The Market Ticker

You'd think that with the ample proof that lying just leads to people shunning your debt and equity issues that global financial institutions would choose to come clean and tell the truth.

You'd be wrong.  Grievously wrong.

Now there is a proposal out there that threatens to make a mockery of the foolishness already in the market and multiply it a few times over:

"The action by the four banking agencies provides more favorable accounting treatment of so-called good will, an intangible asset that reflects the difference between the market value and selling price of a bank. The move is similar to a step taken in the midst of the savings-and-loan crisis that helped many institutions in the short run.

Over the longer term, that decision increased the overall costs of the bailout after the government took away the good will benefits. Under the proposal issued this week, the regulators would permit buyers of banks and thrifts to count some of the good will toward meeting their regulatory capital requirements."

Let me decode this for you.

If I buy a bank for $30 billion but the "net" value is only $20 billion, then there is $10 billion of "Good will" on the balance sheet.  That's the difference between what I paid and what "fair value" is for that particular transaction.

What this proposal - which will be adopted after only 30 days of comment - will do, is encourage banks to overpay for other banks in deals, because they will be able to count this "phantom" value toward regulatory capital requirements!

This is blatant, out-and-out fiction - another word for it would be "fraud".

Nor does it stop there.  Unable to control the FedFunds trading rate or LIBOR, Ben Bernanke has now taken to literally showering the world with dollars - $180 billion worth last night. 

In theory these sorts of swaps are inflation-neutral.  In reality what often happens is that the "other end" plays "blatant print" to cover their end of the swap, which looks neutral to their economy (since the money immediately goes over to The United States) and effectively is exported here!

I doubt this will do anything of value and it may be tremendously destructive.  LIBOR continued to move higher this morning even after this swap line increase was announced, saying quite clearly that the market isn't buying the effectiveness of this move.  The danger here is that if The Fed fails to get LIBOR and the EFF under control then they will have truly lost the capability to manage anything in this environment.  Add to that a rather explicit threat by China to put together a pan-Asian "new reserve currency" paradigm, plus the fact that agency spreads have blown out again and now are above where they were before Fannie and Freddie were nationalized, and you have all the ingredients for a true market panic.

Never mind that it appears that some "market participants" may be intentionally quoting false bids and asks on Agencies.

No, what you saw Monday and Wednesday was not a panic - that was the fat lady clearing her throat.

Watch the credit markets.  They're where the real "tell" is.

I suspect you're going to see a few day bounce here - the selloff yesterday was totally unexpected by me, as I expected the AIG bailout would get thunderous applause and what it got instead was recognition that the house of cards had the Big Bad Wolf breathe on it. 

That was a first during this credit crunch - the "short bus" (equity) traders figured it out fast that this wasn't "good news" at all.

But as the credit noose continues to tighten the upward fuel will wane, and we are very likely to see a "no bid" situation develop in some issues. 

It if develops in the overnight lending markets or worse, in the Treasury market generally, the game is over.

Don't think it can't. 

It can, and if the response to market conditions is to allow the lying to ratchet up instead of to force firms to face the truth it is simply a matter of time before it does.

Watch that video.

Watch it twice, three times if you have to.  Go look at the other video, and the other Ticker referenced in there.

Now understand that there is no solution to this fast and vicious destruction of America's financial markets and financial companies until and unless the lying stops.

It has NOT stopped and in fact has gotten materially worse.

Folks, this meltdown will not stop until either:

• ALL financials mark everything to the market, ALL OTC derivatives are traded on an exchange or declared void, and ALL balance sheets are transparent so we can determine who is broke and who is not.

OR

• The market has completely imploded with every financial stock worth zero as the hedge funds and others short each in turn into the ground, forcing each to be bailed out in turn.

Those are the ONLY TWO CHOICES.

Nothing else HAS WORKED and nothing else WILL WORK.  With each bailout you simply give people another target and a new way to kill the next company in line.  This process will proceed from firm to firm until NONE ARE LEFT and credit availability in the economy is ZERO.

