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Thursday, September 25, 2008

Wall Street Biography

65 comments:

  1. Wednesday, September 24, 2008

    Blogger will be unavailable Thursday (9/25) at 4:00PM PDT for about 10 minutes for maintenance.

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  2. "Eventually and stupidly, these institutions owned them for themselves—lots of them, often at 30-to-1 leverage.

    The financial products were made "safe" by insurance products known as credit default swaps, a credit derivative from companies such as AIG. When housing turned down, the mortgages and derivatives were worth a lot less and no one would lend Wall Street money anymore.

    Then the piling on started. Hedge funds could short financial stocks and then bid down the prices of CDOs stuck on Wall Street's balance sheets. This was pretty easy to do in an illiquid market. Because of the Federal Accounting Standards Board's mark-to-market 157 rule, Wall Street had to write off the lower value of these securities and raise more capital, diluting shareholders. So the stock prices would drop, which is what the shorts wanted in the first place. It was all legit."

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  3. The stooges sailed off into the sunset, after showing creativity, courage, perseverence and style! Stooges--mothers of invention!

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  4. As short-term financing dried up, Fannie Mae and Freddie Mac's deteriorating financials threatened to trigger some $1.4 trillion in credit default swap payments that no one, including giant insurer AIG, had the capital to make good on. So Treasury Secretary Henry Paulson put Fannie and Freddie into conservatorship. This removed any short-term financing hassle. He also put up $85 billion in loan guarantees to AIG in exchange for 80% of the company.

    Taxpayers will get their money back on AIG. My models suggest that Fannie and Freddie, on the other hand, are a gold mine. For $2 billion in cash up front and some $200 billion in loan guarantees so far, the U.S. government now controls $5.4 trillion in mortgages and mortgage guarantees.
    ---
    Well, unlike Mr. Buffett or any hedge fund, the Treasury and the Federal Reserve get to cheat. It's not without risk, but the Feds, with lots of levers, can and will pump capital into the U.S. economy to get it moving again. Future heads of Treasury and the Federal Reserve will be growth advocates -- in effect, "talking their book." While normally this creates a threat of inflation and a run on the dollar, and we may see dollar exchange rates turn south near term, don't expect it to last.

    First, with Goldman Sachs and Morgan Stanley now operating as low-leverage bank holding companies, a dollar injected into the economy will most likely turn into $10 in capital (instead of $30 when they were investment banks). This is a huge change. Plus, a stronger U.S. economy, with its financial players having clean balance sheets, will become a safe haven for capital.
    ---
    You can slice the numbers a lot of different ways. My calculations, which assume 50% impairment on subprime loans, suggest it is possible, all in, for this portfolio to generate between $1 trillion and $2.2 trillion -- the greatest trade ever. Every hedge-fund manager will be jealous. Mr. Buffett is buying a small piece of the trade via his Goldman Sachs investment.

    Over 10 years this could change the budget scenario in D.C., which can also strengthen the dollar. The next president gets a heck of a windfall. In the spirit of Secretary of State William Seward's purchase of Alaska for $7 million in 1867, this week may be remembered as Paulson's Folly.

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  5. "When it comes to financial derivatives, wealth is neither created nor destroyed... it is just transferred. It is a zero sum game, unlike the stock market. If I lost a dollar on a financial derivative, somebody else made a dollar."
    ==

    So where is this wealth sitting?

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  6. WaMu just went tits up. JPMorgan is buying them out.

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  7. It is not sitting anywhere, mat.
    It never really existed.
    Like tulip bulbs, the value was percieved, taken on faith, but the "wealth" was only on paper.

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  8. My ancestors made millions on Tulips, 'Rat, don't knock it.

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  9. ...it got lost somewhere between then and now, tho.

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  10. Saw this ad, today, on one of the news networks.

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  11. Barack Obama has lung cancer.

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  12. It is not sitting anywhere, mat.
    It never really existed.
    Like tulip bulbs, the value was percieved, taken on faith, but the "wealth" was only on paper.
    ==

    Still, who's got the winning paper?

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  13. That's just a cover story for advanced AID's symptoms.

    Grey Hair is from Chemo.

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  14. The winning paper was won in the commissions, Mat.
    I already told you.
    The underlying assets, (when there are any) Are a small fraction, but still Trillions.

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  15. Democracy for America has as its chairman Howard Dean’s brother, James H. Dean. Federal rules prohibit coordination between outside groups and campaigns or parties.

    Daniel Medress, a spokesman for Democracy for America, said James Dean has not spoken with his brother about his activities at the group, which Howard Dean started in 2004. “We don’t coordinate with them,’’ Mr. Medress said of the Democratic National Committee, adding that at family dinners the Dean brothers, “sit there and make small talk, because they can’t talk about their jobs.”

