Serendipitous Sundays for Financials

It's another sucker punch Sunday in the making. Aren't these exciting? Weekends used to be so boring, just sitting around and relaxing. Not anymore. Now they're a thrill-a-minute as we all await the latest crisis and how it's going to be fixed until the next Sunday's crisis -- with the handful of our tax dollars left over after paying for the Iraq War.

Last Sunday was the nationalization of Fannie (FNM)/Freddie (FRE). That was a double popcorn and triple caffeine feature. Hard to top, but they're trying. Today, it's the sale or bailout of Lehman Brothers (LEH)!

The U.S. Treasury, fresh from its buyout of the nation's mortgage industry, is balking at buying Lehman Brothers. Those stingy guys. What's another multi-billion-dollar, taxpayer-funded rescue? They've done it enough. They should be good at it by now. At least they know where to file the forms.

It's not just Lehman, though. AIG (AIG) is teetering so precariously on the edge that it's planning an investor conference call on Monday to outline survival steps such as holding a garage sale to get itself "asset lite" ASAP. I'm guessing Sunday's pre-call party at AIG HQ is a strictly BYOC event -- bring your own capital.

Washington Mutual (WM) is apparently pasting a "For Sale" sign on its headquarters, as well. You know the saying: Billion-dollar banker see, billion-dollar banker do. The groupthink must be all but irresistible at this stage.

Investors worried last week that WaMu's capital -- that's Wham You's cap it all, as in off for good -- had reached the red alert level, and sold the stock down ferociously. Here we thought after all these months that capital was strictly optional in American banking, but evidently some fuddy-duddies are still insisting on it. JPMorgan (JPM) is interested in buying, and may at this rate end up owning the entire U.S. financial sector.

You won't need to bother with an ETF or sector fund anymore. No sirree, Jobless Bob. Just buy JPMorgan stock and Treasury Bonds (now that the government bought the mortgage industry) and you'll own the whole shebang. Life is getting pleasant and simple thanks to these exciting Sundays!

Merrill Lynch (MER) shares fell 17% on Thursday and another 12% on Friday, so earmark it as next Sunday's emergency rescue candidate. Somebody speed-dial JPMorgan. Oh, and get Henry Paulson on the line from the Treasury. He's a good friend of JPMorgan's, and downright convenient in a pinch when one company wants to buy another, but doesn't want to shoulder the risk of the transaction.

No problem these days. That pickle has been neatly resolved with a two-step process: One, move target firm's profitable parts to the acquiring firm's balance sheet and, two, move target firm's bad assets to the taxpayer's balance sheet so Jobless Bob can pick up the tab.

We do value teamwork in America, and nowhere is that spirit more evident than in these serendipitous Sundays, veritable grab bags of financial fun and lucre logrolling! JP, take the profit; Bob, take the bag of crap. Done! Everybody shake hands.

So pull up a chair and sit back for the show. Here comes JP, here comes Henry, and there are the Lehman Brothers mingling with Fannie and Freddie. Jobless Bob couldn't make it, but Henry was nice enough to bring his money for him.

Three cheers for teamwork! See you next Sunday.

Comments

[bankrupt ta...:]

Hi,
Three cheers for the insight into this article. While I am one of the honest taxpayers picking up the tab of all the financial outrages happenning out there, I happen to be single and was curtly told by IRS that I was not eligible for the $600 stimulus that was doled out to everyone because my salary was over the $87000 mark....albeit by a few hundreds...Given that I will be picking up the brunt of all this mess, its high time the government took away the cap and ensures that singles like me do not suffer....

2008 Sep 14 11:30 AM

[SW Richmond:]

"One, move target firm's profitable parts to the acquiring firm's balance sheet and, two, move target firm's bad assets to the taxpayer's balance sheet so Jobless Bob can pick up the tab."

This is the model, and will be the model going forward. Where are the courts? Where are the regulators? Where is the MSM? Oh I forgot, THEY'RE ALL ON THE SAME TEAM, THE ONE THAT IS WINNING WHILE THE TAXPAYER LOSES.

2008 Sep 14 11:54 AM

[Big Al45:]

I'm not sure that JPM will wind up with all the good assets. Goldman Suchs and BAC will probably get their share of the goodies, too.

But you're right that the taxpayer will wind up getting all the crap.

2008 Sep 14 01:09 PM

[PeteK:]

Mr. Kelly, sounds like you are anti-Henry all the way.
Please show some respect, he's working his sweats
off lately. Give him a chance. If all those banks run without greed or big-ego, Henry will be vacationing in Hawaii now.

2008 Sep 14 04:18 PM

[dlaw:]

Bankrupt,

Seriously, you're making a fool of yourself. You're whining about not getting a stimulus check when you're making $87K a year?

Meanwhile the entire economy is fighting for its solvency.

What can you say to such people?

2008 Sep 14 06:39 PM

[Fish Gone Bad:]

I was just thinking about Paulson. Will this guy get a day off before his term ends?

I can just see his secretary penciling in Merrill Lynch for this coming Saturday and Washington Mutual for Sunday.

Then there are the unseen financial icebergs out there as well.

Clark Jenkins
FishGoneBad.com

2008 Sep 14 07:28 PM

[captainccs:]

If you are going to give money away you should give it it the rich because they know how to handle money. Give money to the poor and they just spend it and stay as poor as ever, a total waste of time and money. :)

Taleb was right on the money with his bad financial black swans.

2008 Sep 14 07:40 PM

[Kinabalu:]

A well-written and amusing ("Billion-dollar banker see, billion-dollar banker do") little piece, but bereft of any actual analysis or conceptual understanding of what's going on here.

2008 Sep 15 12:40 PM