Things are moving more quickly now

Okay, so late Friday, things started to happen. As I'm posting this, it's already Monday in Asia, and the dollar is tanking again - new record lows, falling below 101 yen, .68 euros, all that. Bloomberg reports traders are expecting a Fed funds rate cut to 2%, which is well below a ZIRP at this point. We'll see what happens.

Much more interesting was the late-Friday boost in the TAF - kind of like the Fed discount window, only secret (now with extra opacity!) from US$60B to US$200B. That is a absolute Imperial assload of money, and is yet another attempt to restart credit markets and slow down margin-calling. Not easy. In particular Washington Mutual is thought to be in severe, severe trouble, and is begging for cash anywhere it can get it, leading some to worry about FDIC action. But they are not the only ones - the problem is starting to be recognised as systemic. Various sources describe this as the worst the markets have been in living memory:

''We are in historic scarier-than-all hell territory,'' said T.J. Marta, an analyst who monitors the fixed-income markets for RBC Capital Markets. ''I am hearing many people say that the market is more broken now than it ever has been.''

As crazy as they already are, it's not getting any saner yet - MBIA, one of the monoline insurers everyone is trying to pretend is still credit-worthy, asked the one rating agency which downgraded it at all to stop publishing ratings on them! I mean what the hell, people?! The credibility of these rating agencies is truly destroyed at this point. Mish (previous link) opines:

I like this solution actually, provided it would be carried to the logical conclusion: Moody's, Fitch, and the S&P should all lose government monopoly sponsorship. The big three rating agencies are clearly unqualified to rate anything. The conflicts of interest are stunning. They should all stop simultaneously.

He also notes separately that the credit markets are in a panic for the third time.

The strains are showing up everywhere. Hedge funds are blocking withdrawals. Countrywide has another new problem: a reported Justice Department investigation. That's not going to calm anyone down or make any friends. As a reminder, in case you forgot, it's not just the US credit markets; the European LIBOR spreads are also rocketing up. Brad Setser at RGE Monitor has one word for the current situation: Grim. The New York Times had a widely-read article over the weekend noting that the entire post-2002 expansion proceeded without wage gains, and that most Americans are still making less than before 2000. And Paul Krugman asks what's to be done, quoting some interesting testimony from the president of the New York Fed. (Sadly, Krugman's interpretation is... reasonable.)

And several people have linked to this analysis, which calls the Fed actions "covert nationalization, describing the Fed as "Wall Street's genial pawnbroker." I like this section:

What we are witnessing is an incremental, partial nationalization of the US banking system. Northern Rock in the UK is peanuts compared to what the New York Fed is up to.

You may object, and I'm sure many of you will, that our little thought experiment is bunk, debt is debt and equity is equity, these are 28-day loans, and that's that. But notionally collateralized "term" loans that won't ever be redeemed unless and until it is convenient for borrowers are an odd sort of liability. ...

I do not, by the way, object to nationalizing failing banks. There are (unfortunately) banks that are "too big to fail", whose abrupt disappearance could cause widespread disruption and harm. These should be nationalized when they fall to the brink. But they should be nationalized overtly, their equity written to zero, and their executives shamed. That sounds harsh. It is harsh. One hates to see bad things happen to nice people, and these are mostly nice people. But running institutions with trillion-dollar balance sheets is a serious business. Accountability matters. These people were not stupid. They knew, in Chuck Prince's now infamous words, that "when the music stops... things will be complicated.", and they kept dancing anyway.

Market Ticker has a new open letter in response to all that that he's inviting other people to sign and send in themselves. You might give it a read.

(ETA: My contrarian sense is going off a bit. If this weren't of such scale and so systematic (and we weren't clearly in a recession already) this is right about where I'd be looking for things to get better. But it really is that kind of bad. So, well, yeah. Messy and random!)

I hate you, New York Times "news" reporters

So, Chief Executive Mr. Bush vetoed a bill effectively (re)banning torture. (Remember, it's already illegal, but that doesn't stop it.)

Here's the New York Times headline and first paragraph:

Bush Uses Veto on C.I.A. Tactics to Affirm Legacy
By STEVEN LEE MYERS
Published: March 9, 2008

WASHINGTON — President Bush on Saturday further cemented his legacy of fighting for strong executive powers, using his veto to shut down a Congressional effort to limit the Central Intelligence Agency’s latitude to subject terrorism suspects to harsh interrogation techniques.

