AIG remains the bottomless pit. Are they still in the business of writing new credit default swaps and are the additional monies, the latest TARP infusion going to protect losses on new speculation since their September takeover. Increasingly, as Josh posted on the main page of TPM, the clip of Senator Cantwell questioning Geithner, Senators and people want to know who the counterparties are that need protection, but I think a bigger question is whether AIG's liabilities and potential losses have grown recently.

Today, the market commentary said GE CDSs rose substantially. Is the CDS game the same today as when all this started? What is the government doing? AIG;s credit default swap business should be isolated, put into a "bad bank" and settled for 10 - 20 cents on the dollar.

Geithner's refusal to be candid and his coy, irritating demeanor will bring Obama down sooner than later. Geithner should be cut loose soon to protect the presidency.

This was the stuff of predictable recession, what we can call Financial Crisis 1, worming its way through the global economy.

The black swan was the unexpected and unpredictable destruction of faith and confidence in the markets and financial panic that followed the bankruptcy - or rather the murder - of Lehman Brothers by Secy. Paulson (and maybe Geithner)on September 15th. What we are facing since then is a depression - now still small "D" - which is Financial Crisis 2.

Fin'l crises 1&2 are running concurrently. In a recession, monetary and fiscal policy usually work over time, and the waiting time is painful, but not panicked. In our mini-d world, no one has any idea of what will work and the waiting time is excrutiating and catastrophic.

Fear has obliterated faith and hope and even charity. No one knows if stimulus 1 will work, or stimulus 2 or 3. Stimulus package 1 certainly has things in it which would normally be expected to work, but with the emotional overlay of FC 2, may not. But government has to try something to allay fear and provide monetary aid. What the Republicans want to do is just not to do, to refuse to do anything.

So, New Deal or raw deal or let's make a deal, all that anybody can do is keep fingers crossed and hope that new ideas can be incorporated into stimulus package 2 when it comes and they can get 60 votes.

Where was the outrage two months ago?Everyone is in punitive mode - kill all the bankers. No one mentions the Boards of Directors. These men and women serve their masters, who theoretically serve the shareholders and bondholders and employees and customers. Punish everybody? It's happening.

There is a lot to praise in the Geithner plan, and I believe the critics are far too harsh in claiming there are no specifics. $100 billion in TALF to be leveraged to $1 trillion for education, credit card and auto loans, for example. This has got to help.

Geithner was forced to take the middle road because of the opposition of Republicans and the parade of know-nothings on television spewing nonsense. "The public" knows nothing, absolutely nothing, about the financial crisis, as do many "experts" and if politicians are going to determine policy because of ignorami, we are in worse trouble than a mere financial crisis. We all know that.

The greatest mistake in the current financial debate is trying to link the value of all assets to the "market price" as if the market price is always right. The market price can't be trusted if there is no market, if paper and assets aren't liquid and don't trade. Nobel Prize winners and academics can be wrong, and frequently are.

Everyone including Nobel prize winners Krugman and Stieglitz talk as if there was market normalcy. but in the present, the Federal Government must act as the market and must set the price that will satisfy a lot of uninformed and angry people and a voracious media!

Current mark-to-market rules are invalid!

I'm not trying to pick a fight with you, but so much of the argument is based on "maybe" and "much of it" and too little is based on hard numbers. If one reads the published statistics on foreclosures, defaults, etc - numbers cited like 12%, 15% etc - those don't corroborate "most". Most is a minimum of 51%+ by definition and you're not suggesting that we're there, are you. And other experts cite that the collapse of commercial real estate will occur in Q4 2009 and bring a new crisis. This has to be under the heading of "maybe". Maybe the economy will be showing signs of life in Q4 09 and lenders will allow for the possibility of recovery and that a mid-town Manhattan building may have some value yet, or at least a higher replacement cost and allow the borrower to roll-over the debt. I realize this is all very vague but certainly you and others must admit that fire sales to shore up balance sheets may produce distorted values.

