From Vyan at Dailykos:
In the midst of all this handwringing and teeth gnashing over the economy on cable TV, don’t you think it’s about time someone talked to, y’know, an Economist?

In this appearance on Real Time with Bill Maher this weekend, New York Times Columnist and Economist Paul Krugman gives his view of the current Stock Market Crisis, and Bailout. And just when I was starting to feel a little confidence again, he yanks the rug out from under the entire country…

Paul Krugman on Real Time talking about the bail out.

H/T Bat

A commenter at Balkinization posed a good question.

“Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency. “———————————–

1. Can Congress abandon their Constitutional right to oversight of the Executive in this way?

2. Does this statement also mean that even the President cannot question the uses the Secretary of Treasury makes of the $700 billion? I’m not sure I can see how the President could review the expenditures without using an administrative agency of some kind.

While my question 2 seems to be a stretch, I wouldn’t give the authority to override Congressional oversight to someone I trusted a great deal, and nothing the Bush administration has said or done gives me the slightest inclination to trust anyone in it. Even if it were Constitutional to give them the authority which I suspect it is not.

As I understand it, the Constitution does allow Congress to determine jurisdiction of the courts, so that part seems that it may be constitutional. But of course I am no lawyer.

Video of Paulson on Meet the Press

TEXT OF DRAFT PROPOSAL FOR BAILOUT PLAN

TPM: PUT THE BREAKS ON

LARISA ALEXANDROVNA: WELCOME TO THE LAST STAGES OF THE COUP

BALKINIZATION: BUSH ADMINISTRATION: GIVE US MORE UNREVIEWABLE POWER, WE DID SO WELL LAST TIME!

FIREDOG LAKE: PAULSON TO DEMS: NOT ALLOWING CEO’S TO KEEP MULTI-MILLION DOLLAR SALARY IS A “POISON PILL”

POLITICO: DEMS ON BAILOUT:; INCLUDE HOMEOWNERS

PAUL KRUGMAN: NO DEAL

From the Jed Report:
The responses of Barack Obama and John McCain to the economic crisis today tells you all you need to know about the choice in this election.

One the one hand, in Barack Obama we’ve got a statesman who wants to work together to get things done for all Americans. On the other hand, in John McCain we’ve got a yipping little dog (apologies to canine lovers everywhere) who will tear anything down to get ahead.

John McCain has all the answers! To straighten the economy out, he’s asking for resignation of the head of the Federal Election Commission. Check out the post at Undiplomatic. Great post.

Manic and increasingly desperate dealmaking gripped Wall Street on Wednesday as U.S. stocks plummeted to three-year lows amid new signs of distress in the global financial industry.

Morgan Stanley (MS.N) was discussing a merger with regional banking powerhouse Wachovia (WB.N), the New York Times reported. CEO John Mack got a phone call from Wachovia on Wednesday but is also pursuing other options, the paper said.

“In this market, anything’s possible. It seems like the market wants the investment banking model to disappear,” said Danielle Schembri, bond analyst covering brokers at BNP Paribas in New York.

Washington Mutual (WM.N), the country’s largest savings bank, put itself up for sale, sources said, confirming a New York Times report. Potential suitors include Citigroup (C.N), JPMorgan (JPM.N), Wells Fargo (WFC.N) and HSBC (HSBA.L), they added.

And top UK mortgage lender HBOS Plc (HBOS.L) struck an all-stock deal with Lloyds TSB (LLOY.L) to create a 28 billion pound ($50 billion) mortgage giant.

More at Yahoo News

The Federal Reserve says it is taking over crumbling insurance giant AIG in an $85 billion rescue plan.

In a stunning turn, the Federal Reserve Board is taking over crumbling insurer American International Group in an $85 billion rescue plan, officials announced Tuesday evening.

The Fed authorized the Federal Reserve Bank of New York to lend AIG (AIG, Fortune 500) up to $85 billion. In return, the federal government will receive a 79.9% stake in the company.

Officials decided they must act lest the nation’s largest insurer file bankruptcy. Such a move would roil world markets since AIG (AIG, Fortune 500) has $1.1 trillion in assets and 74 million clients in 130 countries.

More at CNN

A friend of mine has worked for Miami-Dade county for years. He just lost a house to foreclosure. Now this. I’m anxious to talk to him and see what kind of hit he’s taken on this. Poor guy.

From McClatchy:

The bankruptcy of Lehman Brothers, a prestigious Wall Street firm, will touch Florida’s pension funds and the state-run insurer because both hold its securities.

The State Board of Administration holds $322 million in Lehman stock and bonds. The SBA manages the state’s employee fund and more than two dozen other funds, including assets for the Florida Hurricane Catastrophe Fund and the Florida Prepaid College Plan.

Dennis McKee, a spokesman for the SBA, said the agency has an $84 million unrealized loss on its holdings.

About two-thirds of the securities are held by the Florida Retirement System, which includes the pension funds for local counties such as Miami-Dade and Broward. The rest is spread out in the catastrophe fund and the Lawton Chiles Endowment Fund, which helps fund Medicare.

McGee said because the SBA is such a substantial investor in the financial markets, with more than $159 billion in funds under management, the agency has a relationship with most of the large Wall Street houses.

The agency said it was trying to quantify its relationship with Merrill Lynch and American International Group, a major insurance company that is seeking a $40 million capital injection from the Federal Reserve Bank to avoid being downgraded by the credit rating agencies.

Here we are. Deregulation, no oversight, government bailout. What a system. Unfortunately for Lehman, they didn’t fail soon enough. The bailout express left the station without them. And what does McCain’s economic advisor have to say? Things today just aren’t that bad. Yes, McCain and his crew are totally out of touch with us common folk.

