Sickening thought if you’re a Lehman banker and the implosion wasn’t bad enough.

www.creditslips.org

and Greenspan’s Black Swan

http://www.itulip.com/forums/showthread.php?p=47721#post47721

This is good.

No real value will be lost today – except from panic. If the government stays out, that will return soon enough.

The value lost by Lehman and Merrill Lynch evaporated months ago, if not years. Ditto with Freddie and Fannie. Capitalism cannot work without risk.

To be trite, actions have consequences. We must let that sink in – and undoubtedly, this will happen again and again in our future as we re-learn history.

I am a bit concerned about political statements regarding “reform” on Wall Street. I hope that means a lower chance of government bailouts and more market based accountability.

I see two main problems in the past 15 to 20 years (Ok, number two goes back farther):

1. Too easy money from the Fed, resulting in housing and market speculation. This may be fun on the way up, but bursting bubbles are not fun (except to watch from a distance). Despite my historic fondness for Alan Greenspan, his recent comments are disturbing – this is largely on his plate, so his comments are not helpful.

2. Accounting firms lack of accountability because of conflicts of interest. CPAs need to audit and to stay out of the tax and management consulting businesses. If they want to be tax lawyers, they should go to law school and then tax school. If they want to be consultants, get an MBA – or at least another job. Then those that are CPAs should only be CPAs. We’ve moved in this direction, but I think not enough. This is for the accounting profession to regulate – not the government.

In your view, has Citigroup done enough to right its ship or could it be next in light of recent events?

I’d love to see him have to sit down right now and explain his understanding of all this and proposed solutions to the press. It would be embarrassing.

The SKF is trading about 80-85 points lower than it was the last time the S&P was at this level in July. I don’t see it going up 80 points today unless there is complete market crash which of course there probably won’t be. Is the market saying something there?

I notice an article in the economist this morning, which adds to the possible panic.

http://www.economist.com/finance/displayStory.cfm?storyid=12231236&source=featuresbox_main

The author states:

“If Lehman’s assets are dumped in a liquidation, prices of like assets on other firms’ books will also have to be marked down, eroding their capital bases.”

In my opinion (as a CPA), that is incorrect. Fire sale prices for assets do not automatically reflect value – except for those items in those circumstances. One of the main assumptions of accounting is the Going Concern Assumption. Applying this to other corporations, their asset values must reflect the lower of historic cost or fair market value (with FMV disclosed in any event, if only in a footnote). Lehman and ML values do not necessarily reflect FMV for a going concern.

Nevertheless, reporting such as appears in the Economist and elsewhere will cause panic for awhile.

We’ll live through it and it will be for the best.

Who goes to jail?

The government (i.e. Joe Taxpayer) should not be bailing out failing companies. Let the system work this out, in the long run it is for the best. Looking at this from a slightly different angle, bailing everyone out is not unlike the fire suppression policies of the Forest Service that allowed too much underbrush and too dense of a tree cover to accumulate in dry western forests which eventually resulted in devastating forest fires.

BoA and ML together; whoa! I heard the rumors over this weekend but frankly didn’t bite. I truly thought they would take Lehman, but once Paulson said he really meant no FED role it was the coupe de grace. As mentioned, I didn’t personally see Lehman’s overall value to the market as such that it portended another taxpayer “intervention”.

That said; look at the powerhouse this creates with BoA’s organization, ML products and now a bank to provide a direct, stable liquidity source? Can you say market behemoth? As the market improves their combined power will be unequalled; save JPM and my guess is they will make another move now for either WAMU or Wachovia (if Wells doesn’t move first).

Furthermore, I would start to think about a vast population of broker-dealers independent from banks as relics of a bygone past. Goldman might be the last one standing, but I wouldn’t place any bets on Morgan Stanley just yet (as an aside I am curious what Purcell is saying about the Discover Bank spinoff now?).

Lastly, I would have to slightly disagree on PDCF and TSLF. They basically aligned the PDCF collateral with that of everyday tri-party repo. It’s not as if they are letting them secure loans with junk grade stuff. This is not a bailout, just a sagacious alignment that enables more liquidity. On the TSLF again, they are allowing a pledge of investment grade debt securities; an everyday occurance outside that facility. This is another move that will permit additional liquidity in the market and restore overall confidence. Long term, I don’t see us left holding the bag on any of this.

I will note there has been a $10 short trade on SKF already this a.m.

The market is saying something.

What does it mean for the “central banks” to “inject liquidity” to markets? According to one of the marketwatch.com headlines this morning: “Fears that the collapse of Lehman Brothers could cause worried banks to freeze lending to each other and customers prompted central banks around the world to aggressively add liquidity to money markets Monday.”

What does that mean???

It is strictly anecdotal, but it sure seems to me that in the last 15 years that the Democrat party has become the party of Wall Street. All those investment bank types in the Clinton administration i.e. Altman, Rubin, Franklin Raines etc., Corzine, and I believe I read recently that Barney Frank was the number one recipient of Freddie Mac and Fannie lobby money. He was referred to as the “Patron Saint” of Fannie Mae.

I think if Obama tries to hang this one on George Bush he could be stepping into another McCain trap. After all, Congress legislates this stuff, last time I checked my constitution. I am sure there are Republicrats whose hands are dirty, too. I say let McCain and Palin throw all the bums out.

After all, it is a Known Fact that everything bad that happens in America is the Bush Administration’s fault.

It is a further Known Fact that Bush and Cheney have been tearing up all regulations that govern Wall Street for the past 8 years, enabling this crisis (pay no attention to the fact that the last Democrat SecTres was a former GS CEO).

It is also a further Known Fact that all Billionaire Wall Street Fat Cats are Republicans (actually a majority are Dems but that’s not important) so it must have been Republican policies favoring these guys that let them get so out of control.

Obviously all of the above is nonsense, but the D’s will no doubt throw it against us and I hate to say it but will probably get some traction out of it.

In the aftermath of George Bush fiscal conservatives, championing the American Entrepreneurial Spirit, must reassert their best natures and demand that leadership once again take empirical evidence into account when making economic, and foreign policy decisions.

{The rest redacted – it’s a reprint of this guy’s Talking Points Memo screed, which means that it was Lefty boilerplante at best and uncritically supportive of misogynistic bigots like Andrew Sullivan at worst. – Moe Lane}

That it is much better, from an election point of view, to get this blood-letting out of the way now versus a week before the election.

I would think this mess will be well on its way to be clearing up prior to Nov.

On a side note, it is about time that the old adage “Ye reaps what ye sows” finally hit home with The Street.

America is one country with many points of view. I openly comment on both a left leaning and right leaning blog.

You have every right to disagree with me. I respect the opinions of both the fiscal and social conservatives, as I do progressive and advocates for social justice (liberals).

Forgive my transgression of quoting Andrew Sullivan on this site. I reveals my insensitivity.

But in this case, at this time, I worry about the Bush administrations penchant for foregoing evidence and the sound economic practices that made this country great. The practices of this administration threatens both the conservative and progress movements. Whether your interests lie on Wall Street or Main Street, the fact is that My Street and Your Street are not doing well under Bush and I fear that the continuation of his policies threatens the future strength of our country.

• We All Suffered Under Bush.

So lets settle this cultural battle and pledge not to resort to degrading language like “bigot”, but argue the issues and strengthen the American fabric.

Thank you for hearing me out.

This issue is too complex for the average voter. Republicans cannot afford to get play policy wonks. Sarah is pitch perfect for the climate right now. Follow her lead: