13. On September 29, the FDIC authorized that Citi take over the failed Wachovia. And, in what is becoming par for the course, Citi was allowed to
"cherry pick" Wachovia's deposits and some of the debt, and the rest of the rotting carcass will be strewn across the backs of the taxpayers to be
carried like so much rotting meat, similar to the recently-failed WaMu.
And who knows what further CDS bombs were set off by this latest failure of one of Wachovia, which is the world's largest financial institutions? My
sense is that Wachovia's collapse was "not helpful" to the already devastated credit default swaps market in particular and the whole derivatives
space in general.
14. ON September 30th, in yet another stunning move by the increasingly-desperate TPTB, the SEC and FASB decided to make it even easier for the failed
gamblers holding dead, toxic "assets" to completely abandon any and all pretense of "mark-to-market" and just allow the mortally-wounded
institutions to literally make up any "value" for these "assets" they deem necessary to shore up the ol' balance sheet.
15. The SEC has extended the "Anti Short Selling Seditionist" emergency rule has been so successful in fixing all stock, bond, currency,
debt-derivatives problems that they are extending it for another few weeks or so.
16. IRS rules were changed to make the deal more palatable tax-wise for Wells Fargo. Here is the actual ruling:
"For purposes of Code Sec. 382(h), any deduction properly allowed after an ownership change of a corporation that is a bank with respect to losses on
loans or bad debts, including any deduction for a reasonable addition to a reserve for bad debts, shall not be treated as a built-in loss or a
deduction attributable to periods before the change date. This guidance does not affect the application of any provision of the IRC except Code Sec.
382. Banks may rely on this guidance until further guidance is issued."
...which, according to calculatedrisk blog, allows Wells to accelerate the tax write-offs associated with absorbing the failed Wachovia's
17. The Treasury is allowing Fannie and Freddie to buy FHLB MBS. I'm not sure why they are doing this since all the GSEs have been effectively
nationalized, but there must be some nefarious method to this madness.
18. October 8th:The Treasury Department announced a "technical correction" that would allow them to backstop additional money market funds under
Treasury's "Temporary Money Market Fund Guarantee Program". According to Treasury, MMFs that have a "policy of maintaining a stable net asset
value or share price that is greater than $1.00 and had such policy on September 19, 2008" are now eligible to participate, provided the fund meets
all of the other original requirements, which basically translates to: they haven't folded up shop yet.
19. October 10th: The G7 goons are at it again. After a reportedly contentious meeting on Friday, they released a statement, which can be found
And here is the "Money Quote Paragraph" from the statement:
"We are developing strategies to use the authority to purchase and insure mortgage assets and to purchase equity in financial institutions, as deemed
necessary to promote financial market stability.
As we develop plans to purchase equity, as in the approach we are taking to broad mortgage asset purchases, we are working to develop a standardized
program that is open to a broad array of financial institutions.
Such a program would be designed to encourage the raising of new private capital to complement public capital.
Consistent with the legislation, any equity the government purchases through a broadly available equity program would be on a non-voting basis, except
with respect to the market standard terms to protect our rights as investors."
20. Since Fannie and Freddie did such a bang up job of destroying the world's economy, the U.S. Treasury decided to reward these two Frankenstein
monsters by allowing them to snap up $40 billion A MONTH in dead dog mortgages from failed financial institutions and then hold the toxic trash in
their own portfolios, according to Bloomberg.
1. Passed the proposed $150 billion "economic stimulus" program suggested by Treasury/Administration
2. Passed the "The Housing and Economic Recovery Act" with an estimated cost of $300 billion (but will surely be much more)
3. Then tacked on the "Bazooka" provision to allow Treasury to nationalize Fannie/Freddie for another $800 billion (so far)
4. Passed the afore-mentioned "Bailout Bill" act, giving Treasury unprecedented dictatorial powers over the failed financial system and perhaps
multiple-trillions of dollars to do so.
5. Just passed $25 billion aid to auto manufacturers