Dead is pretty calm.

Gee, am I first?

I'm more concerned about how Teresa is than how the stock market is. How's she doing?

We are so fucked.

"Of course it's legal," said Addington.

Don't you think he looks tired?

In that excerpt, "stocks gyrate" are two words that don't fill me with a lot of confidence or sanguineness either.

“In the short run, adjustments in the financial markets can be painful both for the people concerned about their investments and for the employees of the affected firms,” Mr. Bush said at the White House after a meeting with President John Kufour of Ghana. “In the long run, I’m confident that our capital markets are flexible and resilient, and can deal with these adjustments.”

Ah, I see. He's calming the investors by assuring them that he's not going to do anything.

Actually, they are doing something. The Federal Reserve Board has decided to accept crap collateral in its Primary Dealer Credit Facility, which means, everyone, than our government will loan money on stuff that couldn't float a dead cat, and if the borrower defaults, you and I are stuck with crap. Not that that is anything new.

He's calming the investors by assuring them that he's not going to do anything.

Compared to some of the things he could be telling them that he'd do, that counts as relatively calming.

Fragano @ 3:

That's exactly what I said when I heard the Supreme Court's decision in Bush v. Gore.

I was sort of hoping this would hold off until we had a competent administration. Oh well--interesting times.

Hey, let's get rid of Social Security and put all that money into Individual Investment Accounts based on stocks!

To expand on Emma at #8, the Feds are now accepting stocks as collateral for loans. Yes, any stock. Yes, your company can print out its own stock. Yes, this means that the Fed is effectively allowing finance companies to print their own american money. Why this is a short fuse to a powderkeg labelled 'catastrophe' is left as an exercise to the reader.

But aside from that, I'm also curious to hear more updates about Teresa.

James D. Macdonald @11: Oh, snap!

I keep wondering how long they can keep this huge financial charade going by simply pretending nothing's wrong and trusting the rest of the world will go along with it because if we're completely fucked they're pretty fucked too.

Seth @7: I'm feeling calmer already. Must be the first time he's ever achieved a goal *that* easily.

Remus @12: It's probably not as bad as that. After all, stock in a company that has no assets is (usually) worthless anyway, so you're not going to get much of a loan like that.

“In the short run, adjustments in the financial markets can be painful both for the people concerned about their investments and for the employees of the affected firms,” Mr. Bush said at the White House after a meeting with President John Kufour of Ghana. “In the long run, I’m confident that our capital markets are flexible and resilient, and can deal with these adjustments.”

"No need for concern, sir. It's only natural in a period of transition for the more timid elements to run for cover."

What... stocks = collateral?

Print your own fucking money?

The bank(s) of delaware corporations?

Oh fuck. just... gobsmacked. Words fail me.

Scraps #14:

I dunno, I'm not sure bailing out some banks, letting others fail, and nationalizing Freddie and Fannie quite qualify as pretending nothing is wrong. There's a certain calm coming from the white house, which has a lot to do with the calm the PR folks use to pretend nothing is wrong while trying to keep the lid on a disaster, but I'm not sure how many people are fooled. By contrast, there's also a certain calm from the Fed and Treasury Dept., but it's more the calm voice of the seasoned airline pilot, informing ground control that his second engine is now also on fire.

I liked Megan McArdle's comment today, something like "I'm glad I don't have Ben Bernake's job."

As an improved terrifying six word phrase, I propose:

"Paul Bremmer will replace Ben Bernake"

Jim @11: Probably not quite as bad an idea as it sounds right now. Well-managed funds are still trading at a profit, despite the drop in the market as a whole.

No worse an idea now than when it was first proposed, anyway...

Dear God, albatross, that moves beyond terrifying and into "Calamity guaranteed, in desert boots."

Jim #11:

I don't mean to come off as dramatic here, but isn't that kinda what we're doing? I mean, the federal budget that has to come up with money to pay social security is also apparently now a large investor in the mortgage markets, and is becoming a large investor in the investment markets. Think of it as a huge, politically motivated, badly managed mutual fund with a set of "names" (aka taxpayers) who are ultimately responsible for paying off whatever debts are run up.