The Fed has expended more than half of their balance sheet, in excess of four hundred billion dollars.  It has not stopped the cascade.

The Government has spent nearly a trillion dollars we do not have in bailouts and other miscellaneous nonsense.  It has not stopped the cascade.

Indeed, all that has happened is that the velocity of the crash has accelerated dramatically.

There is NO WAY to fix this through adding "more liquidity" - the problem IS AND HAS BEEN THE LIQUIDITY in that this allows BANKRUPT companies to continue to operate and LIE instead of forcing them into the open where they can be liquidated under Chapter 11.

We are here precisely because of the intentional provision of far TOO MUCH liquidity by Alan Greenspan and now by Ben Bernanke.

You cannot solve someone's drinking problem by giving them another bottle of whiskey!

THE LIQUIDITY SWAMP MUST BE DRAINED. 

We cannot have a "financial system" that is based on fraud and theft.  We cannot have "financial institutions" that claim to be solvent when they in fact are not unless they are able to make up values that are much higher than the REAL value for their so-called "assets".

Wayne Angell was on "Fast Money" tonight claiming that the balance sheet of The Fed is "infinite" and that "they can't be downgraded."

Wayne, you need to be charged with treason for spewing that crap on national television.

Sure, "in theory" The Fed's balance sheet is infinite - they can coordinate with Treasury to print as much money as they want. 

So was Weimar Germany's. 

The word for what Wayne was promoting on Fast Money this evening is HYPERINFLATION where you find that a wheelbarrow is worth more than all the $100 bills you can stuff into it.

Does anyone remember how hyperinflation worked out for them?  I seem to remember a gentlemen with the first name of "Adolf" that the world got out of that little exercise of an "infinite balance sheet."

Why does this path inevitably lead to political failure?  Because as soon as lenders discern that this is occurring they shut off credit entirely.

Think about it - you have $1,000 to lend out.  You detect that the government is printing and intentionally devaluing your money.  If you lend it out at 10% interest but the government is hyperinflating at 100% a year, you lose about half of the money's value every year!  So if you lend me that $1,000 when I pay you back you can only buy half as much as you could before!  For obvious reasons you're not going to allow that - you will instead immediately spend your $1,000 on something of physical value such as land before it can be debased. 

Hyperinflation kills all credit availability instantly for this reason and any credit-based economy immediately implodes.  This results in enormous and immediate mass unemployment and a resulting rupture of the social and political fabric of a nation.

As for not being able to be downgraded, you obviously didn't hear S&P today, which stated quite clearly that the United States "AAA" credit rating is not a right and must be earned.  Can't be downgraded eh?  Oh yes The Fed can be - along with everything else.

Folks, we require over $2 billion a day in foreign investment in order to pay our bills. 

This is what came out from China today:

"BEIJING, Sept 17 (Reuters) - Threatened by a "financial tsunami," the world must consider building a financial order no longer dependent on the United States, a leading Chinese state newspaper said on Wednesday.

"The eruption of the U.S. sub-prime crisis has exposed massive loopholes in the United States' financial oversight and supervision," writes the commentator, Shi Jianxun.

"The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States."

"Infinite Balance Sheet" eh?  See what foreign governments think of that sort of garbage?

Please understand - if foreign governments withdraw their support of our government funding via either scaling back their Treasury purchases or outright refusal to buy (or worse, they dump them on the market into this "fear spike" we're seeing now), we are absolutely and instantaneously screwed.

Michael Bloomberg, one of the few intelligent commentators out there (and a billionaire by his own hand) said exactly the same thing today:

"WASHINGTON (AP) — New York Mayor Michael Bloomberg is warning a 'next wave' of financial pain may come when foreign entities stop buying U.S. debt.

The billionaire mayor is speaking to an audience at Georgetown University, telling them it's not clear who is going to continue buying U.S. debt as financial firms try to cope with a crisis of confidence on Wall Street."

Mr. Bloomberg sees the same thing I do, but he's a bit more polite than I am about it.

