The Syndrum Files Gecopol update - Sep 29th, 2008

Just some headlines from today:

-- The largest government intervention since the Great Depression, the $700 billion bailout bill, was voted down in congress. 205 Yes - 228 No -- Republicans overwhelmingly voted no, while most Democrats voted yes. This is unprecedented. The treasury secretary, the president, the speaker, and the chairman of the senate finance committee all supported the bill. This is a popular uprising and the awakening of people who are finally realizing what is happening.

-- The Fed takes unprecedented action to increase dollar holdings worldwide in order to prevent a full collapse of the currency

-- Gold rises to $915 an ounce. Gold coin sales halted after retail rush

-- S&P plunges 7.2%, most since Black Monday Oct. 26, 1987

The No vote today is a victory for capitalism and democracy in America. This alone should give reason for hope. Let the bankers reap what they sow. Let the them suffer for their greed and ignorance.

If the bill would have succeeded, they would be walking away with our money. $700,000,000,000 for 138 million US tax payers, is over $5,000/person.
The bailout wouldn't have solved the structural flaws. It wouldn't have cured the irredeemable ilk that glue the present financial system in place.

It would have only delayed the inevitable.

Total systemic financial meltdown.

"It is no surprise as financial institutions in the US and around advanced economies are going bust: in the US the latest victims were WaMu (the largest US S&L) and today Wachovia (the sixth largest US bank); in the UK after Northern Rock and the acquisition of HBOS by Lloyds TSB you now have the bust and rescue of B&B; in Belgium you had Fortis going bust and being rescued over the weekend; in German HRE, a major financial institution is also near bust and in need of a government rescue. So this is not just a US financial crisis; it is a global financial crisis hitting institutions in the US, UK, Eurozone and other advanced economies (Iceland, Australia, New Zealand, Canada etc.)." - Nouriel Roubini

The dominos are just beginning to fall. The fight for manioulated markets is not yet over, but these are signs of a natural reordering of a skewed world economic and political system. The systems of checks and balances are finally striking back full swing, awakening our need to rethink our most basic assumptions about life. About the role money.

If we want to build a new financial monetary system, we have to let the old defunct system destroy itself. We will all feel the pain, but we will all walk away with lessons learned.

...the next banks/brokers in danger of collapse

This past week we saw the shit hit the fan. Lehman brothers went bust and AIG, the world's largest insurer had to be saved by the government; but this is still the tip of the iceberg. Q3 numbers should be out at the beginning of October, but banks are already finding it difficult to sugarcoat their situations.

Who's next? How many more banks are in danger of going under?

This, in a large part depends on their exposure to difficult to trade, value and sell junk -- illiquid assets -- dubbed "Level 3"

Check out Citi, and Fannie & Freddie. A few months ago Bear Sterns was just under Lehman Brothers in terms of level 3 assets as a percent of equity...

If we take the level 3 assets to equity ratio, or the level 3 assets to total assets ratio, we can see who is really in danger...How much longer can the rest hold out?

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