Harry Reed: No One Knows What to Do

Well, that's comforting. I'm much rather prefer the current administration's "everything is fine - the fundamentals of this economy are strong - this is just a small pothole" ;)

• The U.S. Congress is unlikely to pass new legislation to overhaul financial regulations this year because ``no one knows what to do,'' Senate Majority Leader Harry Reid said today.
• ``We are in new territory. This is a different game,'' Reid said at a briefing in Washington. Neither Federal Reserve Chairman Ben Bernanke nor Treasury Secretary Henry Paulson ``know what to do but they are trying to come up with ideas,'' Reid said. (well at least someone speaks the truth)
• Bernanke, speaking to lawmakers last night, called for a review of government regulations to address the current financial crisis, according to those who attended the meeting.
  
• White House spokeswoman Dana Perino said today the Bush administration is willing to consider a suggestion in Congress to have the U.S. buy distressed mortgages, (aha, my call that this would be the eventual action a year ago is coming closer to truth by the day)
• Congress is planning to adjourn Sept. 26 and other Democratic leaders have said they hope to avoid a session after the Nov. 4 presidential election. Reid said that Paulson ``recognizes that nothing is going to be done this year.'' ``It is a multitrillion dollar issue that's facing America and we can't do it on some timeline that is unrealistic,'' Reid said. (translation: gosh darnit we will not work past Sept 26th - we have districts to get back to and re-election campaigns to focus on. We don't care if the US financial system is crumbling! I need to get re-elected and that's job #1 - I have lobbyists families to feed!)
• Reed also called for a second economic stimulus package this year, saying if the federal government can put up billions to help companies such as AIG, it can afford to help out struggling Americans. (but we do have time to steal more money from your grandchildren)
  

So your government now owns Fannie, it owns Freddie, it owns AIG, it now is taking equities as collateral from banks in return to Treasuries (I wonder how that worked out this week) and last it will own mortgages directly instead of through the veil of Fannie/Freddie.

But other than that, the economy is fundamentally sound (never mind the inflation figures we've been distorting, the GDP figures we've been distorting, and the employment figures we've been distorting)

Yes... regulation is evil. It slows down the free market. Greedy human beings are best left to police themselves. :)

It's a fine mess we've gotten into.

As for the market, 1170 remains the break point on the S&P500. Below that level, it could be free fall. As we discussed yesterday that level provided the bounce. And it's providing multiple bounces today. But we sit in 1165-1175 range for hours. With the "enforcement" of naked short rules tomorrow it will be another interesting day in the "no rules" corral. I wonder if we'll have any investment banks by the weekend.