6 months ago I summarised the status of the US banking system finishing with the line “the financial system on the verge of complete collapse”.

I haven’t added much recently because there was no need. It’s like watching a train wreck in slow motion: you stand there with yoru mouth wide open unable to speak as you take in the enormity of the action in front of you.

What’s left to say? The banking system is effectively nationalised but we knew that with Northern Rock. The difference between Lehmans and Bear Stearns was simply timing. BS was first in the queue and so got some help. By the time Lehmans (who I once worked for) came around no one wanted to touch it and given that they didn’t have customer deposits they could be allowed to fail. Mind you I see Barclays already snapping up some units in the US.

Now we have AIG, a private company, but an insurer so therefore a pretty important spoke the the wheel of the economy. $80bln…..the Fed’s printing press must be running to breaking point. Anyone keeping count of all this?

Don’t bother.

The US debt position is in La-La Land.

This move on AIG is dangerous. Not only has the banking system been nationalised but the stock market is being underwritten. Why the S+P isn’t at 1000 is beyond me. This artificial support of the stock market is just as crazy.

The Fed worries about adding “to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance”. Well that’s fair enough but that is the reality. The US has overextended itself over the last 8 years with cheap credit and massive leverage through financial intermediaries.

It’s over. The Fed should be over too.

The authorities need to take a cold hard look at the financial system and the disaster it has wreaked.

No clearer evidence of this has been the advancement into positions of political power by ex-investment bankers particularly from Goldmans. The leverage game must surely be over now.

We are watching the end of 20 years of US financial domination through global investment banking. The end of financial assets being marketed as investments and hopefully a complete reorganisation of the banking and financial system onto a sounder and more stable position, once which encourages productive endeavour and not constant speculation.

Tags: banking, credit, federal reserve, financial crisis, markets