Financials Getting Hammered

Curiously the djia is only down 200-300. It is not reflecting the magnitude of the turmoil we are seeing in the financial world.

I'll just let today's headlines speak for themselves:

Fed funds jump to 6 pct in mkt, tripling Fed's target - MacroEconomic News

Global Markets Are Battered By Wall Street Hurricane - CNBC

AIG, Facing Liquidity Crunch, Reaches Out to Regulator - CNBC

UBS Falls 19%, Hit by Reports of New Writedowns - CNBC

Wilbur Ross: Possibly a Thousand Banks Will Close - CNBC

Bailouts Will Push US into Depression: Manager - CNBC

Stocks in U.S. Drop as Lehman Bankruptcy Deepens Turmoil in Credit Markets - Bloomberg

Lehman Files for Record Bankruptcy, Victim of Meltdown Firm Helped Create - Bloomberg

Banks Hoarding Cash Send Fed Funds to Decade High Over Fed's Target Rate - Bloomberg

Bank of America Will Buy Merrill for $50 Billion as Credit Crisis Broadens - Bloomberg

Credit-Default Swaps Surge Most Ever as Lehman Threatens to Unravel Market - Bloomberg

Finally, from PrudentBear.com.

Here is what we know:

1. Fannie, Freddie and the FHLBs all failed and were effectively nationalized last Sunday.

2. On Monday, the ISDA released a tersly-worded statement that reluctantly admitted that there was a "credit-event" triggered by #1 above. The NY Fed also was involved in this situation and had hastily called for a conference call among the destroyed CDS players.

3. "Coincidentally", this last week LEH fails outright. AIG stock starts trading like pets.com at the end of the Internet boom and Merrill's stock is right behind AIG in the "dropping-like-a-stone" department. Perhaps unrelated, WaMu [stock price] also collapses. So does Wachovia. And others as well.

4. In the meantime, ISDA offers another less-tersly-worded statement that it is working with the destroyed CDS players to figure out who owes what to whom, who owns the underlying $1.4 TRILLION in Fannie/Freddie debt and the actual the size of the CDS positions (which I have made an irrefutable case for their being many multiples of CDS to underlying debt), yet doesn't reveal any of the players or the positions.

5. On Friday evening, the Federal Reserve, the Treasury, the SEC, and EVERY FRIGGIN' LARGE INVESTMENT BANK IN THE WORLD begins meeting to ostensibly discuss "ONLY" the dismemberment of Lehman.
....
Last Sunday's GSE nationalization triggered THE LARGEST DERIVATIVES EXPLOSION IN THE HISTORY OF MANKIND!!!

Yet, now we are being told that the tiny-by-comparison Lehman failure is causing all sorts of problems with parties and counterparties to Lehman debt and derivatives.

And furthermore, every Big-Shot goverment agency AND every major investment bank has been meeting in panic sessions to supposedly discuss ONLY the Lehman autopsy, and NOT the afore-mentioned GSE triggered, multi-TRILLION dollar CDS implosion?

Yeah, right.

For those few readers who need things explicitly spelled out for them, I will oblige:

This AIN'T just about Lehman, folks. It's about what Fannie and Freddie's demise triggered:

THE MASSIVE, UNPRECEDENTED, WORLDWIDE IMPLOSION OF TRILLIONS OF DOLLARS OF DERIVATIVES POSITIONS!!!

And the collapse of Leh, of AIG, of Mer, and of probably all the other banks and hedge funds and other gamblers involved in this "Casino from Hades".