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September 14th, 2008

http://www.boston.com/news/local/articles/2008/09/14/boston_1st_in_savings_from_forgoing_car/

The savings are in the ball park that R. and I discussed: depending on the cost of public transportation, insurance, cost of parking etc., the savings are $10K +/- depending on the city and the details of the situation. The source is a public transportation association, but I doubt there's an unbiased source on any transportation related subject of any sort in this country anyway.

Obviously, if I'm posting about car/no car costs, I don't have a newborn yet.

R. and A. have been paying patty cake (his hand, her foot). It's very cute. Especially when she kicks hard enough to move his entire hand.

tenant continues to overstay lease

Tomorrow is BPL book group and, as usual, I have not yet read the book. I'm eying it, wondering where it falls on the Umbrella Theory (which is: if you don't want it to rain, bring an umbrella; if your garden is withering, plan major outdoor events with no backup plan). Do I read it, hoping to go into labor as a result? Hmmm...

so much for too big to fail

After three days of meetings -- Friday, Saturday and today -- Hank and company have apparently held their ground and the NY Fed was unable to convince the rest of the street to do an LTCM for Lehman. Barclays walked away, and B of A is apparently thinking they can do better with Merrill (does that mean B of A won't be picking through the remains of WaMu?).

Everyone who was cranky about the bailout of Bear Stearns? Now we get to find out what happens when you let one of these houses topple. I will admit to some morbid curiosity of my own. With any luck, given how unsuccessful backstopping Bear Stearns turned out to be, this won't be noticeably worse. (Do you believe that? I don't believe that. Not for a minute.)

BK filing expected by ETA: midnight tonight.

ETA2: I wonder how AIG feels about this weekend's news? Their conference call Monday would have otherwise been all exciting to anticipate and speculate about, but this pretty much ate up everyone's spare weekend business gossip cycles.

ETA3: Apparently a whole _lot_ of people went to work today when Barclays pulled out to prep the trades for when markets open Monday.

http://online.wsj.com/article/SB122139688846233147.html

ETA4: I keep failing to understand. To _do_ the trades between 2-4 p.m. today (!!), contingent on the BK filing happening. Is this a big exercise in transitive closure? Bank A -> Lehman, Lehman -> Bank B gets turned into a Bank A->Bank B transition? Ad absurdum? The mind boggles.

ETA5: I think that's a reasonable summary, but apparently this has turned into a poker game where everyone is showing everyone else their hands. Weird.

"One person familiar with the matter said large dealers contemplated showing each other all of their credit default swap trades with Lehman. Disclosing their positions may enable dealers to find ways to offset their positions with each other wherever possible. Later in the day, some traders were told that Lehman -- with the help of Federal Reserve officials -- will try to figure out which of its counterparties have CDS trades that can be offset. Those counterparties would be informed of the offsetting positions, following which they can unwind their respective swaps with Lehman and concurrently enter into new swap contracts with each other. For example, if one dealer has bought a swap from Lehman and Lehman bought a similar swap from another bank, the two banks could agree to face each other directly."

I waffle between wanting to understand this stuff better, and not wanting to know anything at all.

ETA6: Hey, this is actually a _good solution_! The net effect is a drastic reduction in the total dollar value in credit default swaps, which is essentially a form of leverage WITHOUT, as near as I can tell, any particular pass through effect to the economy-as-normal-people-experience-it. I don't think it improves capitalization anywhere, tho, because these things don't show up in the accounting in any kind of straightforward way.

easy money

In some weird three-way non-deal, there's "financial backstop" provided by the street for the winding down of Lehman, an expansion to the lending facility and a bankruptcy announcement due before midnight tonight. The expansion is to accept collateral of investment grade, including equities. Which is a little spooky, except they were already accepting agency debt and we all saw how well that's done since March.

Some commentators are calling this a backdoor bailout. I don't see it, but maybe I'm just naive.

netting didn't go so well

http://www.cnbc.com/id/26707165

Didn't clear out much. Hmmm.

I would think that every time it goes A-> Lehman, Lehman ->B, there's probably a reverse somewhere. Unfortunately, 2 hours isn't enough time for people to realize that they shouldn't drag their heels in hopes that the money they owe Lehman isn't collected for a looooong, looooong time, since As They Do So Will They Be Done Unto.

And on a _conference call_? Yeesh. I'd like to see this done electronically, but I cannot imagine the facility to do so existing, or being creatable in a reasonable time frame. R. suggests we need a pit. He's probably right.