The NYT today is practically a crash course in the cognitive dissonance that has been plaguing corporate America for years. First we have one article after another showcasing the looming disaster brought about by the financial industry's unbridled greed and total lack of ethical behavior.
Casting aside partisan differences, Senate Democratic and Republican leaders said on Tuesday that they would work urgently on a package of legislation to help millions of homeowners at risk of foreclosure, with the hope of bringing a bill to the floor as early as Wednesday afternoon.
The new pledge of cooperation was the latest sign of fast-growing consensus among Congress, the Bush administration and financial regulators that broader government action was needed to prevent a torrent of new foreclosures and further collapse of the housing and residential mortgage markets.
The mortgage crisis set off fresh shock waves Tuesday, with the biggest banks in Switzerland and Germany announcing huge write-downs totaling $23 billion, adding to the hundreds of billions in losses that financial firms already face from the subprime mortgage fallout.
[T]he Fed played midwife in JPMorgan Chase’s absorption of the investment firm Bear Stearns...accepting $30 billion worth of questionable mortgage-related assets as collateral for a Fed loan that enabled the deal.
The Bear Stearns arrangement, brokered amid fears of a global financial disaster, was accompanied by many other steps, including establishment of a new lending facility for investment banks and efforts to pump liquidity into the turbulent financial markets.
Taken together, most experts say that what the Fed has done in the last several months is unparalleled in modern times. Indeed, the Bear Stearns deal relied on a provision of the Federal Reserve Act not used since the 1930s. As a result, investment experts, many Americans and most members of Congress are bursting with questions.
Mr. Bernanke has yet to explain, for example, exactly how he negotiated the Bear Stearns deal, how he decided to accept the $30 billion in dubious collateral, who set the share price for Bear Stearns and what role was played by Treasury Secretary Henry Paulson.
Every day more than 4,500 people call Hope Now, the White House-backed group formed to help struggling homeowners.
But few of them appear to be getting the relief they are hoping for. One reason is that the financial powers behind Hope Now — mortgage lenders, loan servicers and big investors — are reluctant to change loan terms substantially if doing so hurts them.
Almost six months after Hope Now was created, the group is largely resisting calls for broad relief for homeowners. In Washington, a furious debate is under way over whether to help homeowners on the brink of default, and several possible plans are starting to coalesce.
But Hope Now, which President Bush has held up as a crucial tool to fight foreclosures, is coming under fire from within and without, accused of putting the interests of lenders over those of borrowers.
Now there's a shock.
So, to sum up: the Congress is rushing to react to the economic crisis, it's spreading to Europe where two huge banks have been hit hard, the Chairman of the Fed is under fire for exceeding his authority in order to save a single investment company, and the Bush Admin is concentrating on its usual routine: saving the investor class at the expense of everyone else while claiming to do the opposite.
All of this is, you know, pretty downbeat stuff. So what is the NYT reporting from Wall Street? Why, that the crisis is over and everything is just jim dandy.
Stocks started the second quarter with a soaring rally on Tuesday that sent the Dow Jones industrial average up nearly 400 points, its best performance in two weeks, as investors found reasons to take heart in a fresh round of mortgage-related write-offs at UBS and Deutsche Bank and a capital infusion at Lehman Brothers, the brokerage firm.
Despite the discouraging numbers — $19 billion in write-downs at UBS and nearly $4 billion at Deutsche Bank in the first quarter alone — investors appeared hopeful that the bad news could signal the last of Wall Street’s credit woes.
“UBS was providing transparency to the market,” said Ryan Larson, a Voyageur Asset Management trader. “That’s something we’ve desperately needed in the face of this current crisis.”
Adding to the good feelings, Lehman said private investors had snapped up a $4 billion offering of preferred stock — far more than expected — in a move to dispel a swirl of rumors about its stability. Shares of Lehman jumped 17 percent. UBS said it would try a similar move with $15 billion in additional funds; its shares rose 15 percent.
Nobody is prepared, despite all the warning signs, to admit that, like, The Party Is Over. The house is burning down out back but in the front room, they're ordering more beer.