IM not all that informed O, Fragano is right. We've been watching the equivalent of hurricane warnings headed for our country for quite some time now, and we've been deferring maintenance on levees for many years so we could do more important things (like build bridges to nowhere and impose democracy on unwilling Arabs at gunpoint).

The only stocks in my portfolio that are up today:

McDonald's

Coke

Kimberly-Clark

The latter makes facial tissues and adult diapers, both of which might be in high demand by folks on the floor of the stock exchange.

I'm wishing I'd held onto those brewery shares longer. I bet they'd be doing really well.

I'll just shorten that to:

"President Bush tried to..."

4 words. Goes in front of many others.

You had me at "President Bush."

Stefan @ 23 - Anheuser-Busch is off by a buck (1.5%), but Constellation Brands (2nd largest wine distribtor) is up slightly.

Quoting Mr. Sideshow,

"The Fed also suspended rules that prohibit banks from using deposits to fund their investment banking subsidiaries."

That's the last fragment of the New Deal finance reforms. I do wonder just how bad things are going to get before anyone manages to say out loud that, just perhaps, the purpose of government is not to guarantee the security of wealth.

Do y'all have the option of using credit unions?
(I live in Ontario, where the credit union act was written by chartered bankers just after World War 2; the intent was to produce rules so strict no one could possibly operate like that and make a profit. There are lots of credit unions in Ontario; it's one of the things I like about the place.)

My mother was 13 in October of 1929; her father's work as a highway contractor for the state of Missouri became very skimpy as the state ran out of funds as the result of the Depression. She has, for the past couple of years, been having a lot of anxious recollections as she watches the financial news.

For those who can't get a rundown on the great Depression by just calling home, start with the Crash of 1929 and go from there--the Wikipedia article has a list of basic sources, at least as of this minute.

Have we heard from Phil Gramm yet? Is he still calling us all whiners?

Molly Ivins on Alan Greenspan and Glass-Steagall.

albatross #19: As an improved terrifying six word phrase, I propose: "Paul Bremmer will replace Ben Bernake"

"Gordon Gekko will replace Ben Bernake"

Shit. Does Bernanke own a crossbow?

As it happens, Graydon, neither my wife nor I have any money in a bank. It's all in our credit union accounts. Anyone who has access to a credit union should indeed become a member; I've been using one for most of my banking for the last 25 years or more. Besides the advantages of being at least slightly detached from the house of cards that is our banking system, you get a hell of a lot better service when the staff view you as one of the owners rather than a "consumer".

My IRA (retirement plan, for the non-Americans) is in a b0rkerage, but I'm supposed to accept more risk on those funds. (And it damn sure wasn't in Merrill Lynch in any case.)

We're still on the decks of the Titanic, IMO, but at least we've got a better seat near the musicians.

#26: I bought 100 shares of Constellation after Bush was reelected. Sold it at a good profit. Bush's election also prompted me to invest in gambling and fast food stocks, most of which did really well.

If McCain wins, invest in portfolio of companies that depend on Stupid, Greedy, and Short-Sided.

A Shrub Fund, if you will.

#30 FTW.

Graydon @ 27, I've been banking with credit unions for almost twenty years now.

Personally, I'd have thought "Ladies and gentlemen . . . President Sarah Palin" was right up there.

Actually, I'm going with "the fundamentals of the economy are strong" which fills me with doubt about John McCain's historical awareness as well as his understanding of the economy.

Good thing I'm listing my house on the market this Thursday.

Albatross -
As an improved terrifying six word phrase, I propose:

"Paul Bremmer will replace Ben Bernake"

Translation:

"Stock up on canned goods, matches, water purification tablets, portable generators, stabilized gasoline, seed stock, fertilizer, spare firing pins (and other vital parts for your choice of lethal implementation), ammo, and bolts of cloth."

