WAS THIS AN APRIL FOOLS DAY PRESENT?

What goes around comes around—and in my case ends up on CNBC. Guess what? The rant I delivered about CNBC to a CNBC reporter while watching the protest at Bear Stearns last week, the one still on Mediachannel.org (via YouTube) was picked by CNBC’s Power Lunch program yesterday, I guess, to show me and the world how open they are to all points of view.

I wrote to them suggesting they have me on to debate. I doubt they will, but, as this bit of media agitation shows, anything can happen and often does. This reminds me of a speech I gave eons ago accepting my first Emmy in Boston. I told the audience that I had just been denouncing the Emmys, but now considered them exemplary. Everyone laughed, including myself.

FED DAY ON WALL STREET AGAIN!
MORE OIL DISCOVERED IN, SHOCK , IRAQ
MANY STATES BLAME CREDIT SQUEEZE FOR CUTBACKS

MONDAY was not just the end of March. It was the end of the first quarter. It was also Fed day on Wall Street, or should I, along with Floyd Norris of the NY Times , say another Fed day in the government’s effort to put a damper on the danger of a deeper financial collapse..

“I count six separate days in the first quarter, which ended today, when the Fed announced actions. They are:

Jan. 22, when it cut the discount rate.
Jan. 30, when it cut the discount and Fed funds rates.
March 7, when it announced plans to inject money into financial markets
March 11, when the Fed and other central banks announced plans to inject more credit into markets.
March 16, when it financed the rescue of Bear Stearns and cut the discount rate
March 18, when it cut the Fed funds and discount rates.”

There were 2538 new stories on Google today all about the Fed.

Most of the Wall Street firms welcomed the Paulson Plan to use the Fed to impose new rules on an unruly market, even as many fear it will cut into profits. Nobody seems to be in a hurry to make changes either since everyone recognizes that any real proposed changes will take time, and drag on.

Congress was relived by that, according to Dow Jones’ Market Watch:

WASHINGTON (MarketWatch) — Members of Congress, with a few notable exceptions, reacted calmly to Treasury Secretary Henry Paulson’s blueprint to overhaul the nation’s regulatory structure on Monday.

Why wouldn’t they, a cynic might ask. The Paulson plan doesn’t ask Congress to tackle many controversial and sensitive topics until after the November election. Therefore, campaign contributions from threatened interests can safely roll in until the election, and no oxen will have to be gored.

I have a piece up on Mediachannel, Huffington Post on other sites explaining why I don’t think the new plan will work, if it was ever intended to. Nomi Prinz, a former Goldman Sachs banker feels the same way. Her take is on Salon:

Here’s how to think about the proposed reform of financial oversight unveiled by Treasury Secretary Henry Paulson on Monday: The Federal Reserve Bank, whose job already includes regulating a large component of the financial system, has failed pretty badly at its tasks. The proposed solution—to give it more responsibility—seems ridiculous and hazardous.

Yet that’s the plan. Having ignored or been unduly confused by the complexity of the banks already under its jurisdiction, the new, improved Fed would get more books to examine for undue risk, adding in brokers and insurance companies.

WALL ST JOURNAL OP-ED

“The Fed responds to the credit crunch by cutting interest rates, which would be the seemingly correct textbook strategy if the economy were closed and the foreign exchanges could be ignored. But the economy is open, and capital flies out of the country. Because of the unique position of the U.S. at the center of the world dollar standard, the drain of Treasurys — the prime collateral in impacted credit markets — exacerbates the credit crunch, and monetary expansion abroad worsens world-wide inflation. The Fed then further expands in response to the tightening of U.S. credit markets.'’

Paulson’s Financial Markets Reform Will Do Little for Current Crisis
KNIGHT RIDDER WASHINGTON BUREAU

WASHINGTON _ Treasury Secretary Henry Paulson makes public on Monday a new blueprint for regulation of the turbulent financial markets, one that has plenty to do with the future and little to fix what ails the economy right now.The plan would merge some federal bank regulators, weaken the agency that regulates the stock market and broaden the shoulders of the Federal Reserve, which will become the chief regulator for the safety and soundness of financial markets.The idea of modernizing the regulation of financial markets predated today’s current turmoil, and it was one of the reasons Paulson left his post as CEO of investment bank Goldman Sachs & Co. to take what many two years ago saw as a dead-end job.

