Finally, for all you Joe Six - Packs out there playing a drinking game, I would just like to add...maverick!

From adennak.com

This Just Requires a Link, Nothing More to Be Said

Really?

Fed Pumps $900 Billion With TAF To No Avail

Today, we are seeing the beginnings of the true failure of the banking system. The Federal Reserve has transitioned from the lender of last resort to the central bank. In fact, the Fed has now attempted to lend to banks in one day a sum greater than its entire balance sheet--and failed. Naked Capitalism and others reported that the Fed lending facilities have actually become counterproductive, and today's evidence significantly substantiates their hypothesis. Here, I will attempt to construct a quick time line of the most recent events over the weekend, so as to get a sense of how we got here:

• Emerging markets fail
• Europe evidences the consequences of its intentional lack of plan for a banking crisis under the euro
• Credit markets price to become the most expensive interbank borrowing environment on record.
• Commodities markets plunged, pricing in a total global economic recession.
• The futures markets have priced in a 100% likelihood of an inter-meeting Fed rate cut.
• And all of this is just part of the story.
  

So, my analysis, in keeping with the non-hyperbolic traditions of this fine blog: The world is melting.

In Soviet Rasha ve hav tanks in amerika you hav fainanshl kraisis.

More Wandel Jugend

Cubs Lose, Sox Win

What were the odds the Sox, who were predicted to finish fourth in their division, would have a 2008 season that lasted longer than the Cubs, who were predicted to win their division and, in fact, ended the regular season with the best record in baseball?  The Cubs choked harder than any other moment in their 100 year World Series drought, and that's saying something.  (I would describe my amusement, but I have neither the vocabulary nor the malice, well, maybe the malice.) Suffice it to say to the Cubs, "Happy anniversary." Anyway, here's to the Chicago baseball team that did not throw a rally simply because it won its division. Rather, the last time the Sox threw a rally it involved ticker tape and a World Series trophy.  Go Sox!

Dodgers 3, Cubs 1.  Dodgers sweep Cubs in NLDS.  Slugger Aramis Ramirez goes 2 for 11.

 

Sox 5, Rays 3.  Rays lead ALDS 2-1.  Jenks closes the 9th with a called third strike. 

Iceland: When Too Big To Fail Becomes Too Big To Rescue

By: Felix Salmon
Oct 3 2008 5:50PM EDT

We know that credit ratings agencies made enormous errors over the past few years when it came to rating structured products. And of course it's never easy to rate leveraged institutions, like banks, which are susceptible to runs. But what about the more conventional credits, like sovereigns?

Last year, Moody's briefly gave all of Iceland's major banks, including Glitnir, a triple-A rating, on the grounds that if they ever got into trouble, the Icelandic government would bail them out. After much ridicule, Moody's changed its mind. Clearly, it was silly to treat Iceland's banks as though they were just as creditworthy as the sovereign.

Fast-forward to today, and Iceland has indeed bailed out Glitnir. But here's the thing: Iceland's credit default swaps are now suggesting that the sovereign itself is a distressed credit.

Contracts on Iceland's debt jumped to 17.5 percent upfront and 5 percent a year to protect 10 million euros ($13.8 million) of bonds.

This is not how triple-A sovereigns behave. It's as though the analysts at Moody's were only able to see one step ahead, and not two: they could anticipate that Iceland would bail out its banks, but they couldn't anticipate that when a tiny country bails out a bank whose assets vastly exceed the country's own GDP, then the sovereign itself loses much creditworthiness. One scary datapoint: the assets of Kaupthing Bank amount to 623% of Iceland's GDP, which is possibly why its own credit default swaps are trading somewhere over 2500bp.

How bad can things get in Iceland? Here's what one local emailed Tom Braithwaite:

They are fighting powers that they are powerless to fight. It's like tackling a storm raging in the sea with a teaspoon.
The main supermarket can't get imported goods because they have no currency. The shops are half empty. One of the store managers has advised people to start hoarding. We're running out of oil. And winter came last night - about a month early.

Received opinion has it that if Iceland backstops the Icelandic banks, then the other Nordic countries, or someone, will backstop Iceland. Which might be true: we'll find out "very soon". But there's no news yet.