Bank of America to Pay for Merrill Backstop, Faces SEC Trial (Bloomberg)

Ken Lewis trying hard to buy his way out of trouble, saying BofA will pay $425 million to cancel one piece of unused federal guarantee of Merrill Lynch's assets. Lewis frantically trying to reduce "reliance on government support and return to normal market funding." Will it help fend off the government? SEC says it will "vigorously pursue" its bonuses case against the bank, and maybe the SEC means business now that federal judge Jed Rakoff is on the agency's back.

Liquidation of CDOs aids banks (FT)

Market has loosened up for the assets underlying the complex, toxic securities that crashed Wall Street. An estimated $123 billion of these bullshit, defaulted securities that fed the Street's excessive greed have been liquidated.

Is This a Sucker's Rally? (Seeking Alpha, Jeff Miller)

A good roundup of bloviations good and bad.

Why haven't any Wall Street tycoons been sent to the slammer? (McClatchy, Kevin G. Hall)

In search of a "poster child for the Great Recession." Hank Paulson's always a candidate.

Envoy seeks to ditch 'bullying' US image (FT)

Louis Susman, Obama fundraiser and now U.S. ambassador to the U.K., announces that the Bush Era is officially over: "We are not a dumb power, we are not a bullying power." He adds: "To compare it to the previous relationship, well, some people might say that relationship wasn't healthy. Many people here in the UK didn't think it was healthy because it was without questioning and interaction."

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Federal judge Jed Rakoff's 12-page order filed last Monday formally rejecting the SEC's lame-ass settlement with Bank of America over the Merrill Lynch conniving is an instant classic. You heard about it; now read it.

Rolfe Winkler dished out an excellent report last month from inside Rakoff's courtroom as the judge hammered at both sides. Well worth checking out.

Here's just a taste of Rakoff's order itself:

Hot off the server from Wayne State University's law school is Peter Henning's "Should the SEC Spin Off the Enforcement Division?" Amid all the whining about the SEC, this is a question that has so far eluded most of the press — I mean, the question itself has, let alone any debate or discussion.

I like the way the guy cuts through the bullshit swirling around the SEC to get to the point of how the SEC dropped the ball on the Madoff caper — and how that is a problem stemming from the very nature of the SEC and thus will happen again and again and again.

For Obama, a Chance to Reform the Street Is Fading (NYT)

The president "sternly admonished the financial industry and lawmakers to accept his proposals." Obama says Wall Street is "choosing to ignore" the "lessons of Lehman and the crisis."

Judge Rejects Settlement Over Merrill Bonuses (NYT)

Astonishing, rare, and powerful rebuke of Wall Street by federal judge Jed Rakoff that far outstrips Obama's for-public-consumption scolding — and embarrasses the president and Obama's SEC chief Mary Schapiro. WSJ's "Judge Tosses Out Bonus Deal" points out that the "unusual ruling ... casts doubts about how the [SEC] handles probes of major U.S. companies." Rakoff's ruling strengthens NY AG Andy Cuomo's attempt to file civil-fraud charges against Bank of America's CEO Ken Lewis. Meanwhile, Lewis tells Japan that "there is a potential for a rebound that beats the forecasts." He's talking about the global economy, not his own future.

No Easy Exit for U.S. As Housing's Savior (WSJ)

Housing market's only doing better because the government's propping it up.

Swine Flu Means $25,000 Chartered New York Flights for Senior Executives (Bloomberg)

"Demand for private travel during the swine flu pandemic is boosting the charter business, worth about $33 billion a year worldwide."

For France, a Joie de Vivre Index (WSJ)

"Sarkozy to Add New Indicators, Such as Well-Being, to Measure Economic Health." Clever. Based on Joseph Stiglitz's analysis.

Wells Fargo Dismisses Executive Accused of Using Foreclosed Home for Parties (WSJ)

Bank seized $12 million beach house lost amid Madoff scheme, and senior veep Cheronda Guyton used it to party like it was 1999.

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From page 21 of the executive summary of the Kotz report on the SEC's bungling of the Madoff case.

Picture, if you will, the look on the face of Madoff's lawyer when he realized that the SEC enforcement staff actually believed him when he lied to their faces. Even if he'd burst out laughing, they probably still wouldn't have caught on.

Don't blame Madoff's lawyer (unnamed in this report) for lying. That's what lawyers do on behalf of their clients. Blame the SEC enforcement staff — of all people — for taking lawyers' statements at face value.

But it turns out (executive summary here) that apparently the SEC was honest but stupid. Like Forrest Gump.

You can live with a regulatory agency that makes mistakes because of a few bad apples. But an agency with a brain the consistency of applesauce is of no use to anybody — except to schemers like Madoff.

The last thing the world needs is two regulatory agencies whose duties overlap putting their heads together to come up with a compromise. But that's what's going on right now: The SEC and CFTC are knocking booty in a rare meeting to exchange views on how to deal with Wall Street. The WSJ story on this (with the amusing headline "Exchanges Offer Views on Harmonizing Regulation") notes that CFTC Chair Gary Gensler said in his opening remarks, "All options must be on the table, and there are no sacred cows."

When all is said and done, this is just another act of the dog-and-pony show the Obama Administration is orchestrating to make people think that there's going to be more regulation of cockamamie derivatives and less manipulation of commodity futures prices by the goniffs currently out of control under the CFTC.

