And Then There Were None?

Could it be that by the end of this year, all three of the once mighty Big Three --GM, Ford and Chrysler -- will be in Chapter 11? It seems impossible to imagine. And it seems like it might happen next week.

Fiction Can't Compete.

Because you can't make up stories like this one. When I first read it, I thought it was a spoof on AIG.

On the Money

Steve Pearlstein has been an exceptionally clear-headed columnist throughout the financial crisis. His column today is worth reading in its entirety. Here's an excerpt:

"After getting their closed-door briefing yesterday from Paulson on the government's latest initiatives, Wall Street's finest literally ran from the Treasury to their waiting limousines, bypassing a media scrum eager to convey any scrap of wisdom or insight."

"Court reporters will tell you they can always tell the innocent from the guilty on these kinds of perp walks, and the Wall Street crowd yesterday looked particularly guilty, unable even to conjure up a soothing word to a nation fretting over its shrunken 401(k)s, or a simple thank you to taxpayers for having saved their bacon. Their silence and invisibility throughout this crisis attests to the moral and political bankruptcy of a financial elite that is the perfect match for the financial bankruptcy they have now visited upon their investors, their creditors and their customers."

Don't Turn Out The Lights

Eventually, one of these venerable institutions will survive the credit seizure. Here's hoping that Morgan Stanley will be the one.

The Heart Attack

Here’s an excerpt of an email from a keen observer of the financial markets:

Case in point, today's market collapse. It had everything to do with credit markets, and little to do with anything stocks. It was the market wondering what's worth anything if companies like IBM can only get credit at usurious terms. What companies will fail that shouldn't? (Many.) How can the U.S. backstop all of commercial credit? (It can't.)

Today was very, very close to the heart attack we've been expecting.

Heaven Help Us All.

Kudos to the Wall Street Journal and The New York Times for their excellent coverage of the financial system meltdown this week. How frightening was the seizure (or whatever one calls it)? Consider these three paragraphs from a WSJ story today:

For at least a month, Mr. Paulson and Treasury officials had discussed the option of jump-starting markets by having the government absorb the rotten assets -- mainly financial instruments tied to subprime mortgages -- at the heart of the crisis. The concept, dubbed Balance Sheet Relief, was seen at Treasury as a blunt instrument, something to be used in only the direst of circumstances.

One day later, Mr. Paulson and Federal Reserve Chairman Ben Bernanke sped to Congress to seek approval for the biggest government intervention in financial markets since the 1930s. In a private meeting with lawmakers, according to a person present, one asked what would happen if the bill failed.

"If it doesn't pass, then heaven help us all," responded Mr. Paulson, according to several people familiar with the matter.

Department of Weird Complaints.

Isn't this good news?

Let's Lose Some Money.

How crazy was it today? Here's a snippet from WSJ.com's story on the day's events:

The desperation was especially striking in the market for U.S. government debt, long considered the safest of investments. At one point during the day, investors were willing to pay more for one-month Treasurys than they could expect to get back when the bonds matured. Some investors, in essence, had decided that a small but known loss was better than the uncertainty connected to any other type of investment.

That's never happened before. In a special government auction on Wednesday, demand ran so high that the Treasury Department sold $40 billion in bills, far beyond what it needed to cover the government's obligations.

"We've seen crisis. We've seen recession. But we've not seen the core of the financial system shaken like this," says Joseph Balestrino, a portfolio manager at Federated Investors. "It's just crazy."

Time For A New Ad Campiagn.

Kedrosky first mentioned it. Here's the television spot. I saw it the other day or night during one of the NFL games. It was like a message from The Twilight Zone.

The End Averted.

Had AIG gone under, the consequences would have been catastrophic for the global financial system. Sometimes, you have to bend all the rules to save the game.