“The sooner we get this relief in the hands of the American people the sooner they can begin to do their job of being good consumers,” said House Republican Leader John Boehner of Ohio.

Well that’s a relief, now I know what I’m supposed to be doing. I always thought it was the pursuit of happiness, or some such wobbly thing, which is not all that easy. And that working thing, well I’m glad that’s off the table now. Too bad I spent so many years on a wild goose chase. Oh and that thinking thing, that’s off the table, too. The government will send me money and I will go out and spend it. In return I will keep my head down and shut up. Panem et circenses.

This emphasis on consumption is insane. You might just as well send the ‘crats out to buy everything in the stores and truck it to some huge garbage dump. Economically, the result would be the same. We need savings and its corollary, investment, to build a viable economy that is not dependent on the kindness of strangers. And yet the government persists in destroying any economic incentive to save and invest. It is about as sane as playing Russian roulette with all the chambers full.

Standard & Poor’s said total losses for financial institutions from the mortgage market problems will eventually reach more than $265 billion, including the $90 billion or so already announced. S&P said it cut or may cut its ratings on $270 billion worth of U.S. mortgage-backed securities and put $264 billion of collateralized debt obligations on watch for a possible downgrade.

In the U.S., we see losses moving to regional banks, credit unions, and FHLBs. Certain Asian banks are also exposed. There could be rating actions for selected banks, especially for those that are thinly capitalized. …

Ben lowered the Fed funds and discount rates again. Now he has only 12 25 bps steps left between here and zero, having used up 5 so far this month.

As I write, the effect of the cut is 160 points on the Dow at the cost of a good whack on the US dollar – the Canadian dollar is up 1.2% on the day, for example – and an increase in the cost of fixed rate mortgages of about 0.1%. So since the US is a substantial net importer, consumer prices will go up (or distribution margins will shrink) and anyone who wants to get out of their Greenspan-recommended toxic ARM will have to pay more (and make more money to qualify). However, the net interest margins of Wall street will improve. I’m sure we’re all happy to make any necessary sacrifices to achieve that goal.

Edit: Well the 160 points didn’t exactly last. Dow closed down 37 or so.

I wondered where the SEC was while the FBI and the New York AG were pursuing various investigations related to mortgage-based securities. Well, thanks to Bloomberg (Subprime Lenders Get Big Accounting Break at SEC: Jonathan Weil), now I know. They were off taking care of the industry’s legal problems with the off-balance-sheet vehicles that are being used to hold mortgages after all the up-front fees and profits have been taken out. Of course they were taking care of them by waiving the rules, protecting the industry rather than any semblance of consistent or transparent accounting. Heaven forfend that any losses should offset all those nice profits. Mr Weil observes the possibilities of this strategy:

Perhaps the auto industry could be saved, for example, if only we devise new accounting “interpretations” of the rules governing their massive pension liabilities.

Hewitt couldn’t call his Jan. 8 letter an outright exemption, of course. Unlike the SEC itself, he doesn’t have the authority to overturn the FASB’s rules. Practically speaking, however, that’s what he did.

The SEC and the FASB at least should acknowledge this subterfuge for what it is. Don’t count on it, though.

It is so reassuring to know that the SEC is looking after Wall Street. We wouldn’t want bonuses or the Hamptons houses to be in jeopardy, would we?

An Australian brokerage firm, Tricom Equities, was unable to settle its trades.

Tricom’s managing director, Lance Rosenberg, said last night that last week’s huge trading volumes had created “administrative issues” that Tricom was confident it could resolve – but the bottom line appears to be that the firm had insufficient funds to cover last Friday’s trades under the three-day settlement rule.

One hopes that what happens in Oz, stays in Oz.