Krugman elaborates on the events that made me say yesterday was scary:
The new system was supposed to do a better job of spreading and reducing risk. But in the aftermath of the housing bust and the resulting mortgage crisis, it seems apparent that risk wasn’t so much reduced as hidden: all too many investors had no idea how exposed they were.
And as the unknown unknowns have turned into known unknowns, the system has been experiencing postmodern bank runs. These don’t look like the old-fashioned version: with few exceptions, we’re not talking about mobs of distraught depositors pounding on closed bank doors. Instead, we’re talking about frantic phone calls and mouse clicks, as financial players pull credit lines and try to unwind counterparty risk. But the economic effects — a freezing up of credit, a downward spiral in asset values — are the same as those of the great bank runs of the 1930s.
More details as events warrant.
AIG is about to die; Lehmann won't survive the night; and now, Bank of America has agreed to buy Merrill Lynch. Today has been one of the most frightening days on Wall Street since...well, you know:
Coming just a week after the government took control of mortgage lenders Fannie Mae and Freddie Mac, the magnitude of the industry’s reshaping is staggering: two of the most powerful firms on Wall Street, Merrill Lynch and Lehman, will disappear.
The weekend's once unthinkable outcome came after a series of emergency meetings at the Federal Reserve building in downtown Manhattan in which the fate of Lehman hung in the balance. In the meeting Federal Reserve officials and the leaders of major financial institutions were trying to complete a plan to rescue the stricken investment bank.
Merrill's chief executive, John A. Thain, and Kenneth D. Lewis, Bank of America’s chief executive, initiated talks on Saturday, prompted by the reality that a Lehman bankruptcy would ripple through Wall Street and further cripple Merrill Lynch, people briefed on the negotiations said.
And who may we thank for the seven-year free-for-all that has brought our financial system to its knees? Who was in power? The Greedy Old Party, perhaps? Hmmm....
Milwaukee lost the first game of their double header against Philadelphia this afternoon, so the Cubs' magic number is now 9.
Update, 21:00 CDT: The Brewers just lost 6-1. The Cubs' magic number falls to 8, with 16 games yet to play.
Later update, 21:15 CDT: The Cubs are right now schooling the Astros 5-0 in the top of the 9th at Miller Park. So despite the rain, today is turning out pretty well for the Cubs.
Final update, 21:30 CDT: Thanks to a 7-inning no hitter by Carlos Zambrano—the first Cubs no-hitter since 1972—the Cubs beat Houston 5-0, lowering their magic number to 7.
Via Calculated Risk, Lehman bankruptcy expected before midnight tonight, after Bank of America pulls out of its rescue:
Bank of America Corp. abandoned talks to buy Lehman Brothers Holdings Inc., according to a person with knowledge of the matter, less than three hours after Barclays Plc said it wouldn't buy the faltering investment bank.
The U.S. government is racing to find a solution for Lehman before markets open tomorrow, two people familiar with the situation said. Barclays walked away because it couldn't get guarantees from the government or agree on a private-sector deal to mitigate what it called Lehman's "open-ended" trading obligations.
Banks and brokers today held a session for netting derivatives transactions with Lehman, or canceling trades that offset each other, in case the New York-based firm files for bankruptcy before midnight New York time.
Who said mortgage-backed securities weren't safe?
Update, 18:00 CDT: Yep.
Yesterday Chicago broke its all-time one-day rainfall record of 165 mm (set 14 August 1987) with 168 mm recorded at O'Hare:
And it's still falling:
Here's the Tribune story:
After the rainiest day in recorded Chicago history, residents across the area faced more storms, closed roads and flooded basements Sunday as the remnants of Hurricane Ike were expected to arrive.
Saturday's rainfall, as measured at O'Hare International Airport, was at least 6.63 inches, breaking the city calendar-day record of 6.49 on Aug. 14, 1987. Records have been kept since 1871.
The storm, which was blamed for at least one death, also clogged dozens of roads and stranded motorists from Evanston to Schaumburg to Naperville. The Edens Expressway was closed for hours, and access to O'Hare blocked by both road and train.
An additional 2 to 4 inches of rain are forecast, compounding the damage to a waterlogged region where record flood levels are expected along the Des Plaines River. Prospect Heights officials declared a state of emergency, and Riverside residents were put on alert for possible evacuation as the river rose. Water also edged higher on the Chicago and Fox Rivers.
My just-bathed dog now smells like a clean, wet dog instead of just a clean dog. And it keeps coming down.
Stuff that makes you say "huh:"
The Cubs and Houston will play two of their postponed games at 7:05 p.m. Sunday and 1:05 p.m. Monday at Miller Park in Milwaukee, Major League Baseball announced late Saturday night.
The third postponed game will be played only if it affects the postseason situation, and not until the day after the end of the regular season. Brewers officials said they encourage fans heading to the games in Milwaukee to purchase tickets online and use the print at home feature to expedite the game experience.
Until Saturday afternoon, Houston Astros owner Drayton McLane had refused steadfastly to concede that rescheduling games in a hurricane-ravaged area was unfeasible, insisting the Astros deserved to keep their home-field advantage. The Cubs, meanwhile, continued to push for a switch to a neutral site, with Miller Park—aka "Wrigley North"—being their first choice.
Um...with the Brewers within spitting distance of the NLC pennant, I hardly consider Miller Park "neutral territory." But it is a good compromise. And, if I get my act together, I might go after all (once I figure out the Astros' rain-check policy).
Update: I may actually go to Milwaukee on Monday...
We've had some problems from rain in Chicago today, and we're anticipating getting the remains of Ike tomorrow evening:
The Edens Expressway is shut down in both directions at Pratt Avenue due to flooding from heavy rains falling throughout Chicago area Saturday.
The I-190 ramp into O'Hare is flooded and aviation officials said inbound traffic to the airport is closed. CTA Blue Line service has been temporarily shut down between the Rosemont and O'Hare stations, officials said.
And the rainfall map from Intellicast:
The Cubs' magic number remains 11 (with 15 games left), only because the Brewers were also rained out tonight.
I hope Ike doesn't hit Houston too hard tonight, and I think I'm joining all of Houston—Astros fans or not—wishing the storm had gone somewhere else.
Not the most fun day of my life—let's skip why—but arriving home and checking the blogs, I let out a guffaw at Calculated Risk's post this morning. Sadly, though, it means I'm a big nerd.
Sarah Palin is the prestige in McCain's campaign. I mean that literally: her job is to distract us from McCain's utter, complete, and frightening unsuitability for the presidency with her utter, complete, and even more frightening unsuitability for any national office whatsoever. I worried that the strategy was working for a while, but I think things might be changing.
That said, someone thinking we should go to war with Russia for any reason short of, I don't know, the imminent destruction of Western Europe, might need to re-examine her foreign policies (or get one in the first place). As Josh Marshall put it: "Palin...[drew] out the logical inference of McCain & Co.'s unhinged policy vis a vis Russia—not a huge surprise if you've just learned the policy in the last week. But McCain and those in his entourage at least have the seasoning to know not to traipse into throwaway hypotheticals about 'war' with the only other country in the world with a vast and eminently deliverable nuclear arsenal."
Fifty three days until the election...