Hey, Congress: This Isn't Working

Good morning. If you missed last night's overnight posts, please go here and here. Most of the material I would've covered in this post, I posted as it was happening overnight.

The TED spread bounced off 355 basis points this morning, currently "down" to what would've been a four-alarm fire at 327. This indicates a near-refusal of banks to lend to one another as the market becomes less, not more, transparent. Separately from the bailout, the Fed has just pumped another US$330B into the money markets:

WASHINGTON (MarketWatch) -- The Federal Reserve and other major central banks took unprecedented steps Monday to pour hundreds of billions of dollars in additional liquidity into money markets left paralyzed by fears of further bank failures in the United States and Europe.
The Fed said it was boosting the size of its dollar swap arrangements to $620 billion from $290 billion previously. The agreement, with nine central banks, allows authorities to provide short-term dollar loans to commercial banks in an effort to ease short-term funding woes that have resulted from reluctance by commercial banks to lend short-term funds to each other through the interbank market.

Dr. Roubini notes that the risk of systemic financial meltdown is as high as ever, if not higher. Mish says "the closer one looks the more one can see that Nancy Pelosi and Barney Frank gave in to every wish of the Treasury" and has a set of phone numbers to fax and call against it. Karl Denninger has a video here as part of his post here (but the video is standalone) talking about why this won't work; if you know people who won't read things but will watch videos, well, send it to them.

Wachovia Bank was taken over today by Citibank through a very suspect FDIC action that the FDIC claims was not an FDIC intervention but also oh yeah the FDIC is on the hook for up to $42B in losses; they also say Wachovia was sound. What? Is this even supposed to make sense?

NASDAQ down 4% or so; S&P 500 down 3.5%; Dow's doing better(!) down only 2.5% or so. If this was an airplane I'd be grabbing parachutes.

eta: Fortune:

None of these concessions seriously cripples Mr Paulson’s flexibility or the programme’s appeal to the industry. He can structure the warrants to be painful or painless. The provisions on executive do not seriously hinder companies’ ability to hand over fat paycheques. The prospect of higher taxes five years from now should not affect a firm’s decision on whether to participate today.

Another week, another round of kabuki theatre, another round of unconscionable accumulation of executive power.

Wall Street is panicking right now

All markets crashing - yes, this is a literal, real crash - Dow, NASDAQ, S&P 500. Vote in progress, but it looks like it's losing. It's being held open as the leadership try to change votes, but it's not working.

eta: Dow down 660+, bouncing, crazy 100-point-plus swings... voting apparently continues to be held open as the tallies are still changing long after the 5-minute voting period... they've strongarmed two people over from "Nay" to "Yea" in the last couple of minutes... eta2: Dow down now only 500-ish points... eta3: Only 400 points... gotd dammit you can make a lot of money here if you're a particularly quick day-trader...

Holy crap

Holy crap, it's official; this dog is dead. The sad part, of course - politically speaking - is that it took a GOP revolt to kill it, and the Democrats were still ready to give Mr. Bush's administration functionally everything they wanted.

I'm kind of amazed they called the vote without having the votes already assured.

The question now will be whether they decide to put something together that will actually do some good and pass that, or whether they'll just say fukkit and go home. That latter option would be bad indeed.

an idle thought

Did the Democrats just give the GOP 15-20^* seats in the House this fall?

Popular opinion was overwhelmingly against this action. Calls were ranging between 100:1 against and 300:1 against, depending upon representative. House Republicans rebelled against the Bush administration and its 19% approval rating; Democrats continued to be enablers. GOP economic conservatives who fought against this now have a reason to vote Republican.

I'm not paranoid enough to wonder whether the whole thing was a setup from the beginning - even though with a plan so disconnected from reality you have to wonder - but I do have to wonder if the House GOP saw the public reaction and took an opportunity handed to them.

eta: see kevin_standlee's commentary here about interesting parliamentary action. I wondered about some of that too but didn't know what it meant.

^*: I am, for the record, pulling the "15-20" number completely out of my ass.

Gee, it sure would be nice

Gee, it sure would be nice if we could have a nice round of short-covering at the end of the day to pull the markets out of this waterfall. OH WAIT

(yes, yes, it's only financials... and Sears... and some hotel chains... and who the hell else knows...)