The betting (based on Fed Funds futures) is currently an 88% probability of a 50 bps rate cut on Wednesday. Wall Street has issued its instructions, and Ben is expected to follow them. The boyz have let him know that, if he doesn’t cut enough, the stock market will be tanked. Are the boyz bluffing? Probably not, they don’t want Ben to think he can get away with misbehavior. If they can jam it, they can slam it. But a sad state of affairs. Ben has let himself become a thrall to the stock market, and now it can be used to manipulate him.

Perhaps that would be OK if the boyz had anything but their own self-interest in mind, but of course they don’t. New York AG Cuomo seems to think he is striking paydirt in the investigation of Wall Street’s alleged concealment or misrepresentation of the results of due diligence on the mortgages it was securitizing. He has persuaded one of the due diligence consultants to turn state’s evidence on the promise of immunity. The rating agencies are asserting that it was not their fault, they just believed whatever the Wall Street boyz told them. Not their responsibility to verify the information. Sounds rather like “I was just following orders.” This begs the question, of course, where is the SEC? These mortgages were packaged into securities, you know, the “S” part of “SEC,” which were given high ratings and then suffered massive defaults. Uh, shouldn’t the SEC care about this? Of course not, their job is to patrol the chat boards and descend like a ton of bricks on some poor individual who runs a pump and dump scheme for $25 thousand, while letting the industry pump and dump a couple of trillion dollars worth of junk. At least Cuomo seems to take his job seriously. The SEC is dangerous - it allows the industry to argue that it is regulated, when in fact it is not.

Wall Street is running the Fed and the SEC. And you wonder why their profits and bonuses are so obscene.

Back in the real world, it looks like the housing market pretty much fell apart in December. Prices started to roll downhill - good in a way, as that’s a necessary step to clearing the huge inventories. But sales dropped too, and we are coming up on the Super Bowl, which is the traditional signal to list your house for sale in the spring. How many unsold houses will be coming back on the market?