government in return, no regulations on their activities, and no meaningful restrictions on executive compensation. Here we have a bipartisan chorus against golden parachutes and extensive CEO pay, and yet the provisions in the bill are toothless:

"Restrictions on executive compensation will ensure that taxpayer money is not wasted enriching the same people whose poor decision-making created this crisis," Sen. Charles E. Schumer (D-N.Y.) wrote to Treasury Secretary Henry M. Paulson Jr. yesterday. "It is imperative that these restrictions, including limitations on the incentives for executives to take excessive risks and the elimination of golden parachutes, should apply to any capital injection program."

Exempting the banks in the program is "not in the spirit of the thing," said Rep. Spencer Bachus, (R-Ala.), ranking member of the Financial Services Committee.

Dean Baker has more on these new "welfare queens" running the banks. Injecting the money directly into the banks makes it cheaper and potentially more effective, but at the same time, this feels more and more like a theft. Especially because the neo-Hooverites are ready to step in and forbid such gifts to the mere mortals not on Wall Street.

I for one welcome our new socialist overlords

Looks like Comrade Bush is pulling the trigger.

WASHINGTON -- The U.S. government is expected to buy stakes in the nation's top financial institutions as part of a wide-ranging effort to restore confidence to the battered banking system, following similar moves by European governments that sent global stock markets soaring.

As part of its new plan, the government is set to buy preferred equity stakes in Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp., Merrill Lynch, Citigroup Inc., Wells Fargo & Co., Bank of New York Mellon and State Street, according to people familiar with the matter.

Not all of the banks involved are happy with the move, but agreed under pressure from the government. All told, the moves tie the banking sector to the federal government for years to come. The comprehensive approach rivals the breadth of the government's response to the Great Depression. As a result, taxpayers now have a direct stake in the future of American finance. Along with the government's involvement come certain restrictions, such as caps on executive pay.

This puts the US firmly in line with the rest of the world in their response. The FDIC is offering unlimited lending insurance as well. There is no reason for banks not to lend to one another at this point, with the government on the hook, and if they don't now, they deserve to be liquidated.

That said, while this is the right move, it is economic malpractice that Bush and Paulson resisted it for so long, wasting valuable time and lots and lots of taxpayer stock holdings. For a time the whole world was united but our Treasury Department emperor:

House Democratic leaders, including Speaker Nancy Pelosi (D., Calif.) and House Financial Services Committee Chairman Barney Frank, held a closed-door session Monday with 11 economists and other advisers, including Nobel laureate Joseph Stiglitz, to discuss the financial crisis. The group threw its weight behind Treasury's decision to inject capital into the banking system, in exchange for equity stakes.

"The consensus was so strong towards direct equity injections that there was literally no dissension on the point," said one of the invited economists, Jared Bernstein of the liberal Economic Policy Institute. "The only head-scratching is, why did it take us so long to get here?"

Better late than never. The tools are in place to do this properly, but considering Paulson's dithering, it's not reasonable to have any faith in him to pull this off.

Comeback

Stocks are shooting up today. Why? Well, over the weekend, European leaders followed the lead of Gordon Brown and Britain (who bought up the Royal Bank of Scotland today), announcing plans for equity stakes in banks, and more important, vows to guarantee interbank lending. If that can't grease the skids of the credit market, absolutely nothing can. And since it's a global financial market, this affects Wall Street.

There's also Mitsubishi's buy of a stake of Morgan Stanley, and federal officials guaranteed that stake, protecting the company.

This has appeared to be enough, for now.

As I said a couple days ago, Brown seemed to have the right idea all along, to recapitalize the banks in exchange for equity stakes. Here's Nobel Prize winner Paul Krugman:

This sort of temporary part-nationalization, which is often referred to as an “equity injection,” is the crisis solution advocated by many economists — and sources told The Times that it was also the solution privately favored by Ben Bernanke, the Federal Reserve chairman.

But when Henry Paulson, the U.S. Treasury secretary, announced his plan for a $700 billion financial bailout, he rejected this obvious path, saying, “That’s what you do when you have failure.” Instead, he called for government purchases of toxic mortgage-backed securities, based on the theory that ... actually, it never was clear what his theory was.