Then there was S&P which made this quite clear as well:

"The $85 billion bailout of AIG on Tuesday by the U.S. Federal Reserve "has weakened the fiscal profile of the United States," S&P's John Chambers told Reuters in an interview.

"Lack of a pro-active stance could have resulted in further financial stress and put pressure on the U.S. triple-A rating," Chambers said. "There's no God-given gift of a AAA rating, and the U.S. has to earn it like everyone else."

Is that clear enough?

Congress MUST ACT RIGHT DAMN NOW. 

Congress MUST stop The Fed and Treasury from printing any more money.  The institutions that are insolvent must be forced into the open and put through bankruptcy.

We CANNOT wait until the next Congress and the election to stop this nonsense; that's five months in the future.  By then The United States could easily be quite literally broke and forced into a hyperinflationary spiral!

Debt that cannot be paid must be defaulted.

Yes, this is painful. 

Yes, it will hurt. 

But as you can see it is already hurting plenty; the "alternative" isn't working and CAN'T WORK, as I've been pointing out for over a year!

We CANNOT get a true value on the market until this occurs. 

It is NOT POSSIBLE.

In the BEST CASE if we do not act NOW, take your salary and assets and cut them by 30%.  Everything else - cost of food, gas, electricity, etc - remains the same.

Worst case?  Divide your salary and assets by three, but again, your costs remain the same.

If you are in the lower income echelon, you will go broke and become homeless.

If you are middle class, you will be living in a tenement or trailer.  If you're lucky.  If you currently own a home, you won't any more.

If you are upper-middle class, you will fall to lower-middle class, and all your luxuries will disappear.  No more Lexus or nice vacations.

If you are "well off", you will be living in a modest home, what we now call "middle class", and some of you will go broke outright, because your "well off" status has been achieved with leverage - which will blow up in your face.

If you find this unacceptable you must act TODAY to stop the government from proceeding down the path we are on.

Your choices are:

1. DO NOTHING and your employer and you will lose access to credit.  As he or she does, you will lose your job and ultimately everything you own.
2. GET ACTIVE RIGHT NOW - on the phone with Congress, Treasury, The President and the Candidates.  Take to the streets.  Organize a general strike with your friends and neighbors, and buy nothing for a day or even a week.  Make clear to your representatives that you INSIST that they stop this fraud and nonsense, forcing all of the fraudsters and phony balance sheets and lies into the open, along with removing all of the regulators who intentionally turned a blind eye to this mess, including but not limited to Geithner, Bernanke and Paulson.

If you do nothing, you will get #1, or worse, The Government will continue to face bailout after bailout until the printing reaches a point that foreign governments say "no mas" - at which point our government's ability to fund itself - and our current way of life and representative government ends.

If you're not prepared to see that happen, its time to act.  The start - but not all - of what you need to do is sign this petition.

Last night AIG was "rescued" with a huge "bridge loan", and the futures roared higher.

But then, overnight, HBOS was rumored to be in trouble over in Europe, and got nailed for 50% of its value.  Then there is chatter of a merger (gee, the criminals are playing with their Crackberries once again), and it spikes higher, erasing the loss with "interest."

Needless to say this does some ugly things to the stock market and the US Futures. 

Pre-market we have had a range of 33 points, or close to three percent!

As I write this the futures are down 7.5, or about 1/2%. 

Hmmm... perhaps that "roar" that I expected last night may turn out to be a lion, eh?

Also overnight we find out that The NY Fed had to issue nearly $80 billion in daily liquidity to clear some Lehman unwinding trades, advanced by JP Morgan. 

Oh, and just for a bit of "extra spicy sauce" there was a terrorist attack in Yemen against the US Embassy.

The Russian markets are halted for the second time in two days - this time "indefinitely" - after the index falls 10% within an hour, on the back of a 17% drop the previous day.  Apparently Vlad and Medvedev are figuring out the hard way about what happens when you invade foreign lands and start seizing private firms - people say "no mas!" and run for the door in a disastrous cascade.  Foreign capital has effectively withdrawn from the Russian marketplace, coming to the conclusion that it is radically unsafe to be there and extinguishing liquidity.

