Spreading Ripples

Of course, while America sleeps, Asia does business, and as America is starting to fumble for the coffee pot, Europe is well into its trading day.

The news is...not so good. But with one exception, which I'll note first, there are no signs of genuine panic, and even some signs of rebound.

Russia is not a country one usually associates with the words "stock market" at all, really, but it does have one. Two of its major indexes underwent major pullbacks today, requiring regulators there to actually suspend trading for a couple of hours to give people a chance to cool off and think about what they were doing.

Russia's actually had quite a bit of trouble, lately. Vladimir Putin gambled on flexing his muscles during the recent crisis in Georgia, in part because Russia seemed strong enough again to exert its own economic and political influence. The Russian economy has suffered ever since, however. Investors are nervous about putting money into Russia when it's feeling belligerent, and their banks are having some of the same "liquidity crisis" that we're having over here. Much of Russia's feeling of strength came from its status as an oil producer, but the price of oil has fallen significantly from its high of $147 in July.

Not all the market news is dire, however. The Heng Seng index out of Hong Kong posted a pretty good day, a further reflection perhaps of where China stands relative to the US and Europe in the credit mess. And the FTSE 100 index in London is also holding its own this morning. Furthermore, the futures trading market, which gambles on how the next day will go, is up for the DJIA and the S&P 500, suggesting that bargain hunting will keep the market from sliding much further today. Indeed, as I wrote this, US markets opened with a nice initial bounce, with the Dow 30 gaining 200 points back from the 777 point plummet yesterday.

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Meanwhile, in Belgium, a bank named Dexia is requiring a massive bailout from the governments of Belgium, France and Luxembourg today. Its US operations are haemorrhaging money because of, say it with me now, the sub-prime mortgage crisis; it was trying to complete an over-leveredged buyout of a Dutch bank; and it was apparently tied in with Lehman Bros., somehow, and stood to lose $350mn from that company's collapse.

Dexia's main US operation was a bond-insurance organization called FSA. A large number of the bonds they were insuring were backed by sub-prime mortgages. With the collapse of those bonds, FSA has had to pay out quite a bit of insurance. FSA turned to its parent for help, and its Dexia provided a huge ($5bn) credit line to help FSA stay afloat without having to fire-sale its assets. But this, of course, leaves Dexia as a whole on the hook for FSA's problems.

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Legislatively, today is likely to be a quiet day. The Congress stands in recess for Rosh ha-Shana, the Jewish New Year (for which at least one correspondent has reported seeing anti-semitic gabble on message boards at news sites). There will undoubtedly be back-room negotiations, as most of the principal players in this drama are not Jewish and have every reason not to take the day off. Tomorrow could see some committee action, but the full House of Representatives is not slated to reconvene until Thursday.

Conventional wisdom at the moment, therefore, is that there will be an attempt to pass a modified version of the bill on Thursday, assuming agreement on modifications can be reached; or else that Pelosi and Boehner are going to be breaking out the thumbscrews to try to get the handful of additional votes they need to pass the bill as-is.