The Wall Street Journal explains: Lehman’s Demise Triggered Cash Crunch Around Globe
Australia: down 5%
Asian dealing rooms opened on Tuesday with a massive deluge of selling as investor sentiment across the region reeled from Washington’s stunning rejection of a $US700 billion bailout plan for Wall Street.
With the benchmark Japanese, Australian and New Zealand stock indexes plunging nearly 5 per cent from the opening bell, traders in Hong Kong, which opened more than 5.5 per cent lower braced for similar carnage as dealing began later in the morning.
It was worse in Taipei, where the first half hour of trading saw the main index pummelled by more than 6.3 per cent. Tokyo shares, breaking through levels of support like a knife through butter, struck a year-low as uncertainty reigned.
A friend of mine, on Facebook (“very liberal”), put up a status indicating he was happy at the failed bill. A friend of his asked why he was against it, and he said, paraphrasing, “$700 billion? Where’s my cut.” I think he was trying to be slightly cute in order to avoid a tense political discussion with a friend, but meanwhile, the world’s economy is at stake, and I don’t think this is the time for a random American to be coming off as quite so, well, cute.
Meanwhile, in informed-opinion-land:
This was a terrible bill. To take just a few particulars, why is there no reform of the government interventions that got us to this point in the first place? Why aren’t Fannie and Freddie being wound down — even after we’ve now had to make explicit the implicit, disastrous government guarantee?
Joseph Calhoun: “Trust Capitalism”
Last week Goldman Sachs raised $10 billion in new capital in one day. They sold $5 billion in preferred stock and warrants to Berkshire Hathaway and also completed a secondary offering of common stock that raised another $5 billion. Friday, JP Morgan raised $10 billion in a secondary offering to help pay for the Washington Mutual takeunder. Both of these offerings were oversubscribed, meaning that the companies could have raised more capital if they wanted. There is not a shortage of capital for well run financial companies.
There is, however, a shortage of capital for companies that have acted irresponsibly with investor capital in the recent past. For some reason, our political leaders believe this is a failure of the market, but isn’t this what should be expected from rational investors? Given a choice, why would a rational investor allocate limited capital to the losers rather than the winners? If capital is really as scarce as it seems, isn’t it better for our economy if we make sure that it is allocated wisely?
The biggest bank failure in the history of the United States happened last Thursday night and by Friday morning, it was business as usual. The only difference was the name on the door and the losses suffered by those unfortunate enough to invest in Washington Mutual bonds or stock. The taxpayers didn’t lose anything and depositors didn’t lose anything, only investors. That is how capitalism works in case everyone has forgotten.
That would be Peter’s mortgage!
[Wheat & Weeds] tallies up the fors and againsts: Scoring The Bailout
And, last, but probably one of the more convincing arguments, Bubblehead (from whom I’ve borrowed half my title):
I think I’d rather take my economic advice from Warren.