Meanwhile, the British government went straight to the heart of the problem — and moved to address it with stunning speed. On Wednesday, Mr. Brown’s officials announced a plan for major equity injections into British banks, backed up by guarantees on bank debt that should get lending among banks, a crucial part of the financial mechanism, running again. And the first major commitment of funds will come on Monday — five days after the plan’s announcement.

At a special European summit meeting on Sunday, the major economies of continental Europe in effect declared themselves ready to follow Britain’s lead, injecting hundreds of billions of dollars into banks while guaranteeing their debts. And whaddya know, Mr. Paulson — after arguably wasting several precious weeks — has also reversed course, and now plans to buy equity stakes rather than bad mortgage securities (although he still seems to be moving with painful slowness).

While President Paulson was concerned with whether any plan fit with a carefully constructed ideology, Brown actually looked at the problem and sought to fix it.

It's important not to breathe a sigh of relief and think the crisis is solved. It's not. There are still systemic problems and a virtual certainty of recession. That requires an entirely different response. Getting the credit markets working again is only a start.

Hey Kids, Let's (Pretend To) Buy A Bank!

There was a ridiculous amount of news for a Friday night, the foremost being that President Paulson is finally giving in and doing what should have been done in the first place, purchasing an equity stake in failing banks. The problem is that he is still doing it wrong.

WASHINGTON - Treasury Secretary Henry Paulson said Friday that the Bush administration will move ahead with a plan to buy stock in financial institutions.

Paulson said the program to purchase stock in financial institutions will be open to a broad array of institutions.

The administration received the authority to make direct purchases of stock in banks in the $700 billion measure Congress passed last week to rescue the nation’s financial system [...]

Paulson said the government’s program would be designed to complement the efforts of banks to raise fresh capital from private sources. He said that the government’s stock purchases would be of nonvoting shares so that the government will not have power to run the companies.

Actually, we need the power to run the companies, or at least tell the bankers what to do, more specifically that they must lend to one another. They aren't the kind of shares that Warren Buffett got from Goldman Sachs. If this doesn't change bank behavior then it essentially will do nothing. A bank that refuses to lend is not a functional bank, and the government ought to take it over. As Krugman says, this is a half-Gordon - referring to Gordon Brown's recapitalization plan (not the part about suing Iceland).

Worse, the G7 finance ministers aren't coordinating their efforts.

Oct. 10 (Bloomberg) -- Finance ministers and central bankers from the Group of Seven nations signaled reluctance to adopt a coordinated effort to shore up banks, risking a deeper crisis of confidence after this week's crash in global stock markets.

As equities worldwide suffered their worst week since the 1970s, officials gathering in Washington said they were seeking new ways to stem the meltdown. Still, they argued that tailoring efforts to the needs of individual nations was better than a cross-border plan.

The G-7 is considering including in its statement saying that no bank of systemic importance will be allowed to fail, and may outline principles all nations should follow, two European officials told reporters in Washington. Still, the group is unlikely today to endorse a U.K.-style commitment to guarantee loans between banks, an official from a G-7 member said.

AND, it appears that Paulson is going to use Fannie and Freddie to kickstart the buy-up of troubled assets, essentially widening the money pool:

Federal regulators directed Fannie Mae and Freddie Mac to start purchasing $40 billion a month of underperforming mortgage bonds as the Bush administration expands its options to buy troubled financial assets and resuscitate the U.S. economy, according to three people briefed about the plan.

Fannie and Freddie began notifying bond traders last week that each company needs to buy $20 billion a month in mostly subprime, Alt-A and non-performing prime mortgage securities, according to the people, who asked not to be identified because the plans are confidential. The purchases would be separate from the U.S. Treasury's $700 billion Troubled Asset Relief Program.

Because the $700 billion is going to go to recapitalization, yet he has to reward his banker friends by overpaying for their trash.

AND, GM is talking merger with Chrysler, just weeks after securing a $25 billion dollar loan from the Feds.

These are just the economic Friday news dumps.

And they worry me. Paulson is still trying to work a heist instead of fix the fundamentals. And the market has thus far responded very poorly to heists.

