Evening News

I'm going to need to hire someone to handle the evening shift around here. The pay is nonexistent but you get to blab to a worldwide audience about financial distress from 5 PM to 5 AM. Apply within!

Two companies getting pole axed (20%+ for each today) Wachovia (WB) and Morgan Stanley (MS) consider a marriage. My open question - will that stop the shorts? Won't they just buy up the debt protection of Wachovia and say "now you are taking on your own risk plus Morgan Stanley's?" and cause more panic? I don't know. I mean if you can incite panic in each individually - why not together? Then S&P can downgrade on the "signals the credit swaps are sending us" and they can go to $0 together in 1? Or is this just making it easier for the government to bail them out - instead of 2 Sundays they can do them together in 1 Sunday? And instead of 2 bailouts to send to Congress, it is only 1? Genius.

• Morgan Stanley, one of the two last major American investment banks, is considering a merger with the Wachovia Corporation or another bank, according to people briefed on the discussions.
• Morgan Stanley's [MS 21.75 -6.95 (-24.22%) ] chief executive, John J. Mack, received a telephone call on Wednesday from Wachovia [WB 9.12 -2.39 (-20.76%) ] expressing interest in the Wall Street bank. Morgan Stanley is considering other options as well. Other banks have also expressed interest in Morgan Stanley.

Washington Mutual is up for sale via auction (and you can bet Uncle Hank was in there arm twisting this one).

• Washington Mutual, the struggling savings and loan, has put itself up for auction, people briefed on the matter said Wednesday.
• Goldman Sachs [GS 114.50 -18.51 (-13.92%) ], which Washington Mutual has hired, started the auction several days ago, these people said. Among the potential bidders that Goldman has talked to are Wells Fargo [WFC 33.43 -1.50 (-4.29%) ], JPMorgan Chase [JPM 35.77 -4.97 (-12.2%)] and HSBC.
• TPG, the private equity firm that led a $7 billion cash injection into Washington Mutual [WM 2.01 -0.31 (-13.36%) ] in April, said Wednesday afternoon that it would waive its right to be compensated if the bank sold more shares to raise capital. “Our goal is to maximize the bank’s flexibility in this difficult market environment,” TPG said in a statement (Uncle Hank made a call on this one too) The April deal gave the investing group roughly 822 million new shares, diluting existing shareholders by nearly 50 percent. TPG bought shares for roughly $8.75 each. Those shares have since fallen to $2.14 a share, meaning that the value of the investor group’s holdings at Tuesday’s close had declined 75.5 percent.

You see where this is heading right? We are going to combine our top 50 entities into 5 super companies - and then when the short buy huge amounts of credit swaps, causing panic - the government will be forced to nationalize all 5 as "too big to fail". But instead of 50 bailouts it is only 5 more. Ah, the master plan revealed.

November 29, 2008

Dear Congress,
We know we promised there would be no more. We know we said the bailouts would end. But the guys at SEC are still asleep and the guys at S&P insist on downgrading stocks based on credit default swaps that are rigged by short hedge funds, but we digress. We now have a problem with "The National Bank of Wachovia Morgan Comerica BB&T and Wells Fargo Trust" After the 5 way mergers of the late September period - we thought the problems were over. We were wrong. Since we are down to only 5 such banks in America we ask you for 1 last bailout. The combined cost will only be $800 billion and we plan to fund this through selling more Treasuries. Yes there are always new suckers to buy our debt. So this will leave us with 4 banks left in America. I realize this will balloon our budget deficit but I believe we usually put these transactions in the 'special accounting book' since they are temporary in nature and hence that $800 million does not count. If I can only get to Jan 1, 2009 I can be out of here and the next guy who takes this job can deal with the remaining 4 mega banks we created. So please... one last time - for old times sake - a bailout for the Gipper?

Sincerely,
Hank Paulson