Oddly enough, I came across an article with the same I title as I gave my piece last week. It’s called Commonwealth and is from the February 6th issue of NY Magazine. This article had a similar connotation to mine except with a much more specific and controversial thread. Now, I’m not saying I agree or disagree, but I like that someone took the time to point out the other side of the coin. Its subtitle reads, “Sure, we want to see Wall Street humbled. But beggaring these guys is bad for New York.” I’m hoping, and not alone on this, that we see another book out of Michael Lewis about the demise of some gluttonous financial operations. Liar’s Poker is the first book I read when I decided to enter this realm. This writer, though you can tell he doesn’t have the depth of knowledge on the subject that those in our little financial world do, believes, “Wall Street has a warped incentive ecosystem, but it’s evolved that way because, over the years, it’s worked.” And he thinks Michael Lewis is wrong about the industry being doomed. I will confess I also disagree with Lewis. Please read this. It’s short.

http://nymag.com/news/intelligencer/54080/

Although a staggeringly unfathomable number, we have selectively disregarded the budget deficit this week. After all, it’s last week’s news. This week the AIG bailout restructuring holds the candle. The first attempt was hastily put together back when bailing out was barely considered as an option. Now that officials have more of a handle on a strategy it’s only right that they should use the same one on AIG. The Treasury is exchanging $40B of the preferred shares they currently hold for preferred shares with terms that more closely resemble common equity as well as another $30B line of credit. The Treasury will now have a 77.9% interest in the company. (See front page of today’s WSJ)

Equity markets are choking the AIG plan down being reminded of how hopeless the financial world seems but the treasury market is actually able to take a safety bid from equity’s slide while it has a break from issuance this week. Next week we get 3’s, 10’s, and 30’s. The curve has recently been pushed to the steepest levels since Nov and now we call the 2-10-yr yield spread flat when it runs under 200. Next week’s issuance is likely to push it even wider.

The question is no longer whether or not the government will spend the money it’s what they will spend it on. The Financial Stability Plan will be in textbooks from here on with the same regard as the New Deal. There are just as many, if not more, acronyms invented in its progress. The most prominent at the moment are TALF and PPIF. The decision of the government to buy toxic assets off the sheets of financial institutions is the solution that would stem the need for nationalization. The risk is in how truthfully they can be valued. As soon as details about the PPIF are released, I’ll be sure and post them. I don’t mean to be such a Debbie Downer but every time we wait for THE answer, we are disappointed. Just a heads-up.