Daily Blog: Shock and awe; you just lost at Monopoly; Al Jazeera talks to a Jewish banker

The epic collapse of Wall Street titan Lehman Brothers, combined with the virtual demise of Merrill Lynch and fears for the world’s largest insurance company, sent stocks into a frenzied freefall yesterday as Wall Street grappled with financial chaos not seen since the Great Depression.

City Comptroller William Thompson assured current and former city workers that their pensions are in good standing because only a “minuscule percentage” of the money is invested in Lehman stock.

On Sept. 2, the first day of trading this month, shares of Lehman stock held by the city were valued at $32.2 million. They were worth $420,000 yesterday, when the stock closed at 21 cents.

The state’s $154 billion pension fund owns about 5 million shares of Lehman common stock.

Jim Fuchs, a spokesman for State Comptroller Tom DiNapoli, said losses from Lehman could total about $400 million.

Lehman shares held by the state were worth about $80.6 million at the start of September and were valued at $1.05 million yesterday.

The New York State Teachers $100 billion pension also held an estimated 2.2 million Lehman shares. Officials didn’t return repeated calls about the fund’s potential losses.

The teachers’ pension shares were worth about $36 million at the start of this month and about $462,000 yesterday.

No one cog in the federal government’s machine of financial regulation let down the country by failing to prevent the latest shakeout on Wall Street. The entire system did.

Kathleen Day, a spokeswoman for the Center for Responsible Lending, a consumer-oriented research group, explained the regulatory lapses more starkly: “The job of regulators is that when the party’s in full swing, make sure the partygoers drink responsibly,” she said. “Instead, they let everyone drink as much as they wanted and then handed them the car keys.”

Analysts and politicians are raising serious questions about the nation’s financial regulatory system, which dates to the New Deal era.

On Monday, one Wall Street bank, Lehman Brothers, filed for bankruptcy protection and another, Merrill Lynch, sought comfort by selling itself to Bank of America for $50 billion. Earlier this year, the government helped enable the sale of faltering investment bank Bear Stearns to J.P. Morgan Chase, and more recently took over mortgage giants Fannie Mae and Freddie Mac.

Such troubles were supposed to have been prevented, or at least mitigated, by regulatory systems that the nation began to put in place after the banking system collapsed at the start of the Great Depression.

Many banks at the time were badly wounded by their personal and financial ties to securities trading. The 1933 Glass-Steagall Act, and later the 1956 Bank Holding Company Act, mandated the separation of banks, insurance companies and securities firms.

Those and many other federal laws stabilized the banking and securities markets, but by the 1970s, a stumbling U.S. economy led to a change in America’s political-economic values. Ronald Reagan led a movement that came to power in 1980 proclaiming faith in free markets and mistrust of government. That conservative philosophy has dominated America for the past 28 years.

Even after taxpayers had to rescue deregulated savings and loans, or S&Ls, with a $200 billion bailout in the late 1980s, the push to loosen regulation paused only briefly.

In 1999, President Clinton signed the Financial Services Modernization Act, which tore down Glass-Steagall’s reforms by removing the walls separating banks, securities firms and insurers.

Under President Clinton and his successor, the government became eager to promote home ownership. Interest rates were low, the market grew for loans to borrowers with weak credit and private-sector mortgage bonds boomed. About 38 percent of those bonds were backed by subprime loans. They are at the root of today’s financial crisis.

‘Amid Turmoil, U.S. Turns Away From Decades of Deregulation’

The housing and financial crisis convulsing the U.S. is powering a new wave of government regulation of business and the economy.

Federal and state governments alike are increasingly hands-on in their effort to deal with failing businesses, plunging house prices, worthless mortgages and soaring energy prices. The steps add up to a major challenge to the movement toward deregulation that has defined American governance for much of the past quarter-century since the “Reagan Revolution” of the early 1980s. In fact, some proponents today of a bigger oversight role for government are Republican heirs to the legacy of President Reagan.

I’ll get back to Iraq in a minute, but don’t tell me about Bill Clinton: He not only promoted NAFTA globalization without insisting on protection of workers and union rights, but he also helped re-create monopolies by embracing the 1999 repeal of the Glass-Steagall Act (the FDR Era law that had prohibited banks from merging with securities firms), and by signing the Telecommunications Act of 1996, which further deregulated phone companies and allowed even more mergers. It’s their monopoly game, and they’re the ones on Park Place. You’re stuck on Baltic Avenue, at best, and your children will be renting, not buying.

Israel Adelman, a Fordham Financials trader on Wall Street, told Al Jazeera that “people in upper government don’t understand what the average American is going through”.

“The customer is very squeezed right now, houses are worth nothing, people are up to their ears with credit cards debt,” he said, describing the situation as a “confidence crisis”.

“We’ve been making a lot of money from cheap money . . . we are the pinnacle of greed . . . we’re going to pay for it all the way through next year. The bleeding is going to haemorrhage.”

John McCain has the mo, Barack Obama doesn’t, Sarah Palin is a hotter commodity than they or Joe Biden combined — and no sane expert knows the winner.

Palin’s answers to [Charlie] Gibson‘s questions made it clear that all the briefings and all the cramming that she could absorb in two weeks were not enough to endow her with what her résumé so plainly indicated that she lacked: sufficient exposure to national-security issues to serve as President, should she be required to do so.

She confirmed that she has never been abroad, apart from visits to Canada and Mexico, and a recent trip “that changed my life” to Kuwait and Germany, where she met American soldiers. She also said that she has never had occasion to meet a foreign head of state. She added, a little defensively, “If you go back in history and if you ask that question of many Vice-Presidents, they may have the same answer.”

Perhaps she was thinking of the antebellum period. Since the dawn of the atomic age, of the thirty-one other Vice-Presidential candidates nominated by both major political parties, perhaps only Spiro Agnew, a governor of Maryland, had comparably scant exposure to the world beyond the United States at the time of his selection. However, Agnew did earn a Bronze Star during military service in France and Germany during the Second World War. (His Vice-Presidency ended with his resignation, in 1973—something to do with bribery payments, handed over in brown paper bags.)

Palin is a natural orator, and in television interviews granted before she became a nominee for national office she came across as relaxed, funny, and self-possessed. In the ABC sessions, she told Gibson that when McCain invited her to join his ticket, “I didn’t hesitate. . . . You can’t blink. . . . I didn’t blink.” Palin leaned forward, radiating nervous energy. Gibson, with his large frame, sonorous voice, and reading glasses perched low on his nose, loomed over his subject, presenting an unfortunate image of male professorial condescension as he ticked through foreign-policy issues that he clearly knew better than Palin did. Even so, the Governor’s anxious-sounding answers to his questions produced more than enough awkward moments to justify McCain’s decision to hold her back for study hall.

A Bronx man confessed Sunday to hacking his ex-girlfriend into pieces and entombing her remains under layers of cement in New Jersey, police sources said.

Julio Flores, 32, even called the family of Jaritza Calderone, 28, to tell them they’d never see her again.

Elizabeth Singer jostled her 14-year-old son awake with awful news.

“Johnny, get up,” she said. “Your father is killed.”

She guided the boy into her bedroom so he could have a look.