Does Congress Know What the Credit Markets Are?

Last night another financial institution was brought to its knees as Washington Mutual, the largest savings and loan, was seized by the FDIC and subsequently sold to J.P. Morgan. How many more deaths to prime institutions do we need before Congress realizes the Government needs to act quickly to slow the financial tsunami? There is no one solution to end the current financial crisis but some form of the $700 Billion Paulson fund bill needs to be passed soon to limit some of the future damage.

The credit markets drive the stock market. Most people have no idea what I mean by that but every swoon in the market I have seen in the past 21 years was usually led by widening spreads in the credit markets. That is the situation we have today whether we look at Libor, credit default swaps, investment grade bonds, high yield bonds, or mortages. There is very little liquidity in all markets. Banks don't want to lend to each other, companies are scrambling to preserve cash (i.e. GE and GM), the housing market continues to slide, and the economy is heading into the tank. What is Congress not seeing that I see?

Did TPG think WAMU would dissappear in five months? Wasn't Bear Stearns the investment bank with poor risk controls? Oh yeah, what happened with Lehman, Merrill, and almost Goldman and Morgan Stanley? What is going to happen next week with Wachovia? Will it be independent? The economy is slipping fast and the credit markets are closing. Perhaps we have a few more days to procrastinate in order to get the best government plan but time is clearly running out. Congress needs to read the tea leaves and compromise with Mr. Paulson and Mr. Bernanke before it is too late.