Anybody believe the cumulative strains of the crisis might cause the EMU to fall apart?

All the cross-border loans will make that one twice as fun to clean up.

so is this at all a function of our problems?

Maybe our comrades in China will step in and provide the money. Or..... Comrade Paulson seems intent on bailing out anybody and everybody. Maybe the Peoples Treasury of the USSRA could give them a few gigabucks to get by with.

Issues, issues, issues. . . TED spread almost at 4.0.
http://www.bloomberg.com/apps/quote?ticker=.TEDSP%3AIND 

The Euro finance leaders have concluded their meeting with words rather than actions.

This could bite them very badly.

The Europeans pushed America for the Tarp Plan. Didn't they realize it would do next to nothing for the credit markets ?

Just about everyone here at CR knew it ...

Does the TED spread get updated outside of markets-open hours?

No ... either T-Bills , Libor or both have to have an open market to change the TED.

Some here at CR have noted that when only one is being traded there is a disconnect of real value and that both should be trading for the measure to be current.

Hypo's Depfa is a major liquidity provider (and one of the few, anymore) for US municipals.

Seriously, folks. There is one thing and one thing only that determines the value of a currency: the supply of it.

~~~~~~~~

Way too simplistic ...

A currency has many variables as to its value. The underlying productivity of the economy. The trade balance. The stability of the country. Comparative advantage disadvantage to other currencies. In the US case markets being derived in said currency . and other conditions...
.

“I’m not worried about Fannie and Freddie’s health, I’m worried that they won’t do enough to help out the economy,” the chairman of the House Financial Services Committee, Barney Frank, Democrat of Massachusetts, said at the time.

There you go, noble leader of bailout plan. Priceless.

The key to this whole mess is fractional reserve banking ... the bankers will send the world into a depression to keep their money making monopoly ...

We can't get out of a debt insolvency by creating more debt with the magnitude of debt all sectors of the economy and government are in .. worldwide.

Governments around the world need to take back their sovereign right of money creation ...

Europe is currently holding up well. What will happen once Britain and Spain hit the wall - who knows.
gw
~~~~

I beg to differ ... The European economy is crashing ... even Germany ... England, Ireland, Spain, Portugal, Italy and France have serious RE bubbles as well.

And to think I was soundly thumped yesterday for talking about the disintegration of the EU.

Also from Bloomberg:
European Leaders Pledge to Continue Bailouts, Toughen Rules - Bloomberg.com

European Leaders Pledge to Continue Bailouts, Toughen Rules

Oct. 4 (Bloomberg) -- European leaders pledged to continue bailing out their own nations' banks, stopping short of a regional rescue effort, in response to the global credit crisis.
...

``Each country must take its responsibilities at a national level,'' German Chancellor Angela Merkel said at a joint press conference after the summit.

The centre cannot hold...

``Each country must take its responsibilities at a national level,'' German Chancellor Angela Merkel

>
nice!