Off The Cliff

I'd like it better if "weeks" were reduced to "days":

Oct. 9 (Bloomberg) -- The government is planning to buy stakes in a wide range of banks within weeks as the credit freeze increasingly threatens to tip the U.S. economy into a deep recession.

Treasury Secretary Henry Paulson and top aides are still considering options on how the purchases would work, including having the government acquire preferred stock, two officials informed of the matter said.

The move would be a shift in emphasis in Paulson's original intention for the $700 billion bailout package passed by Congress last week. While the Treasury still aims to buy troubled mortgage-backed securities from financial institutions, a direct capital injection would offer more immediate relief.

"The Treasury is no longer looking for one silver bullet,'' said Steve Bartlett, president of the Financial Services Roundtable, which represents 100 of the biggest firms in the industry. "They have to proceed on all fronts.''

Aside of thinking about how I should have gotten out of certain stocks when I had the chance, I have been wondering about what the hell is taking Paulson so long. He's acting like he has time to sculpt the Pieta as the Dow drops huge chunks every day and the credit markets stay frozen. We're way past the time for action on the margins.

I guess I'm supposed to be cheered that this is showing the unsustainability and intellectual bankruptcy of the conservative project, and leading to their imminent implosion. And that's fine, but the cost is going to be so great, and furthermore it won't be borne by the fanatics and fools (h/t Arianna Huffington) who brought us to the brink.

It's very depressing.

The National

There were hints of this today, and the New York Times breaks it open:

Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials.

Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks’ balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones [...]

The proposal resembles one announced on Wednesday in Britain. Under that plan, the British government would offer banks like the Royal Bank of Scotland, Barclays and HSBC Holdings up to $87 billion to shore up their capital in exchange for preference shares. It also would provide a guarantee of about $430 billion to help banks refinance debt.

The American recapitalization plan, officials say, has emerged as one of the most favored new options being discussed in Washington and on Wall Street. The appeal is that it would directly address the worries that banks have about lending to one another and to other customers.

The socialist jokes write themselves, especially since is happening on the watch of MBA President and free market fundamentalist George W. Bush, but this is a good thing. Nationalizing the banks is the best way to both shore up the system and get the best deal for taxpayers. Obviously it's not what you'd want to do in a sustainable economy, but it's the hand we've been dealt. The Wall Street Journal is arguing in favor of this right now. It's simply what must be done. No bank is willing to lend each other money because they have no expectation that they'll be paid back. Their balance sheets are crap, and they simply need capitalization.

The fact that the Treasury Department came to this realization now is helpful for a potential Obama Administration. He's still going to inherit one heck of a mess, but at least the plan is in action and may be in motion. And ultimately this will put the federal budget in less of a hole. The pain is going to be sustained, but I think we have a path to turn the corner.

The only thing that could derail such a plan is this:

One concern about the Treasury’s bailout plan is that it calls for limits on executive pay when capital is directly injected into a bank. The law directs Treasury officials to write compensation standards that would discourage executives from taking “unnecessary and excessive risks” and that would allow the government to recover any bonus pay that is based on stated earnings that turn out to be inaccurate. In addition, any bank in which the Treasury holds a stake would be barred from paying its chief executive a “golden parachute” package.

The only thing that will stop Paulson is the greed of his buddies. And the only thing that will stop the banks from taking the deal is the loss of their precious parachutes. Of course, there's a way for a President to play hardball on this, but I don't see that coming until January.

(By the way, Democrats forced this option for equity stakes into the bill. Just so you know.)

...I should also note that the US is taking the lead of Britain on this. I'm not fully informed on Gordon Brown's problems, but it appears that he's done quite a bit of good in the past year and is being blamed for the sins of his predecessor.

Today In Economic Armageddon

The Federal Reserve joined forces with central banks across the world for a coordinated interest rate cut of 50 basis points. They're obviously throwing concerns about inflation out the window and trying to kickstart the credit markets, but Paul Krugman explains why that is not likely to work.

A quick illustration: in early July 2007, before the crisis, the target Fed funds rate was 5.25% and the rate on 30-day A2/P2 commercial paper — that is, CP issued by less-than-sterling borrowers — was 5.4%. On Monday of this week, the target Fed funds rate was 2%, down 325 basis points from pre-crisis levels, but the CP rate was 5.61% — up from pre-crisis levels.