    Brad Woodhouse, a spokesman for the Democratic National Committee, said Howard Dean carefully follows all rules and regulations.

    Brave New PAC is affiliated with California-based filmmaker Robert Greenwald, who runs several entities out of his “Brave New” office complex in Culver City; one of them, Brave New Foundation, a non-profit group that runs social issues campaigns, has as the chairman of its board Lawrence Lessig, a prominent Stanford Law School professor who has served as an informal adviser to Mr. Obama on technology policy issues.

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  16. Not so fast. Someone lost billions and someone made billions. The commissions were rewarded based on these billions, no?

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  17. Did anyone else see the Black Avenger's Forgiveness Doc you could print out?
    Think I lost mine, dammit.
    Good old Ken Hamblin.

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  18. Yeah, on the balanced out billions, so?

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  19. So?!
    Why pay capital gains tax if it's monopoly money?

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  20. The traded paper was monopoly money.
    The losses, gains, and commissions, real dough.

    Just like there is Real Estate, far down the line.

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  21. That's just a cover story for advanced AID's symptoms.

    Larry Sinclair strikes again.

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  22. The losses, gains, and commissions, real dough.
    ==

    Ok. Let me rephrase. Whose got the loses, whose got the gains, and whose got the commissions?

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  23. Mətušélaḥ said...
    What does Buddy say about all this?
    ---
    Last I heard, he was upset about naked shorts making a mockery of Oil's fundamentals.

    ...then he went into Hurricane Hell, complete with relatives.

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  24. Sorry, Doug. I just can't see Buddy being upset by naked shorts.

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  25. My Nephew got the commissions at the real estate end.

    New Century got the gains until they went bust.
    People lost Trillions in value of their homes.

    Nephew Jumped ship to Goldman for more gains and commissions, now as a Respectable Banker.

    ...all on a HS Education!

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  26. When they're off his smelly homeless relatives, you should understand.

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  27. When they're off his smelly homeless relatives, you should understand.
    ==

    Isn't that normal dress code in lap land?

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  28. Has Buddy shown up @ Maggie's or anywhere else?

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  29. Cell Phones and Cancer

    A story that's not going away.

    Around cell phones towers, the cows don't give milk, I've been told by those that know.

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  30. Buddy died some time ago. Hadn't you heard?

    It hit most of us here real hard.

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  31. IN 1992, HEDGE FUND MANAGER George Soros made $1 billion betting against the British pound.

    In 2007, John Paulson's Credit Opportunities fund correctly bet against subprime mortgages, clearing $15 billion for the year and $3.7 billion for him.

    Warren Buffett is now hoping to make big money on Goldman Sachs.
    ---
    Meanwhile, 'Rat reports wife's 401k taking it in the shorts.

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  32. PETA wants Starbucks to use human milk, so dry cows won't be a problem.
    Just gotta find some wymin w/o cellphones.

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  33. Has Buddy shown up @ Maggie's or anywhere else?
    ==

    I couldn't find Buddy, but I found this:

    http://www.youtube.com/watch?v=tOBhTuP2w_k

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  34. Buddy died some time ago. Hadn't you heard?
    ==

    You think Ulla did him in?

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  35. I had a roommate in the dorms that sold his bike to 5 different guys when he took a hike!

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  36. Bastard was a collegiate wrestler, got his jollies getting ME down on the floor, much like Bernie, but w/o the Butt Fuck.

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  37. "We're aware this idea is somewhat absurd, and that putting it into practice is a stretch. At the same time, it's pretty absurd for us to be drinking the milk of cows."

    The answer received was thanks but no thanks from spokesman Sean Greenwood who said, "We applaud PETA's novel approach to bringing attention to an issue, but we believe a mother's milk is best used for her child."

    So, if the very idea of milking a nursing mother for the reported 1 ½ gallons of milk it takes to make a single gallon of ice cream leaves a bad taste in your mouth, don’t worry. It doesn’t seem the company is ready for the drastic change just yet.


    Save a Cow

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  38. That video froze @4:14, just as they froze watching her leave the room!
    Only LaBob could explain what otherworldly forces made that happen!

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  39. Oh yeah, it's the Green Ice Cream guys, not Starbucks.

    Mom's Ice Cream, as it were.

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  40. :) hehehe

    "Can you believe it, I met her in the library."

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  41. Poor Doug, you missed the hot part.

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  42. I got it goin by cliking another tab and coming back to it LaBob.
    ...or else you told the green men to lay off.
    Either way, I saw it.

