The Economic S--t Hits the Fan

Late this evening, September 14, 2008, the New York Times posted a report online:

In Frantic Day, Wall Street Banks Teeter

In one of the most dramatic days in Wall Street’s history, Merrill Lynch agreed to sell itself to Bank of America for roughly $50 billion to avert a deepening financial crisis while another prominent securities firm, Lehman Brothers, hurtled toward liquidation after it failed to find a buyer, people briefed on the deals said.

The humbling moves, which reshape the landscape of American finance, mark the latest chapter in a tumultuous year in which once-proud financial institutions have been brought to their knees as a result of tens of billions of dollars in losses because of bad mortgage finance and real estate investments.

They culminated a weekend of frantic around-the-clock negotiations, as Wall Street bankers huddled in meetings at the behest of Bush administration officials to avoid a downward spiral in the markets stemming from a crisis of confidence.

In short, federally sanctioned insider trading is in full swing. What to do to avoid major market meltdown on Monday ... and worse beyond?

The creditors are panicking. The get-richer-quicker schemes -- the years of the long con aimed at the average American -- are falling apart. The world of Alan Greenspan and the Chicago School. The well-quantified world of modern Economics. The proofs, the figures ranged in columns before us. The world of Michael Bloomberg, where only "little people pay taxes" (Bloomberg's own words).

In my more optimistic moments, I imagine the heads of JPMorgan or UBS or Citigroup in a position like that of the Romans in 410 as the Visigoths sacked the greatest city of the Western world. "But this is Rome!"

The myth could no longer be sustained. Even the truest believers finally had to concede what a few "naysayers" -- "nattering nabobs of negativity" -- had been warning of for decades, even centuries.

Unlike Rome, the triumph of the American Empire, will have been remarkably shortlived. Maybe "patriots" (whatever they are) can take some solace in the notion that "the light that burns twice as bright burns half as long".