The situation is far more complex than I can describe.
Hawley Smoot

~~~~~~~~~

and it is changing by the hour ... we've had 2 decades worth of financial news the last two weeks.

Everybody resident without documentation in Western countries had better get legal or be prepared to leave at a moment's notice.

Life as we know it is about to get very ugly.

Debt collectors are going to be greeted with keys and Howls of Derisive Laughter.

Buckle up folks, the predicted currency disaster is going to make the current financial crisis look like a cakewalk.

We are about to experience violent financial dislocations.

Ready set, trade!!!

Someday this war's gonna end...

What about Ireland, Peak, just guaranteed €400Bn of property back debt.

Good question. I suspect other countries will follow suit, so it will mostly be a wash. And Ireland is pretty small compared to the EU as a whole or France and Germany. If it IE goes BK, then it wouldn't be too hard to bail out.

I don't think it will be easy and there will be a lot of heated discussions, but I think the EU will survive, and the Euro with a few departures. Again, the benefits of each have been tremendous.

All is not lost. As a side note, can anybody tell me why the &%$#@! This American Life is one of few outlets that has decent coverage of this crisis?

So it was surprising to learn on Friday that, despite intense opposition from the powerful banking lobby, language authorizing the government to use a stock-injection plan did make it into the final version of the bailout bill. The law does not make a stock-injection plan mandatory, but it does leave it as one option that the Treasury secretary can use when bailing out a distressed bank.

That does make some amount of sense, as this was the type of tool used with AIG.

From the Fannie/Freddie article:

Between 2005 and 2007, the company’s acquisitions of mortgages with down payments of less than 10 percent almost tripled

This is misleading, at best. Some time ago CR posted some historical data showing the GSE's "risky mortgage" percentages had been constant and relatively low (less than 20%) until the beginning of 2007. Then during the first half of 2007 GSE risky mortgage rates absolutely EXPLODED, climbing to about 70% of mortgages (hard to be exact; there were several not-entirely-exclusive categories). The GSEs kept making risky mortgages at insane rates until early 2008, when the risky mortgage rate plummeted back to where it was before.

Although risky mortgages sank Fannie and Freddie, it wasn't a longterm systemic problem. It was a dreadful mistake, only happening in about a 15 months period in 2007-2008. Basically they bought vast numbers of risky mortgages during ludricrously overvalued prices and unmatched and unbelievable fraud rates. The securitization bubble blew prices so high that 2005-6 might have taken the GSEs down, but that was a problem with Wall Street, not the GSEs.

And it is interesting that many people see no problems with expanding deposit insurance, which is an open-ended contingent liability of the government. (Note contingent liability = off balance sheet risk.)

Probably because they do not recognize how big the banking problem really is. They are still living in the world of bank failures being an isolated event.

What does it mean that Italy and some other Eurozone states are hurting? People can't afford stuff? People more unemployed than usual?

Because I live in South Fla. I hear all sorts of immigrant stuff, tho I don't do immigrantion. Cubans, of course, if they can get here, they are legal. Cubans are the most successful immigrant group in history. The different bunches of South Americans look down on each other, for reasons I find incomprehensible. Nicaraguan girls, for example, are supposed to be sluts. I haven't the faintest idea why. My Cuban secy, who is married to a Columbian was expressing dubiousness because someone was or looked like, an Indian. Ummm, what's wrong with being an Indian (of the S. American variety)???. No answer of course.

Anyhow, let me tell you, as of now, they will do anything to get and stay here. It doesn't count as being immoral. They will say they are married, they will stay illegally, they will work off the books. In one sense, I don't blame them at all.

I understand that illegal immigration is slowing up, and I suppose it will continue to do so.

I also will say that our immigration policy is a total and complete failure, and we have RIGHT NOW, as close to completely open borders as makes no difference. A few people are sent back for show, and we are paying for that ridiculously expensive fence. But eventually, everybody who wants to come here gets here.

Chairman mao, the "Cultural Revolution" is going to look like a day at the beach, comparing to what's coming to China. Keep dreaming!

Willem Buiter on Ireland's move to guarantee deposits:

“The Irish guarantee is the most ‘in-your-face’ beggar-thy-neighbour provocation since medieval armies catapulted bubonic-plague-ridden corpses into the cities they were besieging.”

You think he's pissed? DAMN!

Fair Economist, from what I understand the GSEs also invested in complex mortgage securities. What impact do you think those investments are having on the GSEs?

"Congress will probably bailout enough foreclosures in an attempt to put a foot under house prices."

How many would that be, exactly? 10% of them, 20%, 50%?

I know of a street in Manassas, Virginia, where 64 of the 96 townhouses are for sale, all of them short sales or foreclosures. How does buying, say, 32 of them put a floor under house prices?

What do you do with them, once purchased? If you rent them, you drive 32 other landlords into foreclosure.

Plantagenet,
Bailout as in the home owners keep the house but govt takes over part of their payments, or some other equally stupid program.

@Jack Staub:
I'm not familiar with the details of the GSE's MBS investments. Those could be a source of significant losses committed to before 2007. However, if that did pull the GSEs under, I'd still lay the blame on Wall Street. Lots of people got taken in by the toxic securities. I would be very surprised if the GSEs bought any securities without very high ratings.

BeerLobbyist

You paying $0.99/six pack? That beer must really suck.

@Fair Economist: Yes, I believe all MBS purchased by the GSEs were highly rated, many of them backed by AIG, MBIA, and ABK. The rating agencies learned a lesson there that they're not likely to soon forget!

lawyerliz:

"what's wrong with being an Indian (of the S. American variety)???"

I had this explained to me by an ex-GF who was in the third-generation of a Mexican immigrant family. What she described was a blood-based caste system in which people are judged by how much Spanish blood they have vs how much South American Indian blood. Even families with a substantial amount of Indian blood like to think of themselves as "actually Spanish, not Mexican". It was essentially conquistador logic. Indians are looked upon as "stupid peasants".

When I hear people talk about about racism as an American disease, I always wonder if they have ever looked at South America.

chairman mao, if it hadn't been for the U.S.A. you woud still be eating each other. (And not in the American sense of that expresion)

Racism isn't limited to the USA but it is very alive and well here. Palin's recent comments on Obama (he isn't like you or me...) are thinly disguised racism which is now probably the only hope the McCain ticket has, given the collapse of the economy.

Actually, I don't know that Pilgrims were all that successful, and at any rate they were first, so success means they lived & reproduced.

Jews were ultimately very successful.

Cubans made it up to average in half a generation, and some came here with only the shirts on their backs.
My best client came here as part of operation Pedro Pan. He was feisty to say the least as a kid & wouldn't shut up and if his parents hadn't sent him away, I am quite sure he would be dead now.

Jews came here with SOMETHING even if was only a couple of changes of clothes and a pair of pajamas. Of course, there was (and is) prejudice.

I'm just saying that to people in Cali and the southwest, apparently Spanish speaking is a code word for unsuccessful and badly educated, apparently. Doesn't me the same thing to me at all. My only gripe is that Cubans speak a really terrible version of Spanish, to the point where I've given up trying to understand them. Colombians, Venezuelans Equadorians, Mexicans, Puerto Ricans all speak much more clearly. When I complain to same about Cubans, they reply that they can't understand Cubans either.

It seems to me that the question of -- how thinly capitalized are these banks that they can't do a gvt brokered bailout / how radioactive is Hypo -- is going to really throw some cold water on the CP market come Monday.

Farewell short term paper, we hardly knew thee?

Moin from Germany,

here is the money quote from their conference call in August 2008

Quote CFO at this presentation

" We take advantage of the very favourable conditions of the repo market....."

This came after they ( depfa ) ramped up their repo funding 44 percent since the end of 2007 to a whopping € 89 billion.....

It seems the little more extra yiels at this time hasn´t paid of.....