Expect a 50 point basis cut followed by a “temporary” suspension of naked shorting for all financial institutions and insurance agencies.
Think I’m kidding? Watch…..
I might be wrong on the magnitude of the action, but I would be surprised if there is no cut and no ban placed.
Anyone wondering why BAC bailed out Merill but not LEH? I suspect if one plays connect the dots, somehow or the other BAC has some exposure to Merill. The risk of bankruptcy on Merill would open the covers to Merill, which might have uncovered some ugly things that goes back to BAC. Bringing it in house allows BAC to sweep the garbage under an growing a heap of garbage and hide it (for now). Probably same could have been said for the motivations of picking up Countrywide. Otherwise, why not let a firm go to BK and pick it up on cents on the dollar? As far as LEH, I suspect as the covers are open, we’ll see that LEH’s problems were too big for anyone to cover, and perhaps most of the exposures that needed to be covered up affect institutions that are sort of already in trouble.
Anyway, me thinks the Fed is going trash the dollar in the short term by keep lowering the rates, for various reasons, thinking ridiculously that this will prop up some home prices in the shorter term to allow some of these institutions to palm of some of this bad debt in some shape or form, not to mention a trashed dollar would help make U.S. companies overseas with biz. Longer term, this ain’t going to do shit for keeping up home prices. But the short term action will probably be viewed as necessary to restore some order to the financial markets. Controlling Freddie and Fannie to some extent, will enable them to do this even more so.
Really, at this point, what other options does the Fed have?
The only thing I’m surprised the Fed hasn’t done yet is place a moratorium on credit rating agencies downgrade of financial institutions. Yes, that would be the ultimate shitty thing to do, but if one stops and thinks about it, how is this any worse than everything else that is being tried right now….”Fix” the ratings game, and buy time for the institutions. Why hasn’t Paulson thought about this yet?
