lots of news today.

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TREASURY PUMPS $250 BLN SECTION:  3 stories

Treasury to Take $250 Billion in Equity Stakes in Banks in Wide-Ranging Effort to Restore Confidence – … Other elements of the plan, which will be announced Tuesday morning, include: equity investments in possibly thousands of other banks; lifting the cap on deposit insurance for certain bank accounts, such as those used by small businesses; and guaranteeing certain types of bank lending. … – Wall Street Journal

also more at           Reuters   

and     International Herald Tribune

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OTHER NEWS:

hat tip to Marty Rosenblatt: ABA CALLS ON SEC TO OVERRIDE RECENT FASB GUIDANCE ON FAIR VALUE – WASHINGTON-The American Bankers Association sent a letter today to SEC Chairman Cox requesting that among other things, the SEC override the Financial Accounting Standards Board Staff Position issued last week on how banks and their auditors are required to apply FASB Statement No. 157. The letter urges the SEC to address in a more meaningful way the problems of using fair value in dysfunctional markets.   The letter also notes that yesterday 15 European countries moved to make the types of accounting changes ABA has been advocating, but that FASB on Friday, as a practical matter, failed to implement. 

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MUST SEE GREAT VIDEO:  Intelligent Investing:  Ace Greenberg – Former chairman of Bear Stearns and legendary trader on the worst markets he’s seen in 60 years on Wall Street. – Forbes - it is 50 minutes – wisdom like this you do not hear everyday.

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Fannie, Freddie Mortgage-Bond Spreads Exceed Pre-Takeover Level – Jody Shenn – … The difference between yields on Washington-based Fannie’s current-coupon 30-year fixed-rate securities and 10-year Treasuries rose 12 basis points to about 204 basis points at 3:05 p.m. in New York, according to data compiled by Bloomberg. The rise in yields this week suggests higher interest rates on new home loans of about 50 basis points, or 0.50 percentage point.  … – Bloomberg
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Research Zeitgeist: Googling Subprime – A google search for “subprime” carried out 10 years ago would have yielded 14,500 results. Today that same search offers up 14.5 million results. A search for “credit default swaps” in October 1998 yielded 33,900 results, compared with over 1 million today,  while results for “hedge funds” ballooned from 162,000 to over 8.5 million. By contrast, a search for “conventional mortgage” has risen only from 111,000 to 579,000. Even allowing for extraneous factors, these are startling numbers. – Research Recap

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Federal Reserve Bank of Cleveland Econpubs – October’s PDF issue is compiled and posted. This issue contains articles on: Inflation and Prices. The