So will this latest rate cut make any difference to borrowers? Maybe — but only to a few of them. We’re way past the point at which conventional monetary policy has much traction.

On top of this you have the Fed jumping into the commercial paper market, perhaps illegally, to get the rates they can't touch through monetary policy lowered. And they're starting to lend to private companies, putting more taxpayer dollars at risk.

These look like desperate attempts to stave off the inevitable, and nobody's really certain whether or not they'll work. What I think we have here is the policymakers in the White House trying to rescue their failed ideology and not the market. They want to use everything in their power (and a few things that aren't) to halt a slide to recession, as long as it doesn't look socialist and icky. What's more, they'd rather reward their friends on Wall Street than punish them, even though they have the opportunity to do either with the authority granted in the Paulson plan. The wiser move would be to follow Britain and just nationalize the banks already.

Britain’s largest banks are to be part-nationalised after the government took the momentous decision to pump tens of billions of pounds of public money into the sector to avert a banking collapse [...]

Under the UK bank rescue, the government is to put up to £250bn into the banking system in an effort to keep banks lending. It will also offer a guarantee to banks issuing medium term debt, which could mean backing a further £250bn of bank borrowings. But it is likely to demand dividend cuts and the end of big bonuses at the banks in return.

This is clearly what we should be doing here; a Swedish-style temporary nationalization with large equity stakes. It's cheaper and is more likely to be effective. And it looks like Emperor Paulson is slowly resigning himself to that reality:

Did anybody else notice that when Hank Paulson was describing in his press conference today what the Emergency Economic Stabilization Act enables Treasury to do, the first thing he listed was “to inject capital into financial institutions”?

That wasn’t how Treasury initially advertised its Troubled Asset Relief Program. It was sold as a way to get the market for mortgage securities moving (or, to use the jargon, liquid). Lots of academic economists objected that liquidity wasn’t the problem, it was insolvency. What Treasury needed to do was recapitalize financial institutions and take equity stakes in return […]

None of the people asking questions at the press conference really seemed to pick up on this, of course (&%%$# Washington journalists!). Along with Paulson’s affirmation that the FDIC was going to use its “systemic risk” powers to protect depositors and unsecured creditors “as appropriate,” I take it as one more sign that we’re headed toward a Swedish solution of our banking crisis—recapitalization and temporary nationalization of much of the banking system.

The second half of this needs to be a real stimulus bill for ordinary Americans which includes aid to state and local governments as well as infrastructure investment. And that's exactly what Nancy Pelosi is calling for.

DENVER - House Speaker Nancy Pelosi said Wednesday that a $150 billion economic stimulus plan is needed now because of the faltering economy and she may call the House into session after the election to pass it [...]

The Senate is expected to be back at work after Election Day to complete a public lands bill and perhaps deal with other matters, such as a measure to extend unemployment benefits. The House also could return to consider a stimulus plan and additional issues in a lame-duck session before the newly elected Congress takes over in January.

"We may have to go back into session before the next Congress," Pelosi said.

Pelosi said a stimulus package would create jobs by investing in public works, increasing food stamps benefits and extending unemployment insurance for the long-term jobless. She said lawmakers need to "hunker down" and look closely at the federal budget for possible savings, and reconsider whether the U.S. can afford to fight "a war without end" in Iraq.

Reality is intruding on the fantasy scenario that we can continue to prop up the financial system with funny money. The reckoning is going to be painful but we should at least start to head in the right direction.

This Is Such A Set-Up

When I saw that bipartisan press conference claiming that the contours of a deal has been reached, I noticed that the Republican representative from the Senate side was Bob Bennett, not the ranking member of the Banking Committee Richard Shelby. Well, sure enough, Shelby just showed up on MSNBC, and sure enough, he's absolutely opposed to the bill. He was waving around a piece of paper from top economists opposing the bailout, calling it a giveaway to the same Wall Street corporations that created the problem. He also said it bails out foreign banks, which I thought was taken out of the bill.