Welcome to Hell Russia; we may be about to join you there.  I heard a rumor that Beelzebub has  interesting accommodations available down there, and unlike Siberia, its rather warm.

Three-month LIBOR rose to 3.06%, but ominously the dollar overnight rate stands at 5.03% - an inversion that points to extreme stress in the lending system (and utter lack of confidence - and trust.)  The good news?  It fell 1.4% today - the overnight rate stood at 6.45% yesterday!

WaMu appears to be in serious trouble with regulators frantically trying to find a buyer.  Gee, you think?  NOW the regulators are panicking?  It was last April that I wrote about the problems with paying dividends in part out of capitalized interest - an event that should have set off big ringing church bells of alarm.  Now with the stock at $2 and change, someone finally wakes up.

And for only the second time in 25 years, Reserve Primary Fund, the oldest US Money Market fund in existence, "broke the buck" - an ominous development.  If you have funds in a money market and it is not backed by only Treasury debt, you need to consider moving that money right here, right now.  One fund that is fully Treasury-backed is run by Vanguard - VMPXX - and should be safe.

Again I repeat - where are the cops?

This entire mess - top to bottom - is one giant regulatory failure and as far as I can see there is no indication that our regulators have or are doing a damn thing to fix it.

I have for months been sending petitions and tickers to Congress and elsewhere - which anyone who has read this blog can testify to - pointing out that the leverage in the system is poisonous, irresponsible, and has to be taken down or we will run the risk of a cascade failure getting underway that could crush huge portions of our financial framework. 

Bear Stearns underlined the problem - 33 times leverage in a marketplace like this, and six months of warning after the first two big hedge funds they ran blew up, but the firm does nothing to address it?  The rest of the financial system does nothing?  The regulators do nothing to get in front of this and demand that these institutions de-lever and take down risk?

There is effectively no regulation in the markets and hasn't been for twenty years. 

In theory banks are supposed to have a 10% reserve but in fact we have removed regulations that require this reserve to be actually maintained through various forms of cheating, including sweep accounts and allowing essentially unlimited leverage via accounting fictions - that is - LIES.  The effective reserve level in the banking system is in the low single digits.

This looked great when times were good and led to insane "earnings" that were in fact not real, as they were achieved on the back of this "leverage", justified by the belief that property prices would always go up at several times the rate of increased wages - a flat mathematical impossibility.  That regulators refused to step in and put a stop to this horsecrap is a screaming indictment of all branches of government involved, including the OTS, OCC, FDIC, Federal Reserve, Treasury and both houses of Congress.

Yet even today Congress does not get it - Barney Frank and others in Congress still want to allow unlimited leverage in housing via the "Down Payment Assistance" game - another outright accounting fiction - is outrageous.

Folks, personal leverage in homebuying must be limited to 5:1 by federal regulation - which means we must enforce a 20% cash down payment requirement. 

No ifs, ands or buts - period.

Bank leverage must be limited to about 12:1 via strict 10% reserve requirements with no exceptions.  No more sweep accounts, no more off-balance-sheet exposures, no more BS, and this must apply to investment banks and insurance companies - anyone who has access to a public guarantee of performance of any sort, including Fed liquidity. 

PERIOD!

To put not to fine a point on it, it appears that AIG had OTS - the Office of Thrift Supervision - as their "global" regulator.  Where the hell were they in allowing these clowns to write FIVE HUNDRED BILLION DOLLARS worth of OTC derivatives?

I have no way to judge how many other regulatory failures similar to this have taken place, and must assume the answer is "all of them."

This, unfortunately, means that the FDIC's insurance fund (which doesn't really exist; it has been siphoned into the Treasury's general fund just like Social Security "deposits") is woefully inadequate, with some people now claiming that we need five hundred billion dollars, or more than ten times the FDIC's claimed "reserves", to cover the expected bank failure rate.