Uh-huh. The fact is that the SEC, for all its faults, at least has rules in place to actually regulate the markets. The CFTC, on the other hand, is mostly a joke, with its "self-regulating" rules for commodities speculators.

The guys doing over-the-counter derivatives that speculators so often abuse want no part of the SEC telling them what to do. CME Group (Chicago Mercantile Exchange) Chair Craig Donohue voiced the veiled threat. Or, as the WSJ story puts it, "Mr. Donohue cautioned against abandoning the CFTC philosophy of regulation and said an SEC style applied to futures markets would drive the business offshore. While he rejected a wholesale merger, he said there are a "few discrete areas" where regulation could be improved through harmonization, according to the prepared remarks."

But Gensler is no regulator; he's just going through the motions, so don't sweat it too much, guys.

STOCKS SINK IN SEPTEMBER SELL-OFF (NY Post)

Ominous quote: ""September's usually a bad month, but this time it came much too early in just a single day."

Financials suffer amid profit concerns (FT)

Biggest fall since late June for big U.S. banks. Bank of America's talks with government to repay TARP money is not looked upon favorably. Ordinary bank customers beset by new or increasing fees might be amused, however, to learn that BofA is being told it will have to pay a $500 million fee to withdraw from the TARP arrangement.

Bomb Explodes Outside Athens Stock Exchange; One Hurt (Bloomberg)

A few months ago, the same radicals tried to blow up Citigroup's Greek offices, but the bomb fizzled.

News Corp. in Talks for Stake in Saudi Firm (WSJ)

Rupert Murdoch huddles with Prince Alwaleed to buy a 20 percent interest in Rotana Media, which already hosts Fox channels in Saudi Arabia. The prince's Kingdom Holding already holds a 5.7 percent stake in News Corp., so there's a strong business link.

The FTC's hammer comes down on robocalls (Salon, Andrew Leonard)

Good news: Telemarketers have to get your written permission before bombarding you with pre-recorded calls. Bad news: Not covered are calls from "politicians, banks, telephone carriers, and most charitable organizations," says the FTC. And there's nothing to stop debt collectors from dunning you with pre-recorded messages, as long as they're not trying to sell you anything.

After you: Consumers are paying for lenders' past excesses (Economist)

Banks are full of mortgages that make no money, so to compensate they're not doing new buyers any favors.

Redskins Fans Waited While Brokers Got Tickets (WashPost)

They used to call this scalping.

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Bernie Madoff's Hamptons home is finally up for sale, and it's got way more than just celebrity value.

Inexplicably, CNN's Les Christie came away unimpressed after he toured the house at 216 Old Montauk Highway. I don't know what studio Christie shares in Manhattan, but he focused more on the $7 million (or thereabouts) seashore home's unostentatious furnishings ("Think Formica") than on the fact that every fucking room has an ocean view. And that view is better than anybody else's in the extremely fancy neighborhood because Bernie's house sits way closer to the ocean than his neighbors' mansions do (see the pic above). Plus there's a stone fireplace, a nice swimming pool, and greenery all around.

Deputy U.S. marshal Roland Ubaldo, sounding more like a realtor, called the place "simple, stylish, but understated." Perhaps to compensate for Madoff's overstated "investments."

Corcoran (naturally) won the right from the U.S. Marshals Service to peddle the place and is asking $8.75 million. (Zillow has pictures.)

The mansion market is depressed, so that figure is likely to drop. But if Bernie's house is still out of your range, you'll have to make do with the priceless (yes, free) report due out this week on the SEC's botched handling of Madoff. An estimated 450 pages and 500 exhibits, including a record of all the tips the SEC ignored. Should be juicy.

Credit card issuers boost rates ahead of tougher rules (L.A. Times)

Banks "are getting their shots in while they can," says a prominent observer. More: "For the three months that ended June 30, U.S. households on average carried a credit card balance of $7,987, down from a high of $8,529 in the third quarter of last year, according to Moody's Economy.com."

The Coming Recovery Will Most Likely Not Be Robust (Seeking Alpha, Tom Lindmark)

Parsing IMF Chief Economist Olivier Blanchard's prediction that the Great Recession has permanently damaged economic growth.

Time Warner, YouTube Reach Video, Ad Rev Agreement (WSJ)

Small picture: Google on the march to make its YouTube unit show a profit. Big picture: Latest in a series of pacts that will allow advertisers to make big footprints on the Internet. (See also "YouTube Pumps More Ads Into Lineup.") Bad news for network TV; great news for bloggers looking to spice up their sites. Even better news: Adult Swim clips will be available on YouTube.

US Life Expectancy Reaches All Time High (Medical News Today)

Is that good news or bad news? We're up to nearly 78, so we'll be even crankier for even longer and will cause more traffic accidents. We'll also require more health care for longer, and you'll have to pay for it.

Princeton, Harvard Share Top Spot in U.S. News College Rankings (Bloomberg)

Meaningless ratings (except for the huge PR value) by the ailing U.S. News & World Report yield the usual suspects. This account by Oliver Staley is an unusually thorough look at a highly (and humorously) flawed process during which schools are increasingly accused of "manipulating" their admission policies to impress an increasing irrelevant news magazine. More scary is that colleges are now judging prospective students by their "personalities," as the WSJ reports. (Mark me down for a trade school.)

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