Thursday, September 25, 2008

Hi John, 'bye WaMu

Once I did buy WaMu, but I sold. Thanks be.

Federal regulators seized Washington Mutual tonight. WaMu was the largest savings and loan in the country. Now its shares are worthless. The Feds arranged for JPMorgan Chase to buy most of the carcass tonight. They will take control of all the dead thrift's branches tomorrow. The gubment will hold onto some of the bones and maybe a little bag of stew meat.

One report has it that JPMorgan Chase shelled out $1.9 billion for their portion.

WaMu has been among the walking dead for months, but still it's odd regulators moved on a Thursday night. They almost always do stuff like this on Fridays, so there's a day or more for the jitters to settle before financial markets open. Tomorrow's trading on the NYSE might get pretty hairy.

Which leads me to speculate...

Hank Paulson has been working late hours for the past seven days with the likes of Chris Dodd and Barney Frank. He's been giving in as seemed necessary and prudent, even to the point of interfering with executive pay in the "private" sector. This morning they looked to be done; at least in the broad outlines they had a plan.

Then McCain blunders into town with his "principles" and fires up a passel of House Republican ideologues to beat their plan to a bloody pulp before his very eyes. Paulson had already explained why insurance schemes and removing the tax on capital gains was not going to work. It's like wishing upon a star when the train's derailed. But that's basically what the ideologues are demanding now with McCain's tacit blessing. Remember that McCain has had not contact with Paulson or anybody working on the fix during any of this process.

So Paulson goes all Terminator in a last attempt to convince the extremists that their platitudes are less than irrelevant. He calls in his regulator badasses and gives them marching orders: Take out WaMu. Do it now. Watch the blood on Wall Street.

Sure would have been better to have had a debate.

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