I'm not trying to pick a fight with you, but so much of the argument is based on "maybe" and "much of it" and too little is based on hard numbers. If one reads the published statistics on foreclosures, defaults, etc - numbers cited like 12%, 15% etc - those don't corroborate "most". Most is a minimum of 51%+ by definition and you're not suggesting that we're there, are you. And other experts cite that the collapse of commercial real estate will occur in Q4 2009 and bring a new crisis. This has to be under the heading of "maybe". Maybe the economy will be showing signs of life in Q4 09 and lenders will allow for the possibility of recovery and that a mid-town Manhattan building may have some value yet, or at least a higher replacement cost and allow the borrower to roll-over the debt. I realize this is all very vague but certainly you and others must admit that fire sales to shore up balance sheets may produce distorted values.

The main flaw in mark-to-market accounting that, in my opinion, has led to a total mishandling of the financial crisis and banking system, espoused by Mr. Reich and by Nobel-prize winner Paul Krugman in the New York Times, emphasizes and focuses only on today , i.e. what can I sell this loan for, as opposed to tomorrow, i.e. will or wont I be able to collect on the loans. The main flaw is that today's "toxic" paper is judged to have no future antidote. FAS 157 stinks!

On this basis, the Federal Government should be nationalized - oh, it already is! To papraphrase Mr. Reich, perhaps the US "can't or won't be able to repay the loans..." but the actors and audience believe that maybe time will solve the problem, provide the options that permit the toxicity to be cured. Who could repay a loan immediately based on future cash flows and an operational stream? Will the economy be in a depression forever?

There are too many generalizations flying around. The big question on each specific loan should be:
Are the loans current? When they come due in 2010,2011,2012, etc, how much money will we get back?Do the borrowers have options to manage the underlying property, etc. etc.?

To place all bank balance sheets and the value of a hitherto and well-respected institution on a market valuation that depends on the willingness of another schmucky institution to buy it in a collapsed market, has been and continues to be insane, whether you're a Nobel prize winner or college professor.

This debate is crazy! Of course he should say who and when somebody called the Governor!

Why are they in trouble? Poor management? I personally disagree with those who believe Rick Wagoner should be fired. I follow this situation and believe that he is a top notch, energetic executive.

Sins of the past managmements with respect to benefits, legacy costs have penalized this company greatly. Estimates are that $1700 in costs per vehicle for these costs. A new VEBA negotiated with Ron Gettelfinger of the UAW kicks in in 2010 with substantail savings.

Oil prices were driven to $145 a barrel earlier this year by futures traders - don't listen to the nonsense about supply and demand - which drove up gasoline and home heating costs and brke the successful sales model for SUVs and trucks which was consumer driven. GM historically was castigated for not giving the consumer what they wanted, instead giving the consunsumer what GM wanted. All of a sudden, the consumer didn't want those large vehicles.

Now that speculators are wiped out and deleveraging, oil prices are $45 per barrel. The stock market has crashed and customers can't afford any cars, large or small. Annual industry sales estimated at 10 million are crushing GM as well as the Japanese, Korean and German transplants. The whole industry is on the brink of failure if GM is pushed over the cliff.

Failed government policies and regulators including Cox, Paulson and Bernanke have destroyed the economy and the auto industry with it.

And your CNBC colleague and debating partner Mr. Kudlow and his ilk say let hem fold and go bankrupt. The answer is no, no no. Housing prices now down 16% nationally will go off another 16% or more. The consequences will be too ghastly to contemplate.

Re Citicorp, are they really in trouble? Why do you think they're in sufficient trouble that they have to be bailed out? I know it's the conventional wisdom, and people are looking for some action this weekend, but leading analysts such as Dick Bove of Ladenburg, Thalman and many others watch in amazement. They believe that Citi's balance sheet is as strong as JP Morgan's, and that Citi's capital is strong and adequate. However, many believe that because the stock has been driven down by unfettered short sellers in a bear attack that the short sellers are right, that might makes right. The government takes the position that rather than re-adopting the uptick rule and prosecuting naked shorting and attempting to prevent these hi-tech lynchings, to quote Mr. Justice Thomas, and to restoring the workings of the market , that the victim is the problem, and the short sellers must be rewarded. Citi is indeed in trouble because of what George Soros calls Reflexivity - it's collapsed stock price destroys confidence and makes capital raising, etc very difficult. But as with so many other companies, Citi didn't fail on its own, it has been murdered, and Cox, Paulson, Bernanke, and sadly, probably Geithner have been the problem rather than the solution.

This is about as much as I know.