Goodbye to All That.

Does Wall Street hereby become less of an alluring destination for our best and brightest? “Banker” has much less of a sexy ring than “Investment Banker”.

Matt Yglesias surprises me again with his four demands Democrats should make before acquiescing to the bail out:

Preserve substantial financial upside for taxpayers in the event that the bailout works (I think in practice this requires an equity stake in the bailed out firms, but I’m not sure).

Meaningful steps to restructure mortgages and keep most people in their houses.

A real second stimulus package.

Controls on executive pay for bailed out firms.

Reasonable people can argue about the first three points, but the last one’s a howler. What does Matt think would happen with that unused executive pay? Would the secretaries and janitors all get raises? And more broadly, if you think that inequality is the problem to be addressed today, is this even the tenth best way to address it?

UPDATE: Josh Marshall largely agrees.

FT’s Alphaville headline: “The Fed’s Run Out of Money”. Relevant quote from the Treasury press release:

The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve. The program will consist of a series of Treasury bills, apart from Treasury’s current borrowing program, which will provide cash for use in the Federal Reserve initiatives.

If I’m not mistaken, the Fed’s printing dollars now. Hello inflation?

My generation—those born in the late-70’s and later—haven’t had to deal with inflation as adults. May you live in interesting times, as the proverbial Chinese proverb says.

UPDATE: My monetary theory fails me — it’s not money-printing: it’s the treasury recapitalizing the Fed by putting the U.S. further into debt.

Is it inflationary? Potentially, depending on how the Fed acts from here on out. And depending on whether this reeks of desperation, I suppose.

Everyone’s a-titter today about Lehman going bankrupt and Merrill being bought by Bank of America. These are not minor events to be sure, but in many ways they don’t directly affect the day-to-day lives of your average citizen.*

A failure of Washington Mutual, the sixth largest commercial bank in the United States, is another matter altogether. On the ropes for a while now, WaMu’s failure would severely test the ability of the FDIC to insure deposits up to $100,000. Quoth the FT:

Washington Mutual had $143bn in insured deposits on June 30 - about three times the size of the deposit insurance fund, but less than half of its $307bn assets.

You read that right. If WaMu goes belly-up, the FDIC has to pay $143 billion. It has $45 billion in its coffers right now, and could draw on $70 billion more from the Treasury. The difference would have to be made up by going to Congress. By that point, nervousness among savers will probably have caused several more smaller banks to fail, and Congress will be forced to write an increasingly enormous check.

Naked Capitalism offers some more context:

Many readers might think there is no reason for anyone to be so exposed. It’s easy to divide one’s deposits across many banks to remain below the $100,000 limit, right? Not if you are a business. Many firms carry more than $100,000 in balances over the course of a month, particularly if they have a healthy payroll. And the requirements of payroll processing in particularly make it prohibitively expensive to operate multiple accounts.

Yeah, I’ve already cleared out some space under my mattress.

*This is not to say, of course, that the ripple effects of these failures and restructurings won’t impact people’s day-to-day lives.

Maybe it’s because economics requires the development of math skills to the exclusion of writing skills that much economics writing is riddled with ill-conceived metaphors. Paul Krugman sounds the alarm:

Uh oh. we’ve got a downturn that can feed itself and, at the same time, dig trenches. The fascist octopus will sing its swan song any day now.

Sounds like a fun sport, spotting travesties like these. They should be in abundance as reporters struggle to keep pace with events and consequently drop their standards.