Wall Street is swimming in red this morning, bracing for a huge stock selloff Monday following the weekend’s happenings: Lehman files for bankruptcy, Merrill is sold and AIG is scrambling to raise cash. Global markets were down sharply in the wake of the news out of the U.S. Meanwhile, in the background of all this, oil prices fell below $97 a barrel on Monday as Hurricane Ike inflicted minimal damage to oil installations.Some economic data will be out today, but will likely take second stage to all the goings on.
Around 7:20 Dow futures were down 365 points, S&P 500 and Nasdaq futures down nearly 50 points.

More at Blogging Stocks

Attorney fees of $688 million plus interest. Whoa…….

In the largest settlement in the history of U.S. securities fraud cases, Enron shareholders and investors will split more than $7.2 billion from financial institutions accused of playing a role in the energy giant’s downfall.

About 1.5 million people will share the $7.2 billion Enron settlement, an attorney said.

About 1.5 million people and entities are eligible to share in the distribution of the money, according to Dan Newman, a spokesman for the law firm that represented the lead plaintiffs.

“Investors will get an average of $6.79 per share of common stock and an average of $168.50 per share of preferred stock,” Newman said.

To be eligible for the settlement, investors and shareholders needed to have purchased Enron or Enron-related securities between September 9, 1997, and December 2, 2001.

Texas-based Enron collapsed in 2001 after revelations of fraudulent accounting practices. Several former executives were convicted and sentenced to prison terms on charges relating to the accounting scheme. The fall of the company cost 4,000 employees their jobs and many of them their life savings, and the collapse led to billions of dollars of losses for investors.

More at CNN

From Blogging Stocks:

In what I feared might become a regular feature here, the Federal Deposit Insurance Corporation (FDIC) arranged for the takeover of the 11th failed bank of 2008 on Friday. As I posted, the FDIC likes to close banks on Friday after hours so they can reopen as branches of the acquiring bank on the following Monday morning. According to the Associated Press, the bank in question is Nevada’s Silver State Bank.
Nevada State Bank of Las Vegas will take over the insured deposits of Silver State — which had $2 billion in assets and $1.7 billion in deposits at the end of June. AP reports that “[Silver State's] branches will reopen Monday as offices of Nevada State Bank in Nevada and National Bank of Arizona in Arizona.”

John McCain’s son, Andrew, who is also CFO of his mom’s beer distributorship, “sat on the boards of Silver State Bank and of its parent, Silver State Bancorp, starting in February but resigned in July citing ‘personal reasons.’ Andrew McCain also was a member of the bank’s audit committee, responsible for oversight of the company’s accounting,” according to AP.

Read more »

From BloggingStocks.com: (lots of links)

Since China owns $1 trillion worth of U.S. Treasury bonds and $340 billion of mortgage-backed debt, when China gets a cold, the U.S. catches pneumonia. And — as I posted — when we think about the $800 billion bailout bazooka for Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), we should remember that our money is going to help China out of an investment jam. But since we are at China’s mercy, it may be self-help.

This comes to mind in reading the New York Times, which reports that China’s central bank, the People’s Bank of China, has kept its capital modest as it has gobbled up assets. Now it seeks a bailout from China’s finance ministry. According to the Times, “those [$1 trillion worth of U.S.] investments have been declining sharply in value when converted from dollars into the strong yuan, casting a spotlight on the central bank’s tiny, [$3.2 billion] capital base [that] has not grown during the buying spree, despite private warnings from the IMF.”

This need to replenish capital puts the U.S. economy in the middle of a bureaucratic battle on the other side of globe. The People’s Bank wants a stronger yuan while the finance ministry wants a weaker yuan. The Times writes that “as the yuan slips in value, China’s exports gain an edge over the goods of other countries.” Treasury Secretary Paulson has been on the side of the People’s Bank, advocating for a stronger yuan, so his push to bail out Fannie and Freddie can be seen as using U.S. taxpayer money to help it in its battle with China’s finance ministry.

What can China do? It could lower its capital requirements for the People’s Bank or it could dump its dollar-denominated holdings. Lowering the capital requirements would just make China’s central bank less able to withstand a decline in the value of its dollar-denominated holdings. And dumping those assets would cause the dollar to plunge and increase U.S. interest rates.

The lesson for the U.S. should be clear: you can create the illusion of prosperity by borrowing money (U.S. debt has nearly doubled to $10 trillion since 2000), but eventually the bank you borrowed from will get the upper hand. Now we face the consequences of living on borrowed time. Our fate is in Beijing’s hands.

Gotta love that Friday night news ……….. this is NOT good news.

The government has formulated a plan to put troubled mortgage giants Fannie Mae and Freddie Mac under federal control, dismiss their top executives, and use government funds to prop them up, government officials told the two companies yesterday, according to sources familiar with the conversations.

Under the plan, the federal government would place the firms in a legal state known as conservatorship, the sources said. The value of the company’s common stock would be diluted but not wiped out while the holdings of other securities, including company debt and preferred shares, would be protected by the government.

More at the Washington Post

If he can……. yah!

First the borrowers. Now the banks.

Federal and state regulators have closed eight banks this year, four since the start of July, as rising borrower defaults on residential and commercial real estate loans start to push some lenders into default, too.

There were no bank failures in 2005 or 2006 and only three in 2007. Now, some analysts expect a few hundred banks to fail over the next several years — the most since the savings-and-loan crisis two decades ago.

And some critics say the failures aren’t happening fast enough. They say regulators are keeping some troubled banks on life support by allowing them to spend money to stay in business that should be reserved to cover loan losses after the bank has failed.

“They are dragging their feet in forcing these banks to reserve realistically,” said Bert Ely of Ely & Co., a bank consulting firm in Alexandria. “Some of these banks could have been closed two or three quarters earlier.”

More at the Washington Post