Fed News Flow & Wrap Up
Got back long after the FOMC news was released. As we expected yesterday, the Fed disappointed the perma-bulls and left rates unchanged. Here's what grabbed my eye between meeting. While I am gorging on yet another slab of marbled red meat, I won't leave you with nothing to read.
Here is some interesting news flow surrounding the Fed decision, AIG and other, behind the scenes actions:
• Surprise! Fed stays on hold, keeps neutral bias (MarketWatch)
• Parsing the Fed: New Risks, Same Rate (WSJ)
• Fed to futures market: Thanks but no thanks (Rosenberg/Merrill Lynch)
• Bloomberg headline: US Considering AIG "Conservatorship"
• Fed Said to Reverse Stance, Consider AIG Loan Package (Bloomberg)
• Today's WTF headline: JPMorgan Gave Lehman $138 Billion After Bankruptcy (Bloomberg)
• The Crisis of Confidence and the Banks (The Institutional Risk Analyst )
• Geithner Skips FOMC Meeting to Stay in New York (for AIG ?) (Real Time Economics)
• The End of Dissent: Fisher Joins the Majority (WSJ)
• Barclays to acquire Lehman capital markets (MarketWatch)
• AIG-LEH-Federal Reserve and asymmetric information (Kotok/Cumberland)
• Money fund breaks a buck: Reserve Primary Money Fund Falls Below $1 a Share (Bloomberg)
• Shattering the Glass-Steagall: The rise of the commercial banks. (Slate)
• Greenspan: Economy in 'once-in-a-century' crisis (CNN/Money)
• Why the Fed couldn’t lower rates (iTulip)
• A Sense That Wall St.’s Boom Times Are Over (NYT) Do ya think ?
• Bail-out or bust? (Economist)
• McCain Calls Wall Street Reckless, Obama Hits McCain (Bloomberg)
• Investment Banks, By the Numbers (Marketbeat)
• Any notice? Russia fell 20% overnight
Lastly, the always objective, neutral and disinterested Hank Greenberg:
• It is in America’s interest to save AIG (Real Time Economics)
Tuesday, September 16, 2008 | 07:30 PM | Permalink
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Bloomberg just reported that the Fed is offering an $85B bridge loan to AIG and taking an 80% stake in it.
Posted by: KJ Foehr | Sep 16, 2008 7:33:56 PM
AIG threatened the US more than Al-Queda, and the USA gave in.
Posted by: cloudy | Sep 16, 2008 7:37:43 PM
wow. the correlation between AIG and Nasdaq Comp. was just about 1.
http://stockcharts.com/h-sc/ui?s=AIG&p=5&b=5&g=0&id=p10868398724
Posted by: i'm just sayin | Sep 16, 2008 7:40:58 PM
AIG sent the paperwork for bankruptcy to their lawyers. The Fed caved. AIG shareholders are about to get screwed bigtime.
Posted by: Juhuti | Sep 16, 2008 7:46:56 PM
BR: give it a rest. We know Hank Greenberg is a little chiseler but in this matter he's correct. I don't see the Bloomberg claimed bailout anywhere.
Posted by: John(2) | Sep 16, 2008 7:50:10 PM
The FED has an "Unlimited Balance Sheet," according to Wayne Angel, on Krudlow tonight. Wow.
Posted by: JustinTheSkeptic | Sep 16, 2008 7:53:25 PM
I see the Fed is going to take warrants and hammer the common holders.
Posted by: ARISTOTLE | Sep 16, 2008 7:54:13 PM
$85 Billion for 80% of a company that closed the day valued at $10 Billion.
Brilliant!
I wish I could afford to make deals like that. Perhaps I need to start drawing taxes on U.S. citizens.
An outgoing administration is going to leave one Doozy! of a balance sheet for either McCain or Obama.
Posted by: jason in charlotte | Sep 16, 2008 7:56:57 PM
John(2),
The story is on Reuters: 85 Billion Fed Bailout for AIG
Mind you, the story was originally reported by CNBC. So buyer beware.
Posted by: Juhuti | Sep 16, 2008 7:57:08 PM
this is economic extortion/terrorism. AIG represents a whole new dimension to nationalization. Unbelievable. Let wall street unravel. It is NOT the center of the universe.
Guess I'm going to have to start robbing banks because that's where the money is, and they are always protected.
Posted by: cloudy | Sep 16, 2008 7:59:04 PM
Funny how we start hearing about 'national interest' when the going gets rough for the free market
I guess we know who 'america' is now.
Posted by: VoiceFromTheWilderness | Sep 16, 2008 8:01:05 PM
"Obama Hits McCain"
Yeah, right. If you read the Bloomberg article, Obama "hit" Bush. He's running against a candidate who isn't running. Maybe he will do better than the last two Dems who ran against Bush when he was running. I expect better from a graduate of Chicago politics.
Posted by: Max | Sep 16, 2008 8:02:49 PM
I hope the next Administration regardless of who it is has enough sense to breakup and force divestment of all of these too-large-to-fail corporations.
Shame on our leaders for giving a nod in building all of these behemoths!
