We feel the bankers’ pain.
Running down the press:
A surprisingly lively New York Times lede this morning:
[Yesterday] began with an agreement that Washington hoped would end the financial crisis that has gripped the nation. It dissolved into a verbal brawl in the Cabinet Room of the White House, urgent warnings from the president and pleas from a Treasury secretary who knelt before the House speaker and appealed for her support.
“If money isn’t loosened up, this sucker could go down,” President Bush declared Thursday as he watched the $700 billion bailout package fall apart before his eyes, according to one person in the room.
Not since the Clinton Administration has it been widely reported that people were on their knees in the White House and that a president talked about a sucker going down.
And this time it’s a Treasury secretary on his knees, not just an intern. This is some serious shit.
Or not. McClatchy’s Kevin G. Hall, who constantly snoops for fresh angles and comes up with solid material, writes in “Is the bailout needed? Many economists say ‘no’ “:
“It’s more hype than real risk,” said James K. Galbraith, a University of Texas economist and son of the late economic historian John Kenneth Galbraith. “A nasty recession is possible, but the bailout will not cure that. So it’s mainly relevant to the financial industry.”
The Paulson plan will get some bad assets off the balance sheets of troubled Wall Street institutions and commercial banks. That may help thaw the lending freeze.
But it wouldn’t reduce the crush of homes in or near foreclosure, said Simon Johnson, a professor at the Massachusetts Institute of Technology. That’s a problem that will surely grow worse if the U.S. economy enters recession, leading to greater job losses, which feed a vicious downward spiral of even more foreclosures and defaults on car loans and credit-card debt.
What? A story in the national press about the plight of the rest of us? How dare he!
John McCain‘s own September surprise isn’t working out too well, as another McClatchy story points out. In “McCain gets blamed for angry end to Bush’s bailout meeting,” David Lightman and Margaret Talev write:
“What this looked like to me was a rescue plan for John McCain,” said Senate Banking Committee Chairman Christopher Dodd of the Republican objections.
His reference was to McCain’s eleventh-hour intervention in the negotiations, when he declared he was suspending his campaign and postponing Friday night’s debate with Democrat Barack Obama to help negotiate a bailout plan.
Democrats think that Republicans were backing away from a compromise many of them agreed to earlier Thursday — without McCain’s involvement — in order to give McCain time to play a role and perhaps appear as a rescuer.
Senate Majority Leader Harry Reid, D-Nev., said he believed the breakdown was simply an effort to allow McCain to miss Friday night’s scheduled debate with Obama. . . .
Republicans, in contrast, said their reservations on the bailout plan were principled. The plan, they said, had too much government involvement in private industry and too high potential liabilities for taxpayers.
Yes, “principled.” Buy or sell? Sell.
No question that the month has been tough on McCain, but just think about those poor mid-level banker types on Wall Street, which is just a little more than a stone’s throw from my office. (If I had an arm like Rocky Colavito‘s and a bag of stones, I’d take the subway down there and start hurling, instead of just hurling over my latest bank statement.)
Anyway, in “Big banks delay decisions on bonuses,” the Financial Times (U.K.) reports on the plight of British bankers’ bonuses, which depend on how U.S. firms decide their own bonuses:
Morgan Stanley and Goldman Sachs are delaying their decisions about year-end bonuses as they struggle with the financial crisis.
The US investment banks have traditionally set the bar for European and American competitors because their fiscal years end earlier. But the two, which have been forced to seek regulated retail bank status, are putting off their October meetings on bonuses until they have greater clarity about the fourth quarter.
[B]anks have warned that bonus pools will be cut sharply and that top performers will get the bulk of the money. “A falling tide lowers all boats but some people will end up above the river on stilts,” said one bank executive.
Well, we appreciate that news from the other side of the pond that at least we won’t all drown. I’m certainly looking forward to my own bonus. I hope those bananas at the Astor Place kiosk are still only 35 cents apiece.
And here’s a September surprise, again courtesy of the FT, whose Cash for Crash coverage rocks and is free for the viewing. In “Hedge fund chief warns on wrongdoing,” Gillian Tett and James Mackintosh report a frank admission from a financial-world insider:
Investigators and regulators are likely to uncover significant evidence of wrongdoing when they examine the records of some of the financial companies that have failed, a leading short-selling hedge fund manager claimed.
Jim Chanos, head of Kynikos Associates, believes that some of the public statements that emerged from some of the best-known financial groups could have been seriously misleading.
“I do think that what we are going to find out, when regulators and law enforcement people get into some of these firms which have failed, was that . . . the statements which people were making were materially misleading, if not criminal,” he said in a video interview on FT.com. “It is going to shock people…the extent of the deception to the market.”
Chanos is of course saying this as a defense of short-selling, setting up the argument you’ll hear in the coming years that there’s a big difference between conniving and illegal conniving.
And here’s something else in this FT story that comes as absolutely no surprise:
Weary of skipping around the web? Do some one-site shopping this morning. Here’s a clump of readable FT stories that you could skim through and try to choke down over your third cup of coffee — remember to take small bites and chew thoroughly unless you want to spit up hairballs later in the day:
‘US “will lose financial superpower status” ‘
‘Church accused over short selling’
‘WaMu seized and sold to JP Morgan’
‘Flight from Morgan Stanley brokerage’
‘Nomura offers bonuses to Lehman staff’
‘CVS is added to ban list on short selling’
At least one of my Voice colleagues is staying focused on the presidential race: See Lynn Yaeger‘s “How I’m Contributing to McCain’s Campaign Suspension.”
And now . . .
NO PARTICULAR ORDER:
N.Y. Times: ‘In Storm’s Aftermath, Cow Roundups in Southeast Texas’
N.Y. Daily News: ‘Shoplifter turns in Brooklyn rapist’
Washington Post: ‘Health Insurance Costs to Spike an Average 8 Percent’
Slate: ‘Things Fall Apart’
BBC: ‘Arming the Taleban’
Washington Post: ‘U.S. Has Achieved “Victory” in Iraq, Palin Tells Couric’
Haaretz: ‘Jewish terrorists tried to murder left-wing professor’
Washington Post: ‘Away from Wall Street, Economists Question Basis of Paulson’s Plan’
IRIN: ‘Charity coffers face credit crunch’
Washington Post: ‘Carbon Is Building Up in Atmosphere Faster Than Predicted’
Haaretz: ‘Peres: U.S. has no choice but to save world from Ahmadinejad’
Washington Post: ‘Negotiations Falter on Financial Bailout Package’
N.Y. Post: ‘EX-CON HELD AS “JESUS RAPIST” ‘
Washington Post: ‘Debate Remains In Limbo’
L.A. Times: ‘Palin talks to Couric — and if she’s lucky, few are listening’
Baltimore Sun: ‘McCain hints debate appearance “possible” ‘
Financial Times: ‘Ex-Merrill chief considers hedge-fund return’
Jurist: ‘US military commissions prosecutor resigns due to “ethical qualms” ‘
N.Y. Times: ‘Pakistani and American Troops Exchange Fire’