The Commodity Futures Trading Commission and Securities and Exchange Commission will have authority to decide what derivatives must be centrally cleared rather than letting private parties make the call.

&#8220-Central clearing interposes a regulated clearinghouse between the original counterparties in a derivatives transaction and so creates an opportunity to make dealing more transparent.&#8221-

CNBC video

Auditing the Federal Reserve – Ron Paul style

Washington Mutual is seized by the US government.

No Gravatar

– New York Times

– Another one bites the dust:

(Sorry for those who have a narrow screen and don&#8217-t see the right part of this big chart.)

According to InTrade, here are the banks that could fail next:

– Bank United Financial

– Downey Financial

External Links About The Big Bailout:

– Reason magazine have collected opinions from the leading free-market economists on the Bailout issue.

There is no reason to expect the correct solution from the same people who created the crisis in the first place and who until very recently thought the economy was strong and that there was little or no chance of recession. [Mark Thornton]

This is a financial coup d&#8217-etat, with the only limitation the $700 billion balance sheet figure. [Yves Smith]

– Mike Linksvayer has some additional good links&#8230- and some strong words, too. :-D

– Arnold Kling:

– NYT:

UPDATE: Paul Krugman

UPDATE: The Manhattan Institute on financial crisis and the Bailout


Speculating (and hedging?) on US presidential prediction markets would have social utility. Dixit Robin Hanson.

No Gravatar

If Deep Throat is right and the CFTC has indeed already given its stamp of approval to presidential prediction markets, then HedgeStreet and USFE would be well advised to listen to professor Robin Hanson&#8217-s idea with great attention:

Using data from a site like to forecast who will win an election is just scratching the surface, said Robin Hanson, associate professor of economics at George Mason University in Fairfax, VA, and one of the founders of the field of prediction markets. Although the economic incentive is high for picking a winner, Hanson would like to see prediction markets forecast the consequences of a candidate getting into office. Will unemployment go up or down? Will we have more or less trouble in Iraq? Will we decrease or increase the deficit? &#8220-The social value of telling people who&#8217-s likely to win is questionable. The social value of telling people the consequences is arguably far higher,&#8221- said Hanson.

My Question To Professor Robin Hanson: The prediction market that would be interesting would be the one featuring the elected candidate (the so-called &#8220-President-Elect&#8221-). But the expiry of the other prediction markets, featuring the defeated presidential candidates, would be impossible to judge, since these presidential candidates by definition won&#8217-t take office and have any power on the US government. And if the game is murky, you won&#8217-t find any traders willing to risk his/her shirt on those kinds of US presidential prediction markets.

Addendum: Robin Hanson has posted a comment, and I republish it here for everyone to see&#8230-

Let U = the unemployment rate, D = Democrats win, and R = Republicans win. An exchange rate between “Pays $U if D” and “Pays $1 if D” gives an estimate of E[U|D]. Similarly, an exchange rate between “Pays $U if R” and “Pays $1 if R” gives an estimate of E[U|R]. We can compare E[U|D] and E[U|R] to see which candidate is expected to have a lower unemployment rate. And we know how to pay off all of these assets, no matter what happens.

Robin Hanson would like to see prediction markets forecast the consequences of a candidate getting into office. – REDUX