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  43. Super Size that Rescue

    All along, as we faced a softening demand for our products and in the wake of our increased exposure to losses in the commodity derivatives market of beef futures, hog swaps, egg instruments, bun swaptions, potato debt flotations, and partially-hydrogenated vegetable oil puts, it was our intention to reach some productive and effective understanding with our creditors and our business partners. Unfortunately, due to market conditions, that was not to be.

    Effective close of business today, the McDonald’s Corporation is a wholly owned subsidiary of the Federal Department of Agriculture. They wisely — and quickly — stepped in to provide management with a credit facility, in exchange for ownership of the company. If you’ve seen the recent news about what the Treasury Department has done for AIG, the troubled insurance giant, you’ll understand what happened here. It’s basically the same, but with fries.

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  44. ECONOMISTS SAY GO SLOW, HOLD HEARINGS--

    165 economists rip bailout plan
    Contend administration proposal has 3 pitfalls

    Posted: September 25, 2008
    7:08 pm Eastern

    © 2008 WorldNetDaily


    Treasury Secretary Henry Paulson
    At least 165 economists have signed a letter to Congress members warning of three pitfalls in the Bush administration's $700 billion proposal to deal with the Wall Street crisis.

    The economists say they are well aware of the current financial situation and agree there's a need for bold action but ask Congress "not to rush."

    They urge lawmakers to hold appropriate hearings and "to carefully consider the right course of action."

    The three problems with the plan proposed by Treasury Secretary Henry Paulson, the economists say, are its fairness, ambiguity and long-term effects.

    President Bush was joined today by presidential candidates John McCain and Barack Obama at an emergency White House meeting on the plan. Key members of Congress said this morning they had struck a deal in principle, but the outcome of the proposal is unclear. Participants in the White House meeting called it extremely contentious.

    The proposal allows the government to buy the faulty mortgage-based assets of severely weakened financial institutions to prevent them from collapsing and setting off a chain of events that would affect citizens, including depletion of retirement accounts, rising home foreclosures, bankrupt businesses and lost jobs.

    The economists contend the plan is unfair, because it's a "subsidy to investors at taxpayers' expense."

    "Investors who took risks to earn profits must also bear the losses," the economists say in their letter. "Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise."

    The plan is ambiguous, they contend, as neither "the mission of the new agency nor its oversight are clear."

    "If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards," the letter states.

    If the plan is enacted, the economists argue further, "its effects will be with us for a generation."

    "For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity," they say. "Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted."

    The signatories as of this morning were:

