Anatomy of a Clusterf*ck

Fed transcripts, statements and minutes released today for the "hubris-a-paloooza" now known as the financial crisis are a fun walk down the timeline of history. As late as Aug 7 2007, with the yield curve inverted for some time and open recognition of housing going bad, the Fed stood pat. By Aug 10, emergency conference calls were the norm and liquidity was being provided in various ways. A refresher:

On June 22, 2007 Bear Stearns pledged 3.2B to bailout its own "High Grade Structured Credit" Fund after an earlier several million dollar air ball. At the same time, they negotiated others (hello Merrill) to lend against collateral for another Fund. Merrill seized $850M in collateral and could only dump $100M before the excrement hit the air conditioning unit at around 27 cents on the dollar. On June 29, Jeff Cane, coming from the upstanding business down the St. named Lehman Bros. (cough cough, sorry I'm choking) replaced Bear head Richard Martin as charge of the "alpha generating" investment pools. On Aug, 1, the first lawsuits were filed in what would morph into the Obama Administration's "full employment for lawyers but no one goes to jail" act. On Aug 5, 2007 Bear co-president Warren Specter -of his former self- resigned.

The transcripts show a Fed clearly in touch with its constituents -THE BANKS - and aware of the situation from 30,000 feet. (Kind of like the Sam Shepard character in Blackhawk Down.) On August 10, the monetary mop up starts. Amazing read, worth the time.


One thought on “Anatomy of a Clusterf*ck

Leave a Reply

Your email address will not be published. Required fields are marked *