What the @#$% Happened in September-November 2008: Part II

(This is my 200th post for this blog!)

Here's Part II of What the @#$% Happened in September - November 2008, for your Sunday reading. (For Part I, click here.)

Week of September 22, 2008 was all about Paulson/Bernanke's bailout plan and negotiations in Congress and at the White House. Despite telling the Congressional leaders on Thursday September 18 that there would be no market, financial system left unless they do something very quick, Paulson-Bernanke duo (some Wall St. wags called them Hanky Panky and Helicopter Ben) spent the whole week still talking to lawmakers. Paulson's 2-page bailout memo on Friday September 19 would grow to over 100 pages.

As the Congressional hearings dragged on, overwhelming majority of the US taxpayers were against the bailout plan, and many of them even bothered to write to their Representatives and Senators. People heeded the call like this one and/or they even read what was in the bill. The ratio of For and Against letters/emails received by the members of Congress were reported at anything from 10-1 to 1000-1 Against, totally unprecedented (this one, for example: 99-1 against).

With that in mind, let's go to the headlines of Investor's Business Daily front pages. As before, the indices' numbers are those of the day prior to the date; the same goes for the news headlines.

(And here's the Dow Jones Industrial Average chart during that time again, from my other blog, if you need it as a reference. The link opens a new Window.)

September 23, 2008 (Tuesday)
(S&P 500 Index 1,207, Dow Jones Industrial 11,015, Nasdaq 2,178)

• Congress Demands Conditions, Add-Ons To $700 Bil Rescue; Amid tussle, stocks sink; issues on table include exec pay, homeowner aid.
• 'Crony' Capitalism Is Root Cause of Fannie And Freddie Troubles
• Crude Oil Surges As Dollar Dives: Oct. crude vaulted $16,37 to $120.92. The dollar suffered its worst day vs the euro in 7 years amid uncertainty over the proposed gov't rescue.
• Brokerages, Regulators Rethink Leverage; Goldman and Morgan [Stanley] now commercial banks, accepting Fed's limits.
• SEC Expands List for Short Ban; 96 more companies were added to 799 companies.
• Picture of Rep. Barney Frank telling the reporters "The private sector got us into this mess. The government has to get us out of it." [Right.]

September 24, 2008 (Wednesday)
(S&P 1,188, Dow 10,854, Nasdaq 2,153)

• Paulson, Bernanke Defend Rescue Plan To Skeptical Senate, Lawmakers Want To Tinker
• Rescue Debate Rattles Stocks: The market slid for a second straight day as debate over the Wall St. rescue plan continued.
• Good Intentions Paved The Road To Subprime-Stoked Meltdown
• Buffett Takes Stake In Goldman: Berkshire Hathaway is buying a $5 bil stake in Goldman Sachs, getting warrants to purchase Goldman shares at $115 apiece.
• T-Mobile Touts 1st Google Phone [A very unfortunate debut, in the middle of financial mess. No one paid attention.]
• Obama Reins In Spending Plans: Barak Obama said the Wall St. rescue plan will likely force him to postpone or revamp some campaign promises, such as his proposed healthcare overhaul he estimated would cost up to $65 bil a year. [Now that he "won", he seems to completely forgot what he himself once said.]
• Picture of someone taking picture of the new facade of former Lehman Brothers building, now under Barclay's Capital.

September 25, 2008 (Thursday)
(S&P 1,186, Dow 10,825, Nasdaq 2,155)

• Rescue Plan Details In Play As Congress Is Pressed To Act; But $700 bil sticker price could be OK'd in pieces; other restrictions weighed
• McCain Leaves Campaign Trail To Push Rescue Plan Forward
• How A Clinton-Era Rule Rewrite Made Subprime Crisis Inevitable [1977 Community Reinvestment Act and pursuant rule change in how Fannie and Freddie's lending practices]
• Jitters Pop Up In Debt Markets: The 3-month T-bill yield sank 35 basis points to 0.46%, down from 0.96% Friday.
• N. Korea Nuclear Pact Unravels [yet again]
• FBI Targets Collapsed Lenders (Fannie Mae, Freddie Mac, Lehman Brothers, and AIG) for potential corporate fraud [Whatever happened to this one?]

September 26, 2008 (Friday)
(S&P 1,209, Dow 11,022, Nasdaq 2,186)

• Rescue Deal Near, Key Lawmakers Say; A Few Beg To Differ. Dodd: Major Issues Settled. But a high-profile White House meeting with congressional leaders and presidential contenders failed to reach a final agreement. Dodd told CNN the meeting was a disaster. Sen. Richard Shelby, R-Ala said talk of a deal was premature.
• Banks' Fed Borrowing Surges: Banks borrowed a record $262.34 bil from the Fed's discount window.
• Congress Pushed Fannie, Freddie In Wrong Direction During 1990s
• New-Home Sales at 17-Year Low
• Durable Goods Order Fell 4.5%, 3-year low
• Jobless Claims Hit 7-Year Peak, to 493,000 [wish it was this low, now.]
• Picture of President Bush with congressional leaders at the White House. McCain in the near left, at the far right end is Obama.

September 29, 2008 (Monday, issued on September 27 Saturday to report events on September 26, Friday)
(S&P 1,213, Dow 11,143, Nasdaq 2,183)

• Congress Resumes Rescue Negotiations After GOP Uprising; Bush officials, lawmakers want agreement before markets reopen Monday [meaning before the Asian markets open]. "Negotiations took an unexpected turn Thursday afternoon at a contentious White House meeting in which overwhelming House Republican opposition to Treasury Secretary Henry Paulson's plan became evident." "With polls showing the public opposes the administration's plan by a wide margin, House Speaker Nancy Pelosi wants to make sure that the measure has bipartisan support."
• JPMorgan Rises On WaMu Deal. Regulators seized the savings and loan, the biggest U.S. bank failure ever.
• Citi In Talks To Buy Wachovia?
• 1st Presidential Debate Goes On [Did anyone pay attention to this?]
• Money Markets Remain Tense. Central banks around the world poured billions into the banking systems to meet the demand for cash.
• Picture of House Minority Leader John Boehner warning the opponents, "If they thought they were going to roll over me, they are kidding themselves."

The most salient memory from this particular week is that of CNBC. Talking heads after talking heads paraded in front of the TV camera and told the viewers that "We have to do something", that it would be a disaster if we just let the system collapse (as if that's a given). They were all for Paulson's bailout plan of Wall Street. (Well, their livelihood kind of depends on it, doesn't it?) One female personality kept telling us to just imagine what would happen to the stock market if the bailout bill was rejected.

Taxpayers were increasingly skeptical and, I think, afraid. The amount of $700 billion scared them, because it would have to come from their pockets to save rich bankers and government officials who allowed the excess (in leverage, in lending practice) to go on. Why do they have to pick up the tab? Besides, what's in this bailout package that grew from 2 pages to over 100 pages?

I think more people outside Capitol Hill read the actual proposed bill than the members of Congress. And they didn't like what they saw (here, and here).

I skimmed through the draft bill, close to final draft, I think. I was amused by toy arrows and rums, but what I didn't like at all is mentioned in the second link above:

"The bailout bill also gives the Internal Revenue Service new authority to conduct undercover operations. It would immunize the IRS from a passel of federal laws, including permitting IRS agents to run businesses for an extended sting operation, to open their own personal bank accounts with U.S. tax dollars, and so on... That section had expired as of January 1, 2008, and would now be renewed."

and made permanent. What did it have to do with financial bailout?

But the Democrat- controlled Congress and the White House were pushing the bill forward without much debate. The showdown would be next week. That week will be covered in Part III. Stay tuned.

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