Folks, that would imply that somewhere between one and two trillion dollars worth of aggregate bank assets are going to go down the tube given the loss rates within the FDIC since this crisis began last summer.

I have, since this mess began last year, been very concerned that we could see what amounts to a global forcible unwind of all this leverage resulting in catastrophic losses for anyone who requires access to credit, or who is in debt and leveraged either personally or corporately.

Unfortunately it appears that even my "worst case" forecasts may have been too optimistic.

S&P this morning was out saying that the US "AAA" Credit Rating must be earned and is not guaranteed.  In addition, this morning Treasury announced that it is going to issue a "special auction" of T-bills for the explicit purpose of adding to The Federal Reserve's balance sheet, which is a clear statement that The Federal Reserve is out of money.

But The United States doesn't have any money! 

We are the largest debtor nation on the planet and we must stop this RIGHT NOW!

The United States Government must step in here and now, in all of its regulatory arms and forms, and insist on the following from all financial institutions:

• An immediate end to all "Level 3" asset marking, with all claimed "assets" marked to the market, so that investors and regulators can determine the state, today, of every firm's balance sheet.
• An immediate repatriation of all off-balance-sheet vehicles, without exception.
• All banks and other regulated entities, including investment and commercial banks as well as insurance companies, must be forced to de-lever to no more than 12:1 via asset sales or other forms of balance-sheet shrinkage, as necessary, with that process beginning now, with criminal penalties for failure to comply.
• A federal law must be passed to prohibit granting of mortgages with less than a 20% cash down payment.  All forms of "gaming" this system including FHA, VA and "Down Payment Assistance" must be terminated immediately.  It is absolutely critical that consumer balance sheets be protected in this fashion because we need consumers to remain solvent or we run the risk of a 1930s style depression setting in as consumers bankrupt en-masse.

The extra liquidity added since August must be withdrawn now.  If this causes failures in the financial system then it does. 

WE MUST PROTECT THE FEDERAL GOVERNMENT'S CREDIT AND ABILITY TO RAISE FUNDS.

The game-playing must stop RIGHT NOW. 

We are literally on the precipice of a global financial meltdown and the regulators and government have ignored the risks, attempting to "paper them over" with "rate cuts" and "liquidity injections."

As we have seen this approach has not and cannot work; we have watched The Fed literally decimate its own balance sheet in this puerile and foolish attempt to hide the rot within the system - a rot they are fully aware of and intentionally refusing to address.

Congress has as its proper role, per the Constitution, the right to coin and regulate money.  The Congressional delegation of this power to The Federal Reserve does not provide it cover from its abdication of responsibility, and we as Americans must not permit this state of affairs to continue.

The responsibility for this mess is ours.  We have a duty to stand up here and now, right now, TODAY, as Americans.

If Congress refuses to act TODAY - not tomorrow, not next week, not next year, but right now, TODAY, we must as Americans put aside the petty partisan considerations that the political parties use to divide us and band together, going on a general strike. 

We must insist that our legislators - our government - force these firms to stop lying and take down their leverage and risk RIGHT NOW, before we wind up with hundreds of failed banks and a decimated economy.

If we cannot do so with phone calls, letters, faxes and petitions, then we must do so by joining together to halt commerce in the United States through a refusal to provide our labor, when the fruits thereof are going to be continually abused by our government agencies in a continuing effort by these institutions to lie, cheat and steal from all of us.

If we do not stop this insanity RIGHT NOW there is a very real risk that the remaining banks and other financial institutions that make it possible for your employer to operate will all collapse, at which point you will have no job, no money, no credit, and no means to do anything about it.

The government has already spent or "secured" nearly one trillion dollars in "bailouts" - money we do not have - over the last year - a nearly twenty percent increase in the total federal debt which has been attached to you, your children and grandchildren, for the direct and sole benefit of these fraudsters.

