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Paul S

I have to admit to a morbid humor at watching this whole scandal unfold. The people who caused this mess like to be thought of as bold, risk-taking entrepreneurs, willing to stick their necks out and succeed or fail on their own efforts. UNTIL: they can't carry on with their little charade. THEN: they became Das Kapital style Marxists. They go running to Big Government to bail them out. (Where Mr. Paulson or Mr. Bernanke are standing, taxpayer checkbooks in hand.) And Mr. Bush tells us,'Let the free market sort all this out.' Of course, Bush does not want to admit there is a problem; then he'd have to deal with it. BTW: the Times carried an article about how the accounting firm KPMG phonied up their books so Century Financial could carry on with their reckless loans. Sound familiar? It's Enron revisited. Funny how Wall Street gets bailed out everytime, but when employees lose their retirement funds the attitude is, "Tough bounce pal, you're SOL." Funny how this 'free market' stuff works.


oh uh, will daddy bail out LEH too?


Lehman's stock drops amid rumors

Shares of Lehman Brothers (LEH.N) fell by nearly 10 percent in early New York trading on Thursday on rumors that the fourth largest U.S. investment bank could see a run on the bank similar to what happened to Bear Stearns (BSC.N), traders said.

Jim B

Very impressed with your piece on Bush in today's SilverBearCafe. As in extremely.

Thank you,



Thank you for your always-interesting analysis. But what I really want to know is: What do you recommend we DO? Will it just be down and dirty out in the streets? Should we still hedge all of our US dollar savings if we haven't done so already? What actions could the average person take that might make some difference?


So what do you think? Moody's downgrades + LEH rumors =

Discount window borrowing rises to $37 billion on Wednesday
By Rex Nutting
Last update: 4:31 p.m. EDT March 27, 2008

WASHINGTON (MarketWatch) -- Major investment banks and broker-dealers borrowed $37 billion from the Federal Reserve through the discount window on Wednesday, $8.2 billion more than the previous week. For the entire week, loans to the 20 primary dealers averaged $32.9 billion a day, up $19.5 billion from the previous week's average. The discount window has been open to the primary dealers for only the 10 days since the Fed helped rescue Bear Stearns on March 16. The overnight loans carry an interest rate of 2.50%

Elaine Meinel Supkis

Whew, $37 billion? Next week, it will be over $50 billion. And on and on and on. When we pass $2 trillion, we will be half way to the bottom.

What to do?

People ask me this. When a world empire decided to commit economic suicide, the whole world is wrecked. We can't help this. It is the nature of this sort of beast. Investing in whatever is problematic since empires can start world wars.


Wall Street drives White House campaign cash flow
Thursday March 27, 6:07 pm ET
WASHINGTON (Reuters) - Eight of the 10 largest donors so far to the U.S. presidential campaigns are Wall Street banks, led by Goldman Sachs, according to research on Thursday from a political watchdog group. Goldman and its executives have pumped $1.7 million into the races, with 70 percent going to Democrats Barack Obama and Hillary Clinton, despite former CEO Henry Paulson's present job as treasury secretary for the Republican Bush administration.

The Center for Responsive Politics said that securities and investment firms altogether have donated about $33 million to presidential campaign coffers, more than any other sector of corporate America, except lawyers, the center said.
After Goldman, top-giving banks are Citigroup, Morgan Stanley, Lehman Brothers, Merrill Lynch and JPMorgan Chase,

Presidency sold to the highest bidder, again.


One per cent of Americans now in jail
They used to call it the land of the free, but a new report shows that the United States is nowadays more a nation of the incarcerated. For the first time in history, more than 1 per cent of the US adult population is now behind bars. For minority populations, the rates of imprisonment are much higher....It says that nationwide there are now 1.6 million people in prisons, translating into one in every 99.1 adults. It has never been so high ...

HERE'S THE KICKER: The findings also underline America's position as the most prison-heavy country in the world, far outstripping China, which has the second highest rate of imprisonment as well as Russia, ranked third.

Paul S

What we are aeeing on Wall Street is nothing new. Politicians have always been bribed by the monied, business interests. Teddy Roosevelt was known as a Trust Buster because the same type of underhanded activities were going on then. If you want to read about a real thieving pirate (can't think of a better term to describe him), read about John Rockefeller and the way he grew Standard Oil. The current batch of crooks have nothin' on JD Rockefeller. Re the incarceration rate: maybe (IMHO) if we stopped treating drug abusers like criminals, we'd have space for the violent criminals. I am absolutely certain some people need to be in prison (Attn Wall Street), but I believe alot of people are there who shouldn't be. And for the record, I do not use illegal drugs, do not endorse their use, etc. I just think there are much better ways to treat drug abusers.


