How Bad WAS It Last Week?

If you think Paulson just decided to ask for $700Bn because he had nothing better to do that day, get this from McArdle:

...What happened last week is that one money market firm advertised its entire portfolio, including a large chunk of Lehman paper worth slightly less than 2% of the total fund assets. Spooked investors, who did not want to lose out if the fund "broke the buck" started withdrawing as fast as their little fingers could punch the buttons on their phones.

...Thus was touched off a general run on money market funds that held money for institutions

...Suddenly, said one source, no one could sell two-week Wachovia paper at 30% yield-to-maturity-

...The fund runs started to hit money markets that had no obvious problems (Putnam, BKNY/Mellon, American Beacon) causing them to shut down or redeem the shares in kind. Investors began worrying State Street's massive short-term investment fund complex was holding Lehman, which whipsawed its stock price 50% in one day

The red highlight is bonkers wild significant to anyone who's been around finance for more than a week or so.

McArdle then says what I posted earlier, with a much better slant:

No doubt some of my readers are rubbing their hands and saying "Exactly what should happen to people who carry credit card balances!" And I'm sure that among you there are people who pay cash on the barrel for everything, having never taken out any loan for a house, an automobile, an education, a personal financial crisis. These people never even use an American Express Card, which is, of course, a short-term loan. They also do not work for companies that borrow money to buy capital equipment or finance expansion, and their firms do not experience any mismatch between their payables and their receivables. Those people should stop reading now, because I'm pretty sure the Amish aren't supposed to use the internet

McArdle was kind enough not to add "jackass!!" after that paragraph, so I did on her behalf.

There's a lot more at the link. She's savvy, and 'splains it for you.

Let's stop the silly talk and get this deal done. Let's do it the way ABadger wants:

1) Non-political;
2) Clear mission and mandate along with adequate funding;
3) Professional management paid at market rates….this would include bonuses if earned;
4) All profits returned to the funding source….i.e. the government to the general revenues funds;
5) Exhaustive transparency

And if Congress can't do it right, then let's commence the Revolution!!