Yeah. So glad my portfolio collapsed at the beginning of the decade (the parts I didn't cannibalize to pay rent years ago), and I never bothered to rebuild it....

But of course we all know that the markets are faltering because investors think Obama has a chance of winning. Right?

(What I hate is always being able to spit out the likely Republican spin. It means I've fully internalized it.)

So ... how's T?

This may be the final argument that persuades me to cut down some trees so I'll have enough sun to grow food in my yard. I'll keep the firewood too.

James D. Macdonald #11: Now, if that had been done we'd have been shpxrq yvxr Noare Ybhvzn bayl jbefr.

I've been trying to avoid thinking about this until I'm done teaching today. Not going to look at how much my TIAA-Cref has lost. But all of a sudden, Firefly is looking more probable. Should I start learning Mandarin or Cantonese, do you think?

Seven more pretty scary words: “the fundamentals of our economy are strong” (John McCain)

Terry, it's not as bad as all that; the Fed gets to decide which stocks it's going to accept. The problem the Fed and the lege face is getting the bad paper out of the system without having the whole thing grind to a halt. I'm very much concerned about right-wing "leadership" in this area.

Lance @ 30: Shit. Does Bernanke own a crossbow?

Sorry, I totally didn't get that reference. Clearly I should have, cf. Patrick @ 33. [*]? EXPN?

Cliff @40: Today's xkcd couldn't have picked a better random subject.

It was remarkable how fast commenters jumped in on the Boing Boing thread on this subject to explain that it was everybody's fault but the Bush Administration's.

(The Me Update: I want to go home! I feel fine, honest!)

Another Damned Medievalist #42: You might want to consider learning Marathi.

TNH @46: Just say the word and we'll mount an extraction op.

Fluorosphere: Trust me, I've got a perfect plan. We're going to need a gurney, three knitted duvets, a samovar, fourteen pint jars of baby oil, 9'7" of 8" round galvanized sheet metal ductwork, an arc welder, a singing telegram costume, four canisters of tear gas and a seeing eye dog with a fake tail.

Lance: Still confused after xkcd.

Is this referencing a TV ad or show from the last few years? In that case, I won't worry about not knowing it. (That includes the later seasons of Buffy; I'm only part way through 4 now.)

@48

We can probably arrange this.

Let me go check in the cellar...

Cliff: You might be over-thinking the joke here.

The xkcd comic was all about stumbling into a random phone conversation, so of course the context portrayed there is going to be randomly bizarre, it's xkcd! It just so happened to be serendipitously relevant/contextual to the Bernanke comments here and overall news today.

“In the short run, adjustments in the financial markets can be painful both for the people concerned about their investments and for the employees of the affected firms,” Mr. Bush said....

In the long run, everyone is dead.

TNH #46 - You SAY you're feeling fine, but there seems to be some lingering confusion...

After all... it ISN'T the Shrub's fault...

If we had JUST made his tax cuts permanent, NONE of this would have happened... not the sub-prime mess, hurricane Ike, global warming, 9/11, or your heart attack.

Once you're clear on this, we can let you go home.

signed,
the GOP Underground Nursing Cabal (GUNC)

Lance Weber @ 48
Fluorosphere: Trust me, I've got a perfect plan. We're going to need a gurney, three knitted duvets, a samovar, fourteen pint jars of baby oil, 9'7" of 8" round galvanized sheet metal ductwork, an arc welder, a singing telegram costume, four canisters of tear gas and a seeing eye dog with a fake tail.

I think so, Brain, but isn't a cucumber that small called a gherkin?

Narf!

Shinydan @ 5 - If only it were that easy.

Maybe it only works when the Doctor says it?

ADM @42: not too bad, depending on how conservative you have been in allocation. I was, and got my ass chewed out by the "experts" for not being more aggressive... HAH!!! I'm actually still in the black Of course, I moved out of the Asian market right ahead of the last debacle (than you, FT), and moved a lot into bonds a few years ago.