It is way past time to bust up this little party and don't give me this sad story about smaller firms being unable to compete. Maybe a smaller firm can at least stand on its own business plan and quit sucking on the teat of the taxpayer who is lucky to be getting 2% on his money.
For people who pride themselves in being a bunch of smart asses, they are the dumbest bastards I've ever met. This is nothing but stupidity, greed and a game of chicken played out on a global scale.
Posted by: BG | Sep 16, 2008 8:14:09 PM
This is great news in spite of the death wish crowd's desire for self immolation. The other scary one tonight was Reserve Money fund breaking the buck. This could start a run on mutual money market funds. Hopefully the AIG move by Paulson will cool things down a bit tomorrow. I hope so for everyone's sake even if they don't have the wisdom to see it.
Posted by: John(2) | Sep 16, 2008 8:19:02 PM
Imagine you are Evel Kneivel, barreling down the straightaway on your motorcycle at 100 mph, and just as you reach the beginning of the ramp that will sling you across the gap and over 100 end-to-end cars, the front wheel of your motorcycle begins to wobble and nearly falls off and the only option available to you is to try bend down and fix the wheel before you hit the end of the ramp - and just then you realize you don't have the right tools...
Welcome to Evel Bernanke's world.
Posted by: Winston Munn | Sep 16, 2008 8:20:09 PM
truth is," Sanders continued, "that the fundamentals of our economy are strong if you are within the top 1 percent of our country. If you're a million or billionaire, you know what, Senator McCain is right. For those people, the fundamentals of the economy are strong.
But not much longer, Bernie. Not much longer.
Posted by: AGG | Sep 16, 2008 8:25:38 PM
IF AIG is too big to fail... is GM too big to fail... who's next... WaMu??... Citibank??? Morgan Stanley?? Liberty Mutual??
It looks that the lender of the last resort now is the Fed... aka the taxpayer. It's time to breakup AIG, and other big companies.
Tomorrow is going to be brutal... Rome is going to burn that 401K.. to a -1K.
Posted by: mattie | Sep 16, 2008 8:29:44 PM
The Mess On Wall Street: Four Trillion Dollars Down The Drain
http://www.techcrunch.com/2008/09/16/the-mess-on-wall-street-four-trillion-dollars-down-the-drain/
Each box in the graphic is proportional to the size of the market capitalization of the biggest financial firms then and now. As you mouse over the squares, you can see how much each value each company lost between October 9, 2007 and September 12, 2008. Here are some of the individual losses by market cap:
Citigroup: $236.7 billion to $97.8 billion.
Bank of America: $236.5 billion to $150.2 billion.
AIG: $179.8 billion to $32.3 billion
Goldman Sachs: $97.7 billion to $61.3 billion
American Express: $74.8 billion to $45 billion.
Morgan Stanley: $73.1 billion to $41.1 billion.
Fannie Mae: $64.8 billion to $700 million.
Merrill Lynch: $63.9 billion to $24.2 billion
Freddie Mac: $41.5 billion to $300 million.
Lehman Brothers: $34.4 billion to $2.5 billion.
Washington Mutual: $31.1 billion to $2.9 billion
It is staggering when you look at it all together, and when you realize that the companies still standing like Bank of America and Citgroup, have seen bigger market cap declines than some of the institutions that have gone under (Lehman Brothers) or that had to be bailed out (Fannie Mae, Freddie Mac)
Oh and for you McCain 'koolaid drinkers' this is especially for
McCain "Fundamentals" Ad
http://www.youtube.com/watch?v=6reQLzgywzk
Posted by: km4 | Sep 16, 2008 8:31:10 PM
Ok ok, assume the filthy rich swindlers have to win again this time so the rest won't suffer. Now do any of you have any suggestions about what we do to prevent injustices such as this in the future?
My preference is for pulling the teeth out of the financial sharks one by one (and as painfully as possible) until they can bite no more.
Posted by: ponziq | Sep 16, 2008 8:34:11 PM
This market is a disgrace..... it's unreal whats happening in ur markets. Corruption at its best.
Posted by: Andrew 755 | Sep 16, 2008 8:41:10 PM
ponziq - the answer is to stop voting for Democrats or Republicans. They are all participants in the looting.
Posted by: Steve | Sep 16, 2008 8:45:01 PM
Happy days are here again - massive short covering rally and Larry Krudlow gets to ejaculate all over Goldie...or is it gold-e-shower!
This is getting so one sided...will the last middle-class american please piss on the american flag!
Posted by: JustinTheSkeptic | Sep 16, 2008 8:47:52 PM
As a taxpayer, I say nationalize the motherf*&kers, break them up into little pieces, then sell off what is left.
No bailouts - no golden parachutes. You lost it - you lose.
Posted by: Winston Munn | Sep 16, 2008 8:51:04 PM
For the old football player Paulson, let's hope next week is a bye week.
American capitalism has been saved.
Posted by: VennData | Sep 16, 2008 8:59:06 PM
... but what's coming down the pike's gonna make Sarbanes Oxley look like the the rules for Checkers.
Posted by: VennData | Sep 16, 2008 9:09:44 PM
