Last night CBC’s late news carried a rather disturbing shot of Wednesday’s minimalist closing ceremony at the New York Stock Exchange. Today Germany’s Der Spiegel has the backstory.[1]
The original plan actually called for humor. On Wednesday evening, actress Christy Carlson Romano was supposed to ring the closing bell on the floor of the New York Stock Exchange (NYSE) to mark her debut in the Broadway musical "Avenue Q." She plays two roles on stage — a romantic kindergarten teaching assistant, and a slutty nightclub singer.
After that day on the floor, the stock traders could have used a bit of comic relief. But it was not to be. Instead of Christy Carlson Romano, a NYSE employee in a joyless gray suit stood on the balcony and silently pressed a button. The bell rang and he disappeared. No waving, no clapping, none of the usual jubilation.
Just possibly, the powers-that-be on The Street realized that the humor they were planning might have cut too close to the bone.
Doomers will recall that this avalanche started on July 7th [2] [3] when "Lehman analyst Bruce Harting sounded the horn around a possible revision to FAS 140," which was threatening to eliminate a class of off-balance-sheet vehicles collectively called "The Q".[4] Now going on ten weeks later the evolving catastrophe has swept away Fannie, Freddie, Lehman Brothers, and presumably Mr. Harting’s own analysis team. Avenue Q indeed — Muppets? I definitely don’t get out enough …
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Notes and References
[1]: " ‘The World As We Know It Is Going Under’ ", by Marc Pitzke, Der Spiegel, September 18, 2008.
[2]: "Freddie Mac, Fannie Mae shares plunge; GSEs may need to raise capital – Lehman", Press Release, Trading Markets, July 7, 2008.
Lehman Brothers said that a rule change by the Financial Accounting Standards Board (FASB), FAS 140, which could result in the government-sponsored enterprises’ off-balance sheet securitizations moving on balance sheet, could require Fannie Mae to add $46 billion of capital and Freddie Mac to add $29 billion of capital.
…Lehman Brothers said that a rule change by the Financial Accounting Standards Board (FASB), FAS 140, which could result in the government-sponsored enterprises’ off-balance sheet securitizations moving on balance sheet, could require Fannie Mae to add $46 billion of capital and Freddie Mac to add $29 billion of capital.
[3]: "Fannie, Freddie Socked by Investor Paranoia", by Paul Jackson, HousingWire, July 7, 2008.
In a note to clients, Lehman analyst Bruce Harting sounded the horn around a possible revision to FAS 140, which governs the accounting treatment of off-balance sheet entities; a proposed update to the accounting standard by the Federal Accounting Standards Board would eliminate the concept of a qualifying special-purpose entity, or QSPE — a unique kind of off-balance entity that critics have said is to blame for current market woes.
That FASB is looking to eliminate QSPEs shouldn’t have been news; it was something HW first reported on way back in February, despite the breathless coverage the issue has gotten recently.
[4]: "Kill the Q: Subprimes Head for Balance Sheets", by David M. Katz, CFO Magazine, June 2, 2008.
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