Shelby isn't wrong, not to my knowledge. As James K. Galbraith says today, the need for this bailout is extremely suspect. Certainly there are better ideas out there than the crappy Paulson plan. And in many ways, lawmakers and the Bush Administration are trying to fix a problem that doesn't have a fix - the housing market hasn't hit bottom, and it'll drag down the economy regardless (though a new Home Owners Loan Corp. would help).

But the politics of this are clear. Right after Dodd and co. announced a bipartisan deal, John Boehner said no dice. They are going to try to stick the Democrats alongside with Bush on this bailout.

I don't know if that will totally work. Pete Stark is calling B.S. on President Paulson's irresponsible talk about bank runs and depressions. Brad Sherman says his office calls are running 300 to 2 against. The results are the same across the country. I think a good portion of Democrats won't go along with this. But the Blue Dogs, those supposed stewards of fiscal responsibility, will, and they'll put Democrats in the situation of being on the side of the largest bank bailout in American history. At that point, the details will be irrelevant. This is Lucy with the football, and if the Democrats manage to blow this one they actually don't deserve to be a political party.

...the other option here is that House Republicans are holding off until McCain "convinces" them, showing how much of a post-partisan leader he is. That's a possibility, but anyone who votes for this piece of crap bill, absent some really enticing language, is in trouble in 2010.

Forking It Over

So President Power Of Nightmares came on the teevee tonight and spoke darkly of grave and imminent dangers to our financial system, all of them somehow magically divorced from his own laissez-faire policies, belief in deregulation and failure to respond to the very clear warnings that we were headed down a path of disaster.

President Bush on Wednesday warned Americans and lawmakers reluctant to pass a $700 billion financial rescue plan that failing to act fast risks wiping out retirement savings, rising foreclosures, lost jobs, closed businesses and even "a long and painful recession."

His dire warning came not long after the president issued extraordinary invitations to presidential candidates Barack Obama and John McCain, one of whom will inherit the mess in four months, as well as key congressional leaders to a White House meeting on Thursday to work on a compromise.

"Without immediate action by Congress, American could slip into a financial panic and a distressing scenario would unfold," Bush said in a 12-minute prime-time address from the White House East Room that he hoped would help rescue his tough-sell bailout package.

Basically, gimme gimme gimme or the economy gets it. And while Bush appeared to accede to a lot of the steps sought by Congress - vague limits on executive compensation, some ability for taxpayers to cash in on the upside potential, and some manner of oversight - he drew the line at any re-regulation of the companies who got us into this mess, saying that it could "come later." And indeed, most of the talk was about the failure of borrowers to pay their bills, not the predatory practices of lenders to shuttle people into loans without explaining the circumstances (and through yield spread premiums, actually getting bonuses for that).

After a couple days of seeing the Paulson plan go down in flames, I now have a very queasy feeling about this. Bush clearly intervened in a Presidential election by inviting McCain and Obama to the White House, and the joint statement released by the two of them is worthless, all "we must rise above partisanship and work together for the good of the country" gibberish. McCain apparently dropped the specifics from the statement. Now the House and the Senate are claiming a deal with President Paulson, and the draft that's been floating around is not good. Ian Welsh calls it FISA all over again.

It's essentially a Wall Street giveaway plan, with only some fig leaves to try and pretend that it isn't.

Why? Because the language about taking warrants in exchange for buying up toxic assets is only for direct purchases and not for reverse auction puchases, which will be the majority of the purchases. As Soros points out, in any reverse auction, the government will get stuck with the most toxic of toxic waste because of information asymetries. In exchange they should at least get stock, equal not to what they paid, but to the face of the crap they are buying.

There is quite a bit of language about helping mortgage holders, but it is almost all qualified with words like encourage and request, rather than require. Since the Treasury is bailing mortgage holders out, the idea that the Secretary must "encourage" and "request" is just BS. The correct response is to make help for mortgage holders a requirement of participating in the program at all. If financial institutions don't like that they don't need to participate. Good way to make sure that companies that don't really need help don't swill at the trough.

Unlike the Dodd bill, this is not a copy of the actual language of the bill, but a summary gloss. Without seeing the language we don't know what's actually in there. Dodd was straight up with us. Frank is hiding his legislative language. Why?

