Archive - Oct 9, 2011

Below we present some observations on the compensation package of the CEO of bank that is about to be no more (in its existing pre-BearStearns'ed form), a bank which since 2008 had operated with an implicit governmental guarantee of €150 billion and which bank was the biggest recipient of the Fed's taxpayer-funded bailout generosity during the Great Financial Crisis, confirming once again that when it comes to putting US taxpayer capital at risk for total loss, the Fed is truly second to none, without much commentary. It has all been said already numerous times...

A good deal of leverage has been shaken out of the system, of that there can be little doubt. Markets became horribly oversold and are now reacting accordingly and, in such conditions of these, when underlying conviction is absent and the reservoirs of both financial and reputational capital are so scanty, such reverses can be violent indeed, so being bearish is not operationally straightforward, even if being bullish seems perverse. Whether the present bounce is any more than a temporary relief, must however, remain in doubt while the underlying weaknesses lie unaddressed and the treatment prescribed for them are so palpably toxic in their side-effects. At least we have the weekend to ponder it.

Earlier today, Reuters reported that the final solution for Dexia is imminent. "The governments of France, Belgium and Luxembourg reached agreement on Sunday on a rescue package for Dexia , which will be put to the stricken Franco-Belgian bank's board later in the day for approval. "The governments... have reaffirmed their solidarity in finding a solution to secure the future of Dexia," said a statement from the office of Belgium's caretaker Prime Minister Yves Leterme. "The suggested solution, which is also the result of intense consultations with all partners involved, will be submitted to Dexia's Board of Directors for approval." Sure enough, from Dow Jones:

• GOVERNMENTS AGREE TO NATIONALIZE 100% OF DEXIA'S BELGIAN BANK

We are waiting for more details but with that we have Belgium-Dexia CDS compression, an imminent Belgian rating downgrade, and the unleashing of the completely unpredictable domino effect.

The Obama administration is going to give the OWS protest a big boost.