Financial Crisis?
With Congress’ rejection of the Bailout Bill 2.0, what should we expect over the next few days and weeks?
Revised Bailout Bill 3.0?
With the markets down by 10% across the US, and the Asian markets already down by 5% as they opened on Tueday, it is likely that Washington will try to salvage some Bailout package, when they return on Thursday. Will they try? Will they succeed? And suppose they do try AND succeed – is a bailout package sufficient to make the markets rally, or are we at a point where no policy actions will control the generalized loss of confidence in the financial markets and institutions?
More Mergers to Solve Interbank Loans?
With markets what they are, nobody is giving loans to anybody at this point. CDS for Goldman is at an all time high. The good news for Morgan is that their CDS fell from 1700 to 1200 with the news this evening of their agreement to sell 21% to the Japanese bank Mitsubishi (although this still moved their stock price down). Will this be enough? What is Goldman going to do? Are we going to see Goldman merge? With whom? Who is large enough (and trouble-free enough) to take a stake in Goldman? HSBC?
Cross-Border Bank Run?
If we think the economy is in the gutter now, it could be worse. As foreign banks start to worry about their exposures to the US financial institutions, they could create a run on the trillion dollar short-term interbank deficits of the US banking system. Uh oh! What is the probability that this kind of panic will be triggered?