The bill will allow bankruptcy judges to restructure mortgages for those having trouble paying, and that's the bright spot. But in the end, this is a stick-up. A stick-up with a $700 billion dollar price tag that was literally invented out of thin air. Now, there's one paragraph in The Hill piece that suggest this might go in stages:

Paulson said unemployment rates could approach 10 percent if the plan was not adopted, senators said, although he did indicate possible receptiveness to the idea of implementing it in stages. Such a plan, Paulson told senators, has worked in countries like Japan, where financial rescue plans were done in stages.

That's really the only way out of this right now. That $700 billion dollar price tag defunds even the most mildly progressive agenda. I think John McCain may have lost the election today, and at the hands of David Letterman, no less. But with the federal treasury raided and in the hands of Wall Street corporations who made bad decisions, it's hard to see how a President Obama can be anything but a fixer-upper and a caretaker. All because everyone bought the crisis frame so hard.

Today In The Greatest Transfer Of Wealth In World History

I go back and forth on whether this financial situation is a crisis or not. Clearly journalists aren't asking the right questions, but there are reasonable answers to those questions. Clearly the credit markets aren't reacting well and banks are wary of lending each other money, but with Warren Buffett's injection of cash into Goldman Sachs, four of the Big Five investment banks are under relative control, either bought out or propped up.

My personal view is that Wall Street is trying to create a bigger crisis by going on the equivalent of a general strike in an effort to get a sweetheart deal, and don't tell me they wouldn't do it. The market is acting extremely rational. If you were close to getting a $700 billion dollar rescue, you would make things look as badly as possible too.

I think it's become clear now that the Paulson plan is a nonstarter. There are plenty of other solutions, some good, some bad (the two-year ban on the capital gains tax is just more idiotic supply-side talk), but handing over $700 billion isn't the only plan. We could actually learn from history on this one and take a page from Sweden. Barack Obama's ideas include some intriguing elements:

It is wholly unreasonable to expect that American taxpayers would or should hand this Administration or any Administration a $700 billion blank check with absolutely no oversight or conditions when a lack of oversight in Washington and on Wall Street is exactly what got us into this mess...The plan must include protections to ensure that taxpayer dollars are not used to further reward the bad behavior of irresponsible CEOs on Wall Street. There has been talk that some CEOs may refuse to cooperate with this plan if they have to forgo multi-million-dollar salaries. I cannot imagine a position more selfish and greedy at a time of national crisis. And I would like to speak directly to those CEOs right now: Do not make that mistake...This plan cannot be a welfare program for Wall Street executives.

...after the economy recovers, we should institute a Financial Stability Fee on the entire financial services industry to repay any losses to the American people."

Of course, there's a better way to fight runaway CEO compensation, a Constitutional option - make the top marginal tax rate for those making millions back to where it was during the Eisenhower Administration. But I'll settle for hedge fund managers being taxed on their income as income. Alternatively, I could go with this:



Today's latest news is that Chris Dodd may be pushed out of negotiations, which would be really horrible (UPDATE: I'm now hearing that's not true). But Nancy Pelosi is absolutely right in saying that this must be a consensus legislation.

Pelosi (D-Calif.) has effectively sent the message that if she is going to jump off a cliff to rescue Wall Street, she wants House Minority Leader John Boehner (R-Ohio) and George W. Bush holding her hands when she leaps.

Pelosi made this scenario clear at a lengthy closed-door meeting of House Democrats on Tuesday. Many of those present said they took Pelosi’s message to mean that a “majority of the minority” needs to support the bill before she will bring it to the floor.

To get that kind of support, President Bush needs to go on television to speak directly to the public, and get on the phone to rally his fellow Republicans, said House Majority Whip James Clyburn (D-S.C.).

“If it’s a crisis,” Clyburn said in a statement, “and we all need to come together, then as leader of this nation, the president needs to take the lead and bring the country together.”

Word is that Bush is considering just that, which would kill any bill. We have to keep up the pressure.

