Okay, so who tripped the light switch?

Just who was it that forced Lehman Brothers hand at just this point in time, Floyd Norris of the NYT, (no less) asks in Point 10 of his article, causing the immediate squawk for a “bailout plan” right before the debates:

This might not have been needed, at least not now, if the Fed and Treasury had stuck to their own game plan in Bear Stearns, to bail out creditors but not shareholders. We need to learn who pressed to force Lehman to fail completely. That decision led directly to the run on money market funds and to panicked trading conditions for credit default swaps at other brokerage firms.

This has all the “earmarks” of a trigger, a ploy to precipitate political expediency. EIther that or it’s synchronized swimming at it’s finest.

Just a short note on credit markets: Please keep in mind that the TEDSP (TED spread), which a lot of people think of as an indicator of the credit markets (bank friendliness etc.) has a very heavy LRLine nebulosity factor. In other words, it measures more than a real set of data, it measures how “friendly” banks are to one another. “Bailout” means money. Vultures circling, the same Wall Street Firms who caused the problems hoped to somehow get a piece of pie. No quick action? Well, maybe they’re “working on it”. The TEDSP mystically improves out of the danger zone by Friday? Really?

Crom. I expected as much. In fact, take your time with the plan, Congress. Get it right. If you can defer until after the end of the quarter, even better, cause these guys are going to fly off and like vultures, go pick up money elsewhere, and they’re going to forced to write off even more capital, making them a much cheaper deal for a buyer.

That way the next president will have some $$$ to spend to help people suffering with lousy mortgages. Not to diminish the crisis, but I think we have to go the Obama approach here and overhaul financial regulatory policies with a scapel! Very carefully. Obama peppered Poulson in that Q&A session and I’m confident he’s had a way better handle on the sub-prime Mortgage problem than anyone realizes, having been involved in analysis of it for over a year. I also think he will find a way not to deliberately handicap his administration, should he be elected, by dragging what’s left of the economy into the mud. If there is a package, let it be a carefully considered one, please.

A thought: To hedge, invest part of it in the truly boring but necessary improvements we have to have as a nation. You know, stuff like infrastructure investments that can help defray some of the really bad paper…set up your own vehicles, or whatever. That way we can raise income, even if it turns out to be the LePetomaine Tollway (obscure Blazing Saddles ref for the unwary). Toll road operations, pipelines for natural gas, utilities using alt energy, even airports. We have government agencies on the books that would benefit from Treasury money. Why put it into Wall Street? We are so willing to get into the sub-prime mortgage biz, why not go for the Full Monty? (sorry for the visual).


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