YOU HAVE HAD NEARLY ONE TRILLION DOLLARS STOLEN FROM YOU THAT WE DO NOT HAVE AND THERE IS NO INDICATION WHATSOEVER THAT IT IS GOING TO STOP UNTIL THE UNITED STATES GOVERNMENT LITERALLY IMPLODES AS FOREIGNERS, WHO WE NEED TO FUND OUR GOVERMENT OPERATIONS TO THE TUNE OF MORE THAN $2 BILLION A DAY, WALK OFF IN DISGUST.

How much more has to be robbed from your wallets before YOU will stand up and say NO MORE DAMNIT!

The market will roar tomorrow.

Now here's my advice - sell any and all financial stocks - anything that may have written CDS in the market - into the spike tomorrow.

Do it at the opening bell, and do not look back.

Here's why:

By getting warrants that massively dilute existing shareholders what Paulson has done is paint a target on the back of every financial firm in America.

All of them.

Let's say I'm a Hedge Fund.  I want to make a billion dollars.

I pick on, oh, Goldman Sachs.  I know they wrote a bunch of CDS.  I, and a bunch of my hedge fund buddies, short the firm's stock into the ground.

Eventually, this will force a ratings downgrade.  As soon as it does, Goldman can't make the capital calls on the CDS, and is forced to ask for help.

They get help and the common stockholders are wiped out.

I, Mr. Hedgie, say "thank you very much" and cover my short at a huge profit.

Then I repeat this with the next firm.

I get rich and buy me a new yacht, while the common stockholders in the firms are destroyed.

This will happen to every firm in America as soon as this is figured out by the Hedge Fund community, which, incidentally, will take less time than it took me to write this and record the attached video.

Sell your financial stocks into the spike tomorrow folks.  No firm that is "seriously interconnected" in our financial system is safe from this, and this "risk" was wholly manufactured by the actions of our government this evening.

You've been warned!

PS: Here's the press release.  3 Month Libor (currently 2.88%) + 850 basis points (+8.5%)?!  Wow!  I have better rates than that on a credit card; that's slightly over 11%!

You're very likely to hear it.

AIG is the 900lb Gorilla in the China Shop, and he's full of piss and vinegar.

What is AIG?  The largest insurance company in the United States.

So what would make AIG detonate, and why would AIG blowing up kill the financial system?

Because AIG, like so many other insurance and similar companies, wrote Credit Default Swaps to virtually anyone, had inadequate (read: no!) margin supervision, and they now are in liquidity trouble.

In short, they levered up their balance sheet like the rest of the geniuses on Wall Street, and like most of these other clowns, aren't well-enough capitalized to survive a ratings downgrade.

To put this in perspective they are now trying to put together a 70 billion dollar credit line from multiple banks in order to allow AIG to be able to post collateral.

$70 billion dollars?!  Yep.

These folks have a one trillion dollar balance sheet.  And, like the rest of the financials, they have operated in a "no regulation" world for the last 20 years, and thus were running hog-wild making money hand-over-fist writing these swaps.

The worse news is that essentially everyone on Wall Street - and Main Street - is in some way connected to these folks.  Either as a swap-buyer or as a buyer of some other form of insurance.  So if and when they "boom" we have an instantaneous mess that hits everyone at once.

Welcome to reality folks.

I have warned about unbridled leverage for over a year, since The Market Ticker began publication.  This disease has infested every corner of our financial system, from the corner store to the investment banker to the insurance company.  None ignored the "vast profits" they could make, and to a lesser or greater extent they have all dug very deep holes from which there is no escape.

One by one the explosions of one firm will set off more blasts, until the leverage is reduced to safe levels, frequently by bankruptcy.

As each firm falls its credit default swaps become "zeros", and the people on the other end either have to be able to net it out (e.g. if the detonated firm had an opposite position with someone else, and you can find them, then you can rewrite the deal between the two of you - no harm, no foul) or someone has to pay.  Of course if the swap is on the dead firm's debt, well, that poor bastard has to get out his wallet.

The bad news is that he may not have anything in it, and then the other guy both has a lawsuit and an exposed position he thought he was hedging.

Neither political party has had the will to get in front of this and put a stop to it.  I have been writing, faxing, and petitioning (along with many of the readers of this blog) Congress and Regulators over the last year, pointing this out the entire time, and insisting that Congress and Regulators had to get in front of this problem and put a stop to it.