    Acemoglu Daron (Massachussets Institute of Technology)
    Adler Michael (Columbia University)
    Admati Anat R. (Stanford University)
    Alvarez Fernando (University of Chicago)
    Andersen Torben (Northwestern University)
    Barankay Iwan (University of Pennsylvania)
    Barry Brian (University of Chicago)
    Beim David (Columbia University)
    Berk Jonathan (Stanford University)
    Bisin Alberto (New York University)
    Bittlingmayer George (University of Kansas)
    Boldrin Michele (Washington University)
    Brooks Taggert J. (University of Wisconsin)
    Brynjolfsson Erik (Massachusetts Institute of Technology)
    Buera Francisco J.(UCLA)
    Carroll Christopher (Johns Hopkins University)
    Cassar Gavin (University of Pennsylvania)
    Chaney Thomas (University of Chicago)
    Chari Varadarajan V. (University of Minnesota)
    Chauvin Keith W. (University of Kansas)
    Chintagunta Pradeep K. (University of Chicago)
    Christiano Lawrence J. (Northwestern University)
    Cochrane John (University of Chicago)
    Coleman John (Duke University)
    Constantinides George M. (University of Chicago)
    Crain Robert (UC Berkeley)
    Culp Christopher (University of Chicago)
    De Marzo Peter (Stanford University)
    Dubé Jean-Pierre H. (University of Chicago)
    Edlin Aaron (UC Berkeley)
    Eichenbaum Martin (Northwestern University)
    Ely Jeffrey (Northwestern University)
    Eraslan Hülya K. K.(Johns Hopkins University)
    Faulhaber Gerald (University of Pennsylvania)
    Feldmann Sven (University of Melbourne)
    Fernandez-Villaverde Jesus (University of Pennsylvania)
    Fox Jeremy T. (University of Chicago)
    Frank Murray Z.(University of Minnesota)
    Fuchs William (University of Chicago)
    Fudenberg Drew (Harvard University)
    Gabaix Xavier (New York University)
    Gao Paul (Notre Dame University)
    Garicano Luis (University of Chicago)
    Gerakos Joseph J. (University of Chicago)
    Gibbs Michael (University of Chicago)
    Goettler Ron (University of Chicago)
    Goldin Claudia (Harvard University)
    Gordon Robert J. (Northwestern University)
    Guadalupe Maria (Columbia University)
    Hagerty Kathleen (Northwestern University)
    Hamada Robert S. (University of Chicago)
    Hansen Lars (University of Chicago)
    Harris Milton (University of Chicago)
    Hart Oliver (Harvard University)
    Hazlett Thomas W. (George Mason University)
    Heaton John (University of Chicago)
    Heckman James (University of Chicago - Nobel Laureate)
    Henderson David R. (Hoover Institution)
    Henisz, Witold (University of Pennsylvania)
    Hertzberg Andrew (Columbia University)
    Hite Gailen (Columbia University)
    Hitsch Günter J. (University of Chicago)
    Hodrick Robert J. (Columbia University)
    Hopenhayn Hugo (UCLA)
    Hurst Erik (University of Chicago)
    Imrohoroglu Ayse (University of Southern California)
    Israel Ronen (London Business School)
    Jaffee Dwight M. (UC Berkeley)
    Jagannathan Ravi (Northwestern University)
    Jenter Dirk (Stanford University)
    Jones Charles M. (Columbia Business School)
    Kaboski Joseph P. (Ohio State University)
    Kaplan Ethan (Stockholm University)
    Karolyi, Andrew (Ohio State University)
    Kashyap Anil (University of Chicago)
    Keim Donald B (University of Pennsylvania)
    Ketkar Suhas L (Vanderbilt University)
    Kiesling Lynne (Northwestern University)
    Klenow Pete (Stanford University)
    Koch Paul (University of Kansas)
    Kocherlakota Narayana (University of Minnesota)
    Koijen Ralph S.J. (University of Chicago)
    Kondo Jiro (Northwestern University)
    Korteweg Arthur (Stanford University)
    Kortum Samuel (University of Chicago)
    Krueger Dirk (University of Pennsylvania)
    Ledesma Patricia (Northwestern University)
    Lee Lung-fei (Ohio State University)
    Leuz Christian (University of Chicago)
    Levine David I.(UC Berkeley)
    Levine David K.(Washington University)
    Linnainmaa Juhani (University of Chicago)
    Lucas Robert (University of Chicago - Nobel Laureate)
    Luttmer Erzo G.J. (University of Minnesota)
    Manski Charles F. (Northwestern University)
    Martin Ian (Stanford University)
    Mayer Christopher (Columbia University)
    Mazzeo Michael (Northwestern University)
    McDonald Robert (Northwestern University)
    Meadow Scott F. (University of Chicago)
    Mehra Rajnish (UC Santa Barbara)
    Mian Atif (University of Chicago)
    Middlebrook Art (University of Chicago)
    Miguel Edward (UC Berkeley)
    Miravete Eugenio J. (University of Texas at Austin)
    Miron Jeffrey (Harvard University)
    Moretti Enrico (UC Berkeley)
    Moriguchi Chiaki (Northwestern University)
    Moro Andrea (Vanderbilt University)
    Morse Adair (University of Chicago)
    Mortensen Dale T. (Northwestern University)
    Mortimer Julie Holland (Harvard University)
    Muralidharan Karthik (UC San Diego)
    Nevo Aviv (Northwestern University)
    Ohanian Lee (UCLA)
    Pagliari Joseph (University of Chicago)
    Papanikolaou Dimitris (Northwestern University)
    Paul Evans (Ohio State University)
    Peltzman Sam (University of Chicago)
    Perri Fabrizio (University of Minnesota)
    Phelan Christopher (University of Minnesota)
    Piazzesi Monika (Stanford University)
    Piskorski Tomasz (Columbia University)
    Rampini Adriano (Duke University)
    Reagan Patricia (Ohio State University)
    Reich Michael (UC Berkeley)
    Reuben Ernesto (Northwestern University)
    Roberts Michael (University of Pennsylvania)
    Rogers Michele (Northwestern University)
    Rotella Elyce (Indiana University)
    Ruud Paul (Vassar College)
    Safford Sean (University of Chicago)
    Sandbu Martin E. (University of Pennsylvania)
    Sapienza Paola (Northwestern University)
    Savor Pavel (University of Pennsylvania)
    Scharfstein David (Harvard University)
    Seim Katja (University of Pennsylvania)
    Shang-Jin Wei (Columbia University)
    Shimer Robert (University of Chicago)
    Shore Stephen H. (Johns Hopkins University)
    Siegel Ron (Northwestern University)
    Smith David C. (University of Virginia)
    Smith Vernon L.(Chapman University- Nobel Laureate)
    Sorensen Morten (Columbia University)
    Spiegel Matthew (Yale University)
    Stevenson Betsey (University of Pennsylvania)
    Stokey Nancy (University of Chicago)
    Strahan Philip (Boston College)
    Strebulaev Ilya (Stanford University)
    Sufi Amir (University of Chicago)
    Tabarrok Alex (George Mason University)
    Taylor Alan M. (UC Davis)
    Thompson Tim (Northwestern University)
    Tschoegl Adrian E. (University of Pennsylvania)
    Uhlig Harald (University of Chicago)
    Ulrich, Maxim (Columbia University)
    Van Buskirk Andrew (University of Chicago)
    Veronesi Pietro (University of Chicago)
    Vissing-Jorgensen Annette (Northwestern University)
    Wacziarg Romain (UCLA)
    Weill Pierre-Olivier (UCLA)
    Williamson Samuel H. (Miami University)
    Witte Mark (Northwestern University)
    Wolfers Justin (University of Pennsylvania)
    Woutersen Tiemen (Johns Hopkins University)
    Zingales Luigi (University of Chicago)

