Interesting news from Europe today.  It seems that most European nations do not quite have the robust deposit insurance that the United States government provides its citizens.  In fact, some only insure deposits up to a measly twenty thousand euros.

That was then, this is now.  Germany has announced it will be insuring all deposits of any amount.  That of course has people worried that the Germans - as the financial and banking powerhouse of the European Union - might know something the rest of us don’t.  Based on my reading of the article, it seems that the ripples of something really huge are beginning to show themselves in all quarters of the European Union.  France, Germany, Italy, the UK and Spain all seem to be bracing for a big fall.

See?  We do still have influence over world affairs.  sheesh.

The irony here is that in his speech last night, ol’ George said there was too much foreign capital in the market, and now a foreign news service has audio of ol’ George telling people that there wasn’t enough in 2002.  Which is it?

FHA Mortgages are becoming increasingly popular after the subprime meltdown.  Well, you could have knocked me over with a feather when I read that. . . .

Look, I’m all for reforming the way Wall Street does business, and I agree that this would ultimately include finding some way to bring top executive compensation down to a reasonable level.  But why is this the most important thing in the current crisis?  Is there some subtlety of economics I’m missing (entirely possible)?

Democrats in Congress are pushing for a slower and more deliberate pace to the process of aiding Wall Street out of it’s current crisis.  Bravo.  But why the sudden inclusion of executive compensation?  Are we going to risk forcing issues and looking petty in the face of a crisis?  I don’t get it:

Dems push for cautious approach to bailout - Stocks & economy- msnbc.com

“We want to limit those as a condition for giving them aid,” Frank, D-Mass., told ABC’s “Good Morning America.” “If Secretary Paulson would agree to that, we could move quickly.”

Rep. Christopher Shays, R-Conn., who also serves on the panel, said members “need enough time to debate this” and echoed Frank’s concerns about executive pay. “We don’t have these great golden parachutes and so on. In the end we’re doing it for the taxpayers.”

Oversight is certainly a proper demand.  Reforming banking rules is a good idea - like, for example, erecting the wall separating commodities trading and mortgages that Phil Gramm destroyed in the Ninties would be a good start.  Keeping banks on the hook for the difference between what the government spends in the bailout and what it gets back from selling off assets is an excellent suggestion.

But executive compensation?  Is that really going to change anything?

Great news for all you rich people!  On the announcement of the bail out, the S&P Financials market soared 19%.  Just though you aught to know.

OK, it took me three reads to get to where I thought I understood this article from Paul Krugman, but it’s worth understanding the montetary policy side of the current financial crisis.  Typically, when the economy gets into trouble, The Fed simply produces more money, which increases inflation and helps bouy unstable markets.

That’s what they usually do.  However, in this case the T-bill market is in bad enough shape that it’s not capable of helping out in any way.  Krugman does a really wonky job of explaining it.  It’s worth the multiple reads, honest.

I’ve not been reporting or analyzing on the current state of the financial meltdown very much in the last week.  That’s at least in part because things are moving so fast at the moment and statements are coming from so many different quarters, it’s difficult to keep up with in a meaningful way.  I don’t see any reason to add to the din unless I can provide something on the order of a coherent statement, which at the moment is difficult.

But one thing I can say for certain is that the speed of the recovery effort is more troubling than the speed of the crisis, at the moment.  There’s lots of big headlines and breathless discussion in the media, but let me say that no one in a position of authority should have been surprised by what is happening now.  The subprime/ARM mortgage meltdown has been going on for eight months and it is on the basis of commoditized mortgages that a lot of wealth has been built which is now disintegrating.  Where were all these leaders while Secretary Paulson was handing out bailouts?  Where were the big questions that might have provided us a more organized solution?

And now that we’re trying to come up with a national solution to a problem, I am drearily unsurprised to see that the problem at hand is largely rich people losing money.  No one cared when some grubby poor people were losing thier homes, but now that large bank executives are in danger of losing their yachts, it’s all hands on deck.  So, now the Congress is expected to hand over $700bn dollars to the White House that brought us Katrina and Iraq without strings.

Here’s a question that’s worth asking: what, precisely, is the purpose of all these billions of dollars?  Irrespective of what we do in the short run, there is nothing more fundamental to this crisis than the fact that all of the wealth accumulated in the last ten years or so was built on an entirely false pretense: the notion that these mortgages were going to be paid off.  No matter what we do in the next three months, a breathtakingly large portion of global wealth is about to evaporate.  Irrespective of whom does the selling - the government or the banks - the bad debts which are the basis of the problem will necessarily be sold at fire-sale prices.

The plan as far as I can tell is that the White House wants to buy up bad debt - whose value is in free-fall - from banks at a fixed price.  Guess whom that benefits?  If you guessed “the banks,” you’re spot-on.  Because we’re never going to get our $700bn back from selling those assets.  It’s like buying a bag of over-ripe bannanas.

I think Hank Paulson is a genuinely disciplined and principled person, based on what I know of him and what I see of him in interviews.  I’m watching him on This Week right now, and there’s no question he’s freaked out, but he’s clearly trying his best to solve a problem for which there are no easy answers.  And of course, if it’s up to you to solve the problem, you’d want as few strings attached to the money you need just in case the first idea doesn’t work the way you’d hoped.

But it’s worth all of us taking a breather for a moment and considering how we got here and whether what we’re doing is going to improve the future.  In my estimation, without stipulating some sort of reforms in addition to the bailout, we are doing very little for our future much past the first ten years when such “superfunds” and mortgage-based investments will be highly unappetizing to “the market.”

Four Fannie Mae execs resign.  Wall Street execs who created the Subprime mess in the first place tsk, tsk as usual

You’ve gotta love this McCain Op-Ed in the Wall Street Journal, excoriating Fannie and Freddie Mac for their supposedly endemic problems and the do-nothing Congress that let it get so out of control.  Best of all, McCain blames lobbyists, presumably meaning the 20 or so lobbyists that run his campaign and have advocated for Fannie or Freddie over the years.  I’ll bet he’s giving them hell over the crab dip at fundraisers.

But wait. . . .

Fannie and Freddie have lobbyists?  Does anyone see the logical fallacy in this?  Yes, of course.  Government agencies do not lobby each other.  Fannie Mae and Fredie Mac, while setup by the Congress, are autonomous agencies over which Congress has had very little control.  Until now, that is.

And so I’m confused: is John McCain advocating Congress and the government take more control of the national housing economy?  Because Fannie and Freddie are easily the largest institutions in that market.  That means that the mortgage industry is for all intents and purposes a national industry at this point.  Dig that?  You can’t have a national health care plan, but you can have a nationalized mortgage industry.

That doesn’t sound very Republican to me.

And I say it every time we get on the subject of the Fannie/Freddie near-collapse: the problem is not any internal structural problems at these two agencies, though I’m sure there’s probably plenty of those.  The problem is that the government is stepping in to save the country from the depression that could have happened because of reckless private banking.  Not that anyone’s going to bother reporting that, but I though you might be interested.

If you’ve been paying attention to the Subprime situation at all, you no doubt anticipated this move, despite the government’s assurances that it such would not be necessary: the Treasury today assumed responsibility for Freddie and Fannies mortgages, firing their CEOs.

Oh, dear.