Wednesday, October 8, 2008

Financial Corporafornication Continues

Despite Uncle Sam's best efforts, the big money boys still won't loan money to each other at reasonable rates. As a result credit remains locked up and the Treasury checkbook remains open. What's happened to date?

1. Bear Stearns $29 billion
2. Fannie Mae and Freddie Mac up to $200 billion
3. AIG received an injection of $85 billion, followed by another $38 billion
4. Direct liquidity injections for banks $900 billion
5. Purchase of corporate commercial paper, $1.3 trillion qualifies
6. Purchase of toxic assets produced or owned by Wall Street $700 billion
7. Half point interest rate cut, coordinated worldwide

The bill is well over $3 trillion and the Treasury window sits wide open for more. The focus shifted from liquidity to recapitalization. This means new owners, Uncle Sam, private equity underwriters and sovereign wealth funds.