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  45. That said, we are now a department within the federal government, and we will have to adjust our business practices to reflect that:

    The target service time, from the customer’s order at the counter to the delivery of his or her meal, with change. The old target of 120 seconds will be replaced by a new, federal target of three hours.

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  46. Lars Larsen had it that the word was Bernanke/Paulson put a call to McCain begging him to come to D.C. and put pressure on the pubs to get a deal.

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  47. I wonder how many times all those academic economists ever made any predictions that turned out to accurate?

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  48. Bush: Congress Must Act to Save Stupid People

    by Scott Ott

    (2008-09-24) — The foundation of the U.S. economy could crumble, President George Bush said today, if Congress fails to approve a U.S. Treasury plan to take over foundering financial firms, a proposal which the president called “a much-needed 21st-century civil rights act for stupid people.”

    “To sustain this shining city on a hill,” Mr. Bush said, “we need to rescue the ignorant, irresponsible folks — from Wall Street to Capitol Hill to Main Street — who got us to where we are today. We must guarantee that no American suffers the soft bigotry of being forced to live with the consequences of his bad decisions.”

    The president, in remarks to the news media clearly aimed at reluctant Republicans in Congress, said, “Our financial system rests on a foundation of huge banks, brokerage houses and quasi-governmental agencies that followed Washington’s lead by gambling on long-shot, poorly-collateralized investments. Now this glorious way of life is threatened, and we must act to preserve it.”

    “We need to guarantee that the structures, systems, people and products that got us to this point won’t be tossed on the ash heap of history,” said Mr. Bush. “If these giant companies fail, then America will be left with nothing but thousands of small to mid-sized financial firms that made prudent investment decisions during the past 15 years.”

    The president added that, “Americans value the liberty they have to buy homes they can’t afford, to invest in securities backed by nothing but hope, and to draw six- and seven-figure salaries based on the courage to risk taxpayer dollars on deals that even the dealmakers don’t understand.”

    “It is a moral imperative that we guard the civil rights of these idiots,” he said. “If we fail, then we face the specter of free market capitalism run amok, and millions of Americans will feel the painful lash of personal responsibility across their backs.”

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  49. Be cool if the conservatives could demand and get that the profits go to paying down the national debt.

    Flying Pigs Territory, no doubt.

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  50. I like this gal more and more [Mark Steyn]

    An Alaska mayor writes to a California newspaper:

    “Dear Editor,”

    Palin wrote in 2002. “San Francisco judges forbidding our Pledge of Allegiance?

    They will take the phrase ‘under God’ away from me when my cold, dead lips can no longer utter those words.”

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  51. Wife says they even have short sales in Real Estate here now.

    (never heard the term before wrt Real Estate)

    Means house is upside down.

    Maybe you could pay for it with legal tender denominated in negative numbers?

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  52. Treasury Secretary down on one knee before Pelosi...

    Both McCain and his Democrat rival, Sen. Barack Obama, left without any joint endorsement. A beleaguered President Bush had to struggle to maintain order and reassert himself. And when Democrats left after the meeting to caucus in the Roosevelt Room, Paulson pursued them, begging that they not “blow up” the legislation.

    The former Goldman Sachs CEO even went down on one knee as if genuflecting, to which Speaker Nancy Pelosi (D-Cal.) is said to have joked, “I didn’t know you were Catholic.”

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  53. Short sales in local real estate?

    A new investment vehicle.

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