Randolph, I was earlier but you can count.

TNH, #46:
~/o It's not our fault we had no liability
We told you that before you began o/~

I think this is the end of the libertarian "self-organizing system" argument as applied to economics.

Clifton @#49, oh boy do you have a treat coming. Season 5 is simply amazing, with all but one episode at least good, many excellent, and three (from weakest to strongest, _Fool for Love_, _The Gift_, and _The Body_) among the best fiction I've ever encountered in any medium.

At #51, Lance Webber writes:

Cliff: You might be over-thinking the joke here.

The xkcd comic was all about stumbling into a random phone conversation, so of course the context portrayed there is going to be randomly bizarre, it's xkcd! It just so happened to be serendipitously relevant/contextual to the Bernanke comments here and overall news today.

I'm not entirely sure you're right. I concede that the joke works fine considered as a pure non sequitur.

However, it has been dawning on me that video games have grown a "literature" of story, image, and song that has been soaked up by people much younger than me. And Mr. Munroe alludes to this body of art with some frequency.

So I am sometimes suspicious that a strip like today's refers to some scenario of which I am ignorant. It's like... well, it's like someone who's never watched television, overhearing a gang of Baby Boomers.

(Where XKCD is concerned, my immersion in the technoculture more than makes up for this shortcoming-- when Munroe cracks wise about algorithms, spacetime, programming languages, robotics, Donald Knuth, etc., I am an appreciative audience.)

I have the same problem going in the other direction; a lot of the references in "To Anacreon in Heaven" go over my head, too.

albatross @ 19: "Paul Bremmer will replace Ben Bernake"

GYah!!

Don't do that.

Fragano@47 : Why Marathi? Not that I mind, but if you think that we're in any better shape over here, you're very much mistaken. Just have a look at the Bombay Stock Exchange yesterday (and over the last year, for that matter).

Graydon, #27, I use a credit union.

Randolph @58: oh, you WISH.

Latest I heard, the whole problem has been caused by government interference with interest rates.

The whole Lucifer Effect driven mass insanity of lending to people who can't afford to repay the damn loan WAS ALL THE FAULT OF THE GOVERNMENTS TRYING TO PREVENT INFLATION.

THE CORPORATION IS YOUR FRIEND. TRUST THE CORPORATION.

Amit #62: Mostly because of Bollywood.

Randolph #58- nope, as long as there is some gvt involvement in the financial system, they'll use that as their get out clause to claim that it is still the gvts fault. Of course none of them can point to any successfully functioning economy in which there was no gvt involvement, or only severely limited involvement.

This morning's casualty appears to be AiG, whose stock worth is looking like the Shinano after USS Archerfish found her sailing without escorts in 1945.

Jim @11: Can you imagine what the nation would be doing right now if that plan (investing Social Security in the stock market) had actually taken place? I'm thinking lynch mobs and pitchforks heading for Washington...

Fragano L @65 -- Languages I can do, but I'm screwed if I have to learn to dance ...

heresiarch #61:

Bremmer's first order of business will be the de-math-ification of the finance industry--everyone with an understanding of the Black-Sholes option pricing formula will be sent home with his computer. Michael Milken will be brought in from exile to help run things in the new financial order. The creditors will greet Bremmer's forces with candy and flowers. Soon, other markets all around the world will see the wonderful success we're having, and will decide to adopt the same policies.

If you don't believe this beautiful vision, you are a traitor, un-American, and probably some kind of racist who thinks Wall Street doesn't deserve Democracy as imposed at gunpoint by the government. Don't misunderestimate them!

