Who's Next?

In order to regain a shred of credibility, the Fed has to let someone fail. Even if Ben does not realize it, Hank knows that someone has to take one for the team.

The question is, who?

Not the public. We're on the menu as a slow roast.

WaMu? Spreads say its a good bet. The question we're pondering is cui bono, who benefits. Ben has to be gagging on this one since they are a 'real bank,' but the breakup fees and carcass picking must be tempting indeed to the pigmen. Maybe, but more likely for later. It might be messy. Same goes for Wachovia. Possible, but potentially dangerous.

LEH? It would make a manageable splash and the desperation is apparent. Dick "The Gorilla" Fuld is widely disliked and he's been at Lehman for so long he's probably not very wired into the right places. He's on the Board of the NY Fed, but we'd bet he used his time there to generally piss off the wrong people. An asset sale and then death by boofoo seems like a decent bet. Or just a sudden death and fire sale after the fact. Contrarian-wise too many expect it, but that might just be a way to keep it from shocking the markets, which is a plus.

MER? They are in deep trouble, but John Thain is making the right moves and knows too many gravesites, and is well respected. Maybe, if he gets airlifted out first and taken care of in a big way. He'd make a great chairman of the SEC, Treasury Secretary, or a government Resolution Trust chief.

We'll be looking for the unwinding of obligations by the right crowd. They-who-must-not-be-named very publicly put one behind Bear's ear by pulling their business, but its unlikely to be that publicly obvious next time. That was payback for LTCM.

That's the gameplan unless something unexpected happens. Then its time to grab some gold and head for the nearest door. But for now it looks like the Working Group on Managed Markets has this one by the nose and is just taking care of business.