Well, That Could Have Gone Better

I watched almost all of the hearings in front of the Senate Banking Committee, and I have to say that the mood I gauged from the public comments of the Senators is extremely damaging to President Paulson's hopes of a stick-up for $700 billion. Chris Dodd came out and called the Paulson plan unacceptable. Richard Shelby, the Republican ranking member, is skeptical that the plan would even work. I didn't hear really any positive comments, and Sherrod Brown's were pretty representative:

To Bernanke: "I haven't received one phone call from a constituent that's been positive. I don't think people making $50,000 a year are interested in bailouts out executives whose country club fees are many times that. Does Wall Street owe the American people an apology?"

The anger in the Dirksen Senate office building reflects the anger in the country at the prospect of giving a significant portion of the Federal treaasury away, no-strings-attached, to those rich people who created the problem in the first place. The CEO compensation issue may be somewhat irrelevant, but if ordinary Americans see the through-line between their wallets and billionaire executives' luxury racing craft then the deal is politically impossible and will face a great revolt. What's more, the big banks are threatening not to participate in the bailout if their bonuses are taken away, so it is a factor, and I think Senator Obama is exactly right:

First, the plan must include protections to ensure that taxpayer dollars are not used to further reward the bad behavior of irresponsible CEOs on Wall Street. There has been talk that some CEOs may refuse to cooperate with this plan if they have to forgo multi-million-dollar salaries. I cannot imagine a position more selfish and greedy at a time of national crisis. And I would like to speak directly to those CEOs right now: Do not make that mistake. You are stewards for workers and communities all across our country who have put their trust in you. With the enormous rewards you have reaped come responsibilities, and we expect and demand that you to live up to them. This plan cannot be a welfare program for Wall Street executives.

There are bigger issues, however, and that's whether or not taxpayers get equity stakes in these banks who are relieving their distressed assets. In arguing against that, Ben Bernanke gave the game away.

"I believe that under the Treasury program, auctions and other mechanisms could be devised that will give the market good information on what the hold-to-maturity price is for a large class of mortgage-related assets. If the Treasury bids for and then buys assets at a price close to the hold-to-maturity price, there will be substantial benefits.

First, banks will have a basis for valuing those assets and will not have to use fire sale prices. Their capital will not be unreasonably marked down …"

This should be read in the context of Brad Setser’s calculations: he finds that if Treasury pays a price that seems appropriate given the poor quality of the assets, “The hit to the banks balance sheet might be too big” — the losses would be much larger than the amounts banks have already acknowledged, so that their capital position would be severely weakened.

So the plan only helps the financial situation if Treasury pays prices well above market — that is, if it is in effect injecting capital into financial firms, at taxpayers’ expense.

What possible justification can there be for doing this without acquiring an equity stake?

The Wall Street Journal sees the same issue. And Markos finds a key quote that connects the executive pay issue and the equity stake issue and proves that this is really about making rich people richer.

Straight from the horses' mouth, the White House's press lackey:

"With respect to executive pay, again, I'm not going to get into specific, point-by-point details on what our views are on that, other than the Secretary of Treasury said it would make more difficult to make this plan work and effective if you provide disincentives for companies and firms out there who are holding mortgage-backed securities and other securities from participating in the program. You have to remember, these are not all weak or troubled firms that own mortgage-backed securities. A lot of them are very successful banks and investment houses that have done very well, have been responsible, are holding performing assets that have value. They were not necessarily irresponsible players, and so you have to be careful about how you deal with them."

Careful how you deal with them? How about you LET THE FUCKING FREE MARKET HANDLE IT then? If they want taxpayer funds to bail out their incompetence, they give up equity, they accept limits on executive compensation. If they don't want those conditions imposed on them, they don't take our money.

Simple, right? And if they don't take our money, who cares? They are strong and successful! And the taxpayers don't have to give up a dime. Everyone wins!

I am now certain that this is all a giveaway to the GOP's friends on Wall Street and an effort to financially handcuff the next administration. It has little to do with saving the economy. Otherwise, Treasury and White House officials wouldn't be talking about bribing and arm twisting these banks into taking government handouts.

Not to mention the fact that Paulson flat-out lied about wanting oversight in the bill when he presented a plan that stated his actions would be "non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

I don't quite know where this is going to go - the Congress and the White House have ignored the entreaties of the American people before. But the movement is away from the stick-up and toward something with an upside for the taxpayer. Chuck Schumer talked about a short-term plan to test the system and waiting until the next Presidency to make a full solution. Chris Dodd is doing a great job so far, and I don't know where it's going, but this doesn't totally feel like a steamroll right now.