Instead all we've seen is Congress and Regulators, including Treasury, the FDIC, the OTS, OCC and The Fed stick their fingers in their ears and go "la la la la la la la la la".

Now we are discovering that the "exigent circumstance" facilities that The Fed has put in place, and Congress has permitted, have in fact made the problem worse because instead of forcing everyone to take their marks and deleverage, they have instead allowed everyone to play "hide the sausage" and continue to lie, cheat and steal.

That is exactly what they did but the fuse continued to burn and has now gone inside the box.

In turn we have now seen Fannie, Freddie and Lehman detonate.  The fuse is inside on AIG and as it approached the corner of the container Merrill snipped theirs (temporarily anyway) by committing an obscene act with Bank of America.

If and when AIG detonates the impact will be global - and substantial. 

There is $440 billion of counterparty risk embedded in AIG; this is the sort of BS that we allowed in that this firm alone was allowed to amass this much centralized risk to the system without the capital to back the swaps it wrote, and if there is no resolution to the AIG mess it is reported that they will be filing bankruptcy tomorrow. 

Such a filing will trigger a "credit event" on the entirety of the $440 billion, in addition to impacting the insurance policies the firm wrote in the "real" economy - auto, fire, life insurance, annuities, business insurance and everything else!

The hubris displayed by these executives and regulators is outrageous - and in many if not most cases deserving of indictment. 

Both Presidential Candidates, and indeed, the entirety of the House and Senate finance and banking committees, have received dozens of my Tickers documenting these abuses and the fact that these "extraordinary facilities" have been abused and no transparency has in fact occurred.

This morning we learn that one of the reasons that BAC said "no mas!" to Lehman was that their marks were, in BAC's opinion, indefensible. 

Folks, there is one and only one way to stop this crap, and that is to ban "Level 3" and off-balance sheet garbage entirely, as I have repeatedly called for since last fall in both Tickers and petitions. 

We had Enron years ago as a consequence of permitting this crap and now we've got the entirety of our financial system on the verge of imploding as a consequence of our lawmaker's refusal to put a stop to this outright FRAUD!

Senator McCain was on CNBC this morning claiming that "we're all at fault" (no, really John?) and yet what has he done about it as a sitting Senator?  Where are your bills to address the fraud Senator?

Senator Biden (Barack Obama's VP pick) was on CNBC this morning talking about how the real cause is "the war" and other similar garbage.  Senator, where are your bills to put a stop to the off-balance sheet crap and outright fraud in our financial system?

Senators, here is my solution, as I have said for over a year in multiple petitions and tickers:

• No off-balance sheet anything.  Period.
• No Level 3 anything.  If you can't get a bid on it in the market, its worth zero.  If you can get a bid, that's its value today.  If it goes up in value tomorrow, fine, but today, that's its price.
• No off-exchange derivatives.  You want to trade it, you can do it on an exchange with a central clearing house.  This guarantees that margin supervision will be enforced because the "guy in the middle" is going to demand it.  The OCC and DTC have done a damn good job of guaranteeing margin supervision.  Bring that level of supervision to all derivatives and do it today.  As a transition "tool" declare that any derivative not traded on a public exchange has a valuation and coverage against any other asset of zero.
• All "assets" must be disclosed and marked daily.  No exceptions.  My account must be marked every night to the market.  So should everyone else's, especially those who are trading with (or are) regulated and/or public entities.
• No exceptions.  You cheat, you go to pound-me-in-the-butt prison.  PERIOD.

Oh by the way, if our CONgress and President don't cut this crap out, right now, we are going to go down the drain.  The TIC data was out this morning and made clear that confidence is being destroyed - quickly - in the United States.

Agencies, corporates and equities are all down big, and Treasury purchases are declining.

Cut the crap right now Washington, or that $2 billion a day we need to meet our budgetary requirements is going to disappear. 

How much more CLEAR of a warning do you need?