This is wrong on every level. Honestly, every level.

I'll leave aside picayune commentary noting things like how a veto of a torture bill can be so warped as to rely on a positive verb ("affirms"). First, let's note how this piece of filth still refuses to use the word "torture," instead picking the euphemistic "harsh interrogation techniques." WRONG. The word is torture, you wretches! LEARN IT, LIVE IT, because apparently you LOVE IT - you've certainly been covering up for it. What's being affirmed here is torture.

Secondly, and key to the second Great Lie, is that this bill is about "fighting for strong executive powers." WRONG. The fighting for "strong executive powers" - note "strong," another positive - throughout this administration has been the successful fight to be above the law entirely, by rewriting law, ignoring law, declaring himself and the Executive branch immune to law, spending money forbidden to be spent, and ordering Congressionally-ordered spending stopped. (Idly, note that this was an article of impeachment against President Nixon.) The "strong executive powers" Mr. Bush has been "fighting for" are not about any particular law, but to be above it. The status of any particular law in the normal, Constitutional channels is completely irrelevant to this goal.

Thirdly, and lastly, this veto is for show, because he doesn't feel the law applies to him or the Executive branch anyway. But there is a reason to veto it: elections. When he vetoes something (rather than signing it then issuing a signing statement rendering it null and void), he does it for show. This is about painting the "opposition" party as "weak on terror" this fall, a lie - being pro-torture is fucking stupid, not "strong" - the mainstream media will enthusiastically endorse, as they have over and over again the last six years. That's what this is veto is about.

Pathetic, and yet typical. C.f. this extensive Greenwald column on how American journalistic "standards" mean printing only what the powerful want you to print. Seriously, read that, too. It's wretched.

what actually mattered today

Here's what actually mattered today:

Margin calls on Treasuries. That's right: margin calls on funds guaranteed by the Federal government:

The hedge-fund industry is reeling from its worst crisis in a decade as banks are now demanding more money pledged to support outstanding loans even when the investment is backed by the full faith and credit of the United States.

Since Feb. 15, at least six hedge funds, totaling more than $5.4 billion, have been forced to liquidate or sell holdings because their lenders -- staggered by almost $190 billion of asset writedowns and credit losses caused by the collapse of the subprime-mortgage market -- raised borrowing rates by as much as 10-fold with new claims for extra collateral. ...

"If you have leverage, you're stuffed," said Alex Allen, chief investment officer of London-based Eddington Capital Management Ltd., which has $195 million invested in hedge funds for clients. He likens the crisis to a bank panic turned upside down with bankers, not depositors, concerned they won't get their money back.

Bold added because amusement.

Here's other stuff that matters some, but not as much: Crude oil hit $108/barrel today before closing just under that. That's 12 times the cost 10 years ago. Twelve times. Also, TIPS, which are inflation-adjusted bonds, are in such demand that their current rate is negative. That's right: you pay to own them. Buyers are betting, accordingly, on hyperinflation, and the resulting (and automatic) surge in interest rates associated with the bonds. Minyanville thinks they're betting on the wrong horse.

And briefly, in criminal justice matters, Monoline insurer and AAA-fantasy-league player MBIA asked Fitch to destroy data related to MIBA's downgrade. Gosh, that's not at all suspicious. Also, the Countrywide probe might give Bank of America what is almost certainly just yet another way out of that deal.

Finally, for those keeping score, yes, the ABX (residential-lending based CDOs) and CMBX both set records yet again today in the bad ways. Fantasy-world AAA-rated ABX CDOs are almost down to 50¢ on the dollar; AA is hanging on just barely over 20¢; everything else is of course even lower. CMBX spreads are crazytalk, with BBB-grade material moving - when it moves at all - at 2100 basis points (six months ago: 800), and fairyland AAA paper still in moonshot mode up to 275 (six months ago: 40).

Oh, and here, this'll scare you good: CNBC's Jim Cramer is warning of old-fashioned bank runs. Some people consider him a bit of a contrarian indicator, but that's not so much valid when he talks about explosively bad things. Tasty.