Gotta hand it to the chinese, they have enormous discipline.


Not your average Zhou
Rumors of central bank governor Zhou Xiaochuan’s professional demise have been greatly exaggerated. Many believed that Zhou would be replaced during this year’s National People’s Congress (NPC). But China’s desire for stability and a seasoned hand at the helm won out and Zhou was reappointed to his post. He didn’t waste any time getting to business, either. During the NPC he announced that he saw “no need” to use the appreciation of the yuan to fight inflation, while hinting that further interest rate increases might be one of the weapons the PBOC uses fend off rising prices. Shortly after the NPC concluded, the PBOC announced that China would stop checking the sources of foreign exchange for Chinese outbound investments, a move likely to encourage capital outflows and curb excess liquidity. It also raised the reserve requirement ratio 50 basis points to a record 15.5%. The central bank added that it would consider ways to open its domestic financial markets to foreign investments, though no details were provided.


I don't understand why the european doesn't simply raise their interest rate and let euro climb. Their main import is oil. And it's priced in dollar. Their export to rest of world isn't exactly big for their economy. What's the harm?


Thanks for this report; Mr Paulson spoke from the Capital Markets Competitiveness Conference. Have you noticed how Orwellian the government leaders and their speeches are?

The Competitiveness Conference has noting to do with Competitiveness, rather just the opposite, it has to do with Corporatism -- state corporate combined rule over the people.

Elaine Supkis

You are totally correct, Richard. I should have noted that. It just seems so obvious. heh.

About Asia: they are still exporting like crazy. No change there. About Europe: they make HUGE exports and are being hammered now due to the strong euro. And Japan and China are flooding Europe with imports.

Bear of Little Brain


"except lawyers". Priceless.

Elaine Meinel Supkis

Yes, Rock is right about the lawyers. Heh. Agree with Bear.


strange things start to happens from Fed opening windows to non bank. (I really think, they can't do what they do without people start wondering if all those treasury worth anything at all.)

this chart:

and a comment trying to explain the chart.


13.March 21st,2008 9:07 pm
It appears clear that yields on treasury bills have been driven to near historic lows by a dramatic flight to quality. It also appears that negative repo rates are driven, in part, by increasing numbers of fails and low yields on collateral.

The troubling issue is that it appears possible that the market is beginning to question, in a subtle manner, the QUALITY of U.S. Treasury securities. Over the past few weeks, and prior to the Fed’s “bailout” and liquidity-providing actions, the yield on 90-day t-bills had actually been trading slightly above 2-year note yields. You may recall it caused a trough in the yield curve at 90-days.

Some reasons why the credit quality of U.S. Treasury securities may now become questioned include: (1) the Fed’s acceptance of securities which, in its history, did not meet credit quality guidelines; (2) the acceptance by the Fed of UNCERTAIN amounts of credit risk by accepting the default risk of the securities; (3) the apparent acceptance by the Fed of the legal risk of Bear Stearns, evidenced by the fact that JP Morgan established a “legal reserve” with $6 Billion of the $30 Billion received from the Fed. Until Congress reviews the transaction (hopefully), we can only assume that if the legal liability is in excess of $6 Billion, say $50 Billion as an example, U.S. taxpayers will pay that increased amount. Not surprisingly, as Robert Rubin put it on McNeil & Lehr, there were probably better alternatives, but there was also a need for “quick action”. As usual, that “quick action” resulted in a deterioration of the U.S. government’s balance sheet. At a minimum, it raised the risk level of the balance sheet and thus, Treasury securities.



was looking at this pdf. Top derivative trading are interest rate and currency exchange (but both are going crazy right now. Who can predict the value of those derivatives if exchange rate are going every which ways?)

also. the proportion of numbers. Currency derivatives is around $250B. But they are pumping $30, 60, 70B into the system. And people wonder why prices are going all over the place.

I hope the arabs don't get mad and unpeg their currency, we are going to drawn for sure. (oil price, interest rate, currency flight, everything)


Elaine Meinel Supkis

You are right, Anthony. This level of monetary and lending instability has consequences. One is, it will destroy both the bears AND the bulls.

This is classic, of course. No matter how any government tries to stabilize a system, it will only rock wildly until it stabilizes itself, sometimes but sinking like a rock.

Elaine Meinel Supkis

Thanks for the chart, by the way. Yes, it is definitely an 'off the cliff moment.'


When do they stop? And how many real players are at this poker table? And Elaine, I have a question. Is all this building in Dubai our money?

Elaine Meinel Supkis

They won't stop. See my latest post and watch the Kennedy funeral.

And yes, it is money we gave Dubai building all that stuff there.

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