Watch out for credit default swaps

Congress to pass the $7B plus (plus? plus?) package.

``I am betting on the Congress doing the right thing for the American public and passing this bill,'' Buffett said on CNBC today. ``I certainly have a vote of confidence in Goldman and vote of confidence in Congress.''

The Independent offers this analysis:

That Mr Buffett should be making a headline-grabbing investment in a beaten-down bank is all the more remarkable because of his unhappy experience as a major shareholder in Salomon Brothers at the end of the Eighties, when he lost money and the company became embroiled in a trading scandal. Most recently, in his letters to Berkshire Hathaway shareholders, the man known as the Oracle of Omaha for his homespun investment wisdom has derided the complex derivatives beloved in the investment banking industry as "financial weapons of mass destruction" and "time bombs".

He has long predicted that the opaque nature of the derivatives market would lead to trouble, and the explosive chain reactions in the credit markets have proved his point.

Paulson's Fix is going to implemented, says Paulson, mostly by the great experts he's surrounding himself with from...GS.

Okaaay.

Paul O'Neill was on WNYC this morning--and nary a mention of CDS's. I'v been asking that it be discussed. Nope. Hasn't made the MCM mindset yet.

But, get this, Brian Lehrer, one of the better interviewers on radio, actually asked the Rush Limbaugh question of a guy from the Workers Party.

I cannot believe it--but he did ask whether it was loans to all those poor (read undeserving) people which "caused" all this mess!!! And wasn't that the fault of the liberals in Congress and people like those in the Workers Party!! No mention that the law involved was that people who could meet the standards of a loan be allowed to get a loan and not be "redlined." "Redlining" was not used nor the concept mentioned. Yikes.

The financial sector realized they could sell anyone anything, tell them that in two years they would have so much equity they would "just" refinance, and then the Masters of the Universe went off and sold the same mortgage over and over and over in different forms. Each sale earning beaucoup bucks for the seller--and the last buyer is the chump. And they were unregulated, unscrutinized--some unscrupulous.

It was a Ponzi scheme.

But, the MCM (mainstream corporate media) tells the tale of the powerful, except for those few intrepid reporter/investigators who really dig into things--and, if they make the newspaper pages at all, it's way at the back of some lesser read section.

And, alas, even our intrepid public radio personnel are influenced by the MCMers' incessant telling of the tale of the powerful, the Village Narrative.

This is reminding me so much of the run-up to the Iraq Invasion--the truth is there, it's even been reported by some, but the truth, if told at all, gets told once, then is lost in the din of MCMers' all saying much the same thing.

Help! I want a real free press!

Has Roubini been invited back on the more widely broadcast programs since the very beginning of this mess? I haven't seen him on NewsHour since very early into this. I think he scared both Jim Lehrer and Charlie Rose.... Maybe they'll have him back--after the Blank Check is passed.

Buffett's not usually a bad guy. He's usually a pretty savvy guy, at least when it comes to money.

What we know is the markets are every bit as vulnerable to hokum, scare tactics, and rabid superstition as ... oh, any lost tribe of primitives.

What we can't prove is whether or not he's trying to create the situation the insider-trading laws are designed to prevent. He's using, I think, the publicity generated by his buy-in to drive up the price of the stock. Whether he intends this to benefit himself first and foremost primarily or to be a way to kickstart a recovery in general is the really big question. Criminal intent? Or a guy trying to do the right thing?

We can admit that we're killers ... but we're not going to kill today. That's all it takes! Knowing that we're not going to kill today! ~ Captain James T. Kirk, Stardate 3193.0

Total book value of all derivative products combined is estimated - estimated, mind you, because nobody knows for certain - at $1.5 to $2 Quadrillion - more than the value of every material thing on Earth.

If it all comes tumbling down, much of the paper balances out; some will be winners, some will be losers. The estimated settlement loss - what will still be owed once all the books are balanced - is somewhere around $65 trillion. Most of this loss, maybe 80% of it, will settle in US institutions including retirement funds, state and municiple investment pools. (Total US net worth is about $20 trillion - we are, as a nation, technically bankrupt right now.) It is this crash that the $1 trillion injection is intended to avert, but nobody knows if it will work or exactly how to do it for maximum effect.

It is All In, but worse; if they don't pump in a big bunch they could lose everything, and even if they dump a trillion $ it could still all go South beyond anyone's control. The feeling seems to be we should try to do what we can, since if it all goes to hell anyway that $1 trillion would get wiped out regardless, like a match in a deluge.

The real key is getting equity for the money, and not just spending it to buy up other people's junk. There is so much junk out there we simply can't buy it all, and what they'll sell us is the worst of the worst. The only way we get anything back is if we own a big chunk of whatever businesses are left, and then regulate the hell out of them.

If there is good news here, the Free Market crowd are done with - for another generation or two, anyway - and Alan Greenspan will live to see his name dragged through the mud as it should be.