INVESTMENT NEWS: Dodd looking into Dimon’s Fed connection

J.P. Morgan CEO also sits on board of New York Fed—which brokered bank’s bid for Bear Stearns

The chairman of the Senate Banking Committee has expressed concern about a conflict of interest of J.P. Morgan chief executive Jamie Dimon. Specifically, Mr. Dimon held a Federal Reserve Bank of New York board seat while his bank was talking with the Fed about The Bear Stearns takeover.

“[Mr. Dimon] also sits on the board of directors at the Federal Reserve in New York. Having decisions being made over the weekend with an institution where its leader is also a member of that board raises some serious issues,” Sen. Christopher J. Dodd, D-Conn., said in a National Public Radio interview.

When asked if he suspects that Mr. Dimon’s New York Fed board seat might have been a conflict of interest, Mr. Dodd said:

“This is what we needed to talk about.”

Senate Finance Committee Chairman Max Baucus, D-Mont., and Senator Charles Grassley, R-Iowa, said they are seeking details on how J.P. Morgan’s buyout of Bear Stearns was negotiated.

BUSINESS WIRE.COM

Corporate homebuilders – including those responsible for the mortgage and housing crisis – would receive billions of dollars in tax breaks under a provision of the Foreclosure Prevention Act currently pending in Congress, according to a report released today.’

AP: WILL THINGS GET WORSE?:

“It’s been almost an article of faith: Any recession this year will be mild and brief.But now the stunning meltdown of a top Wall Street investment bank and stubbornly persistent financial market turbulence has called that into question, raising fears that severe problems in housing and the nation’s bedrock financial system could cripple the economy and wallop many millions of Americans.But the severe credit crisis that erupted last August - and claimed its biggest victim two weeks ago with the forced sale of Bear Stearns Co. - is raising doubts about those mild forecasts. “

AN OPED IN THE BOSTON GLOBE SAYS RATING AGENCIES NEED TO BE REFORMED TO REESTABLISH TRUST—OR ELSE

Scott Burns and Laurence J. Kotlikoff write:

“Are we over-dramatizing? We don’t think so. With the Bear Stearns bailout, the Fed has pledged $330 billion to shore up banks, investment companies, hedge funds, and quasi-governmental lenders. This is a pittance measured against the $10 trillion in mortgages or mortgage-backed securities held by these institutions.

If home prices keep falling and delinquencies keep rising, the Fed will have a terrible choice: Let these institutions fail or print trillions of dollars. The first course could leave the financial system and economy in free fall. The second could spell hyperinflation.

AND TO MY FRIENDS IN NY WHO THINK WE ARE INSULATED

2008-03-31 — Bloomberg.com

‘New York City’s residential real estate market is showing the first signs of fallout as U.S. banks and securities firms cut the most jobs in seven years.’

WP: STATES HARD HIT BY CREDIT COLLAPSE

NEW YORK — In Illinois’ Cook County, women in poor neighborhoods no longer have access to free mammograms from two mobile vans testing for breast cancer.

In Michigan, hikers will find about 20 campgrounds closed, and scientists are ending their studies of fish populations in the Great Lakes.

In New Jersey, state workers are being laid off, and at least one town is canceling its traditional Fourth of July fireworks.

And in California’s San Fernando Valley, Everardo Orozco, 53, who has AIDS, exhausted his medical benefits and can no longer afford the drugs that are keeping him alive.

“I don’t know which ones I can afford every month,” Orozco said, explaining how his supply is dwindling and his share of the payments has skyrocketed from $400 to $3,200 per month. He now injects himself with some medications once a day instead of twice — not enough to keep his T-cell count from dropping or to prevent his body from becoming resistant to treatment. And he fears that there will be more cuts.

State budgets have been hit hard by a worsening national economy, including rising costs for energy and health care. In addition, fallout from the subprime mortgage crisis — declining home sales, deflated property values and mounting foreclosures — has caused a slide in states’ anticipated tax receipts. Revenue from property taxes, sales taxes and real estate transfer taxes is affected.

At least half of the nation’s states are facing budget shortfalls, some of them severe, and policymakers in most of the states affected are proposing and passing often-painful measures to trim costs and close the gaps. Spending on schools is being slashed, after-school programs are being curtailed and teachers are being notified of potential layoffs. Health-care assistance is being cut for the elderly, the disabled and the poor. Some government offices, such as motor vehicle department locations, will start closing on weekends, and some state workers are receiving pink slips.

THE D WORD IS OUT OF THE CLOSET
A VIEW FROM THE UK: USA 2008: The Great Depression

We knew things were bad on Wall Street, but on Main Street it may be worse. Startling official statistics show that as a new economic recession stalks the United States, a record number of Americans will shortly be depending on food stamps just to feed themselves and their families.