I'll be reviewing Brian Francis Slattery's October Tor book LIBERATION (set "After the Collapse of the United States of America") in a future Locus, and for all its ghosts and weirdness he certainly gets a lot of things right. One brief quote, if you'll permit: "The water was rising over the wall, the bombs exploding, buildings tumbling, the dollar lying in the road, bent at dead angles, bleeding itself out." Just a few months ago, that didn't seem so unnervingly realistic!

guthrie #66:

I'm not sure a financial collapse brought on by the meltdown of the (heavily regulated, extensively politically manipulated) mortgage industry is exactly a commercial for the beneficial effects of regulation and political activism in markets. I think you could find such commercials (say, with the hedge fund bailouts of a few years back). But this ain't it.

I'm not sure anyone outside a very, very thin fringe of anarchists thinks that anti-fraud regulation has no place in the market. Certainly, you won't find many Republicans arguing in that direction[1]. Instead, the question is what kind of regulation makes sense, and how much, if any, political manipulation should take place.

Like, should the two big parties establish quasi-governmental corporations to encourage widespread home ownership? Should those corporations make it explicit policy to expand home ownership to poor people and minorities who wouldn't normally qualify for a loan? Should those corporations make it implicit policy to keep housing prices rising, no matter what, even to the point where they have to water-down lending requirements for people with good jobs and good credit to buy houses, because the house prices are so insanely high?

Should those companies operate under an implicit guarantee of their debts? Should they have private shareholders, bondholders, and management, all able to make a profit? Should they be able to hire armies of lobbyists?

That particular intervention into the market isn't looking so smart, just now.

[1] Though mostly, they argue for regulation that privatizes profits and socializes losses.

Mary Lou Klecha @ 55: Maybe it only works when the Doctor says it?

No, it works only against women.

albatross@71

The thing is, those two "quasi-governmental corporations" USED to be government agencies doing roughly the same job. And, nearly as I can gather, there wasn't any particularly good reason for them to stop being government agencies.

(And "heavily regulated" seems an odd description for the mortgage industry. At least those portions of it that deal with actual customers.)

Michael I #73:

ISTR that Fannie was originally a government agency, but was privatized to get all that debt off the US government's books. (Note that this was basically shaking up the organization chart to make the balance sheet look better; I think a private company which did that might end up having their CFO and CEO go to jail for it.)

I'm not sure how to measure how regulated the home mortgage market is, but there clearly are a fair number of regs involving what must be disclosed, what sort of information may be used in deciding creditworthiness, what the forms look like, etc. My understanding is that for Fannie/Freddie eligible mortgages, various inspections must be done. Various people have, after the fact, gotten in trouble with the law for violating those regs.

Now, if the regulations were there but not enforced, or were enforced but not very effective, that's also not exactly a commercial for the power of regulation to fix the problem.

The way it looks to me: This was a market in which we had market transactions setting rates/prices and assessing risk, overwhelmingly based on stuff that would make a Chicago-school economist smile. That whole mechanism made a set of disastrous errors, causing a financial meltdown. We also had quite a bit of regulation in this market, in all kinds of places. None of it helped much. We also had, in the mortgage market, massive, long-running politically-motivated government intervention in the market. That didn't seem to help either. I don't think there are simple narratives (regulators are incompetent/regulators are corrupt/the market is irrational) that are supported by what actually happened. It was a massive, multilateral, and indeed global f-ckup, by the best and brightest in government and several industries.

None of which makes our plight, sitting on that 747 at 10,000 feet with two engines trailing smoke, any better.

#73 and #74
Sounds like the USPS: semi-privatize it, then use 'government' as a reason for not funding it and 'private, must make profit' as a reason for increasing rates while cutting services. (Also Amtrak, but I don't think they were ever government in the way the USPS was.)

#74 & 71 albatross

regulation that privatizes profits and socializes losses. is a direct quote...

"best and the brightest" ? Uh-uh. Michael Greenberger was arguing against/warning against the "derivatives" years ago. He got flushed out of government in the neocon takeover, and teaches a class at University of Maryland which exposed those instruments as the long-acting contact posion they turned out to be. The people promoting them and conspiring to implement them are a mixture of exploiters, True Believers, con people, fools, sheep, and the acceding-because-they-ran-out-of-resources-to- withstand-the-onslaught-and-wanted-to-preserve-jobs-and-income -as-best-they-could.