UPDATE: Hilarious. The Republican Study Group - basically hard-right conservatives - have released their counter-proposal for the bailout. It includes suspending the capital gains tax for two years, privatizing Fannie and Freddie, and repealing the Humphrey-Hawkins Full Employment Act. In case you thought that the GOP suddenly got religion on economics and wanted to move forward without throwing money at rich people at the expense of the poor.

Sherrod Brown: National Treasure

To Bernanke: "I haven't received one phone call from a constituent that's been positive. I don't think people making $50,000 a year are interested in bailouts out executives whose country club fees are many times that. Does Wall Street owe the American people an apology?"

Now talking about equity stakes in the affected companies. He's got Paulson and Bernanke on the run. Brown is giving voice to this refrain:

Henry is playing the role of Colin Powell in selling a disastrous plan to the American people. We all know how that turned out.

I have come to the conclusion that the bailout bill cannot be fixed and thoughtful members of Congress should simply say no. This is closer to the Social Security privatization fight - where only saying no until privatization was off the table - than the minimum wage increase fight, where Republicans extracted billions in tax breaks for business as the price of paying poor people a little bit more. Liberal congressional leaders are treating the bailout like the minimum wage deal. It is not. This vote is the bookend signature act of the Bush Administration to be coupled with the first vote authorizing Bush to invade Iraq. The details are not particularly relevant. Reports out of Washington say that the Bush Administration is comfortable adding in the notion of taxpayers getting an equity stake in bailed out Wall Street firms, but only if it is option, and not a requirement. And just who do you think is going to take that option? Not Henry Paulson.

There's a serious question to be asked about whether this is an effort to rescue the financial markets or an effort to drain the federal treasury and block a progressive agenda.

...see also Bernie Sanders, another progressive hero, calling for a progressive tax so that the wealthiest Americans can pay for this bailout. Christ, even Jim Bunning is questioning that credit card debt and student loans have been crammed into this bill. This may be a situation where Congress rumbles and grumbles and then passes a shit bill, but I'm not sure...

The Latest On President Paulson's Bailout

The scene on Capitol Hill looks confused to me. The refrain from the morning papers is that progress is being made toward a bailout bill, and yet the Congress is at odds with the White House on key points, Congressmen are at odds with one another, conservatives don't appear to be going along, liberals don't appear to be going along, rank-and-file Democrats have their own ideas...

I think the best practice here is to follow the lobbyists. And if you do that, it becomes clear that Chris Dodd's plan is rapidly becoming the basis for the legislation - otherwise they wouldn't be working so hard to defeat key elements of it.

One financial services lobbyist said his group was keeping a flow chart to try to keep track of who on Capitol Hill was pushing what.

“It ebbs and flows,” the lobbyist said. “It literally changes by the hour.”

Added Josten: “I think every 10 minutes, something changes here. I think they are wrapped up in it. It’s hard to tell what’s in, what’s out.”

One congressional reaction that emerged — Senate Banking Committee Chairman Chris Dodd’s (D-Conn.) response to the rescue package — wasn’t favorable to many of K Street’s banking clients, who oppose one provision in particular: giving bankruptcy judges the power to lower mortgages for distressed homeowners.

“We are vigorously opposing that,” said Steve Verdier, a lobbyist for the Independent Community Bankers Association (ICBA). “If that happens, then the mortgage rates for other consumers are going to go up.”

It's hard out there for a corporate lobbyist. By the way, if mortgage rates were to go up because homeowners facing foreclosure were to get their rates lowered, then they should really go up if the home goes into foreclosure and the bank is left with a worthless piece of paper. Yet they refuse to value their assets, and clarity is obviously the great killer of their fantasy.

Sen. Dodd is chairing a hearing right now with President Paulson, who is talking a lot of gibberish with a hint of warning. He has a nice suit on, so I expect half the Democrats on the panel to hide under their desks. CNN is carrying it live. This is very fluid right now.

...somebody might want to ask Paulson how much his plan would help his buddies at Goldman Sachs.