James Howard Kunstler writes: It turns out the real hurricane blew through Wall Street last week,
not Galveston. This morning, Manhattan is strewn chest-deep with the
debris of banking and at this hour (seven a.m.) nobody knows how far,
deep, and wide the damage will spread. The fear, of course, is that we
are witnessing a classic “house-of-cards” or “dominos-in-a-row,”situation, and that the death of Lehman Brothers and Merrill Lynch will
cascade into a generalized collapse of the entire consensus of value
that supports mediums of exchange.

At least one thing ought to be clear:
this has happened due to the negligence and misfeasance of the
regulating authorities, namely the Republican Party, and that now all
the hoopla surrounding Sarah Palin can be swept away revealing that
group to be what they actually are: the party that wrecked America. …

I wish I knew whether this extravaganza of ruin might settle the question as to whether America goes into hyperinflation or implacable deflation, but the net effect is that money is leaving the system in big gobs. And if not money per se, then the idea of money as represented in certificates, contracts, counter-party positions, and gentlemen’s agreements. This is the day that America finds itself a much poorer nation. The capital we thought was there, is gone.

A lot of it was actually translated over the years into Hamptons villas, Gulfstream jets, and other playthings that will now go up on Ebay or some equivalent as we turn into Yard Sale Nation in a general liquidation of remaining assets. Of course, the trouble in a situation like this, where absolutely everybody is trying to pawn off assets, is that there are very few buyers on the scene, so the prices of all these things go down down down. Everything is for sale and nobody has any money. …

We should be frightened by the political implications of this
Great Implosion of presumed wealth. Some group of somebodies will have
to clean up this mess. Moving toward a major election, it is hard to
imagine the American people giving the clean-up task to the very group
that created the mess — no matter how many cute little faces Sarah
Palin can make on TV. Both parties have so far managed to ignore the
gathering crisis of banking and money, but they can’t ignore the
sequoia trees crashing down around their ankles and shaking the earth
they stand on.

At issue now will be the question of legitimacy in all its human
social dimensions. Is our money legitimate? Is the authority of our
elected officials legitimate? Are our values and ideas legitimate?
These are the things that will determine what kind of future we find
ourselves in.

So, to begin this process, and to clarify the situation, I urge
readers of this blog to identify the Republican Party by its new
brand-name: the party that wrecked America. At least, then, we can reinstate one cardinal value into the juddering structure of what we claim to believe: that actions have consequences, that you can’t just swindle and loot a society and walk away with the swag. (09/15/08)
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Financial Times – Wall Street was in turmoil on Monday after Lehman Brothers filed for bankruptcy protection and Merrill Lynch agreed a $50bn takeover by Bank of America.

Confidence in financial institutions around the world was shaken
as central banks introduced a series of emergency measures to ease the
crisis in the global financial system.

Equity markets fell heavily and debt spreads widened as banks, investment managers and insurance companies came under heavy selling pressure. By mid-morning in New York, the S&P 500 had fallen 2.9 per cent to 1,215.89. led by a 3.8 per cent drop in financials.

BofA’s bold bid for Merrill came as the world’s top banks abandoned efforts to save Lehman and set out to build a firewall against further financial chaos with a $70bn liquidity pool to support other vulnerable institutions.

George W. Bush, US president, acknowledged on Monday that the changes had been painful but remained focused on the health of the financial system as a whole. “In the long run I’m confident that our capital markets are flexible and resilient and can deal with these adjustments,” he said.

The moves capped a weekend of high drama that could lead to one of the most radical reshapings in Wall Street history. …

The weekend’s dramatic events undermined confidence in financial stocks across Europe. Banks and insurance companies were the heaviest fallers on Monday while gold prices jumped higher as investors sought the safety of the precious metal.

The
Markit iTraxx Crossover index, which measures the cost of insuring
European junk-rated credit derivatives, widened 17 per cent on Monday
to 640 basis points as the likelihood of defaults was perceived to be
higher.

Monday’s market reaction will be closely watched by
regulators and banking executives to gauge investor sentiment towards
the credit crunch that has wreaked havoc on the financial sector for
more than a year.

BofA’s rapid U-turn, which saw it abandon talks to buy Lehman
and move to Merrill in the space of a few hours, will throw the
spotlight on Morgan Stanley and Goldman Sachs. The two could soon
become the only independent investment banks in the US. (09/15/08)
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