Wow. I saw this article about the possibilty of downgrading the rating of US treasury securities. I think I'm overusing the term these days, but the only word fit for polite company that comes to mind when following these developments is "ominous."

I very much liked this discussion of what's going on and how we ought to respond. The model he's using is basically that we've been using clever financing to paper over all kinds of unpleasant and painful changes the country has been going through, both in terms of unsustainable private spending/borrowing, and in terms of government spending/deficits. I'm not sure it's right, but it at least makes some sense, and it's a bit different take that you might see elsewhere.

Any government that wasn't trying to yank our chains and thinking about its party's fate in the next election would be raising our taxes right now.

This link has a funny take on the Paulson presentations of certain economic doom, in light of previous Bush administration fun and games.

I'm probably not the only one who is having flashbacks to the massive sense of urgency to do something, right or wrong, as long as it's soon, that took over the country right after 9/11. We're being stampeded into a restructuring of our whole economy, in a direction that pretty much nobody wants, right away, to stave off a crisis. Maybe this is even a good idea, and maybe it really is as critical as it seems. But damn, how did it work out for us the last few times we made huge changes to the workings of our society and government in a panic to react to the scary news? The patriot act, secret prisons, Guantanamo Bay, torture, massive domestic spying, no-fly lists, the Department of Homeland Security, the Bush Doctrine, and the wars in Iraq and Afghanistan, all came from the panic and urgency right after 9/11. Again, we were stampeded into disregarding the law, the constitution, and our principles in order to address the crisis. Those urgent decisions aren't looking so smart these days. I wonder if the urgent decisions we're about to make will look any better.

albatross #77: I saw this article about the possibility of downgrading the rating of US treasury securities.

For S&P decision makers to do that would be an act of treason, willfully damaging the economy during a time of war. For another country to do that would similarly be an act of war.

Earl #80:

Bond rating companies aren't generally run by their governments, so I don't quite see how it would be an act of war if a foreign bond rating agency downgraded our bonds. Similarly, to the extent bond ratings are a matter of speech, it sure seems like changing the ratings on ours would be protected speech when done by someone within the country.

At any rate, suppose it becomes common knowledge that the only thing keeping bond rating agencies from downgrading US debt relative to other governments' debt is the threat of some kind of nasty retaliation. What does that do for your expectation of the likelihood of a default? Suppose it came out that the US government was threatening economic commenters, strong-arming financial publications, etc., to prevent any respectable voices discussing the possibility of a debt default. The effect would almost certainly be worse than that of a downgrade.

The result of either is an increased perceived risk of default, and thus higher interest rates required to roll over our debt over time. Inflation risk in dollars will also be rolled into the rates, and I think risk of the dollar falling a lot relative to other currencies (basically, when we have more inflation than other currencies) will also increase those rates. None of that is done by a single actor who can be threatened--instead, it's done by people simply changing the amount they're willing to bid on treasury securities.

Earl @80:
For S&P decision makers to do that would be an act of treason, willfully damaging the economy during a time of war. For another country to do that would similarly be an act of war.

So when S&P downgraded, say, Vietnam's credit rating in May, was that an act of war? Where should Vietnam send its army? New York? Washington, DC?

Credit rating agencies make their living by the accuracy of their predictions. Those who make bad predictions go out of business; those who make good ones have a place in the market. For S&P, or Moody's, or anyone in the business, to avoid lowering the credit rating when their commercial opinion is that the institution in question is commercial suicide.

Calling them "traitors" if they lower the US's rating is shooting the messenger, nothing else. Look elsewhere for the people who damaged the economy. Interestingly enough, they're the same people who shout most loudly that we're "at war" as well.

(<cynicism>'cause it wouldn't be profiteering if we weren't at war</cynicism>)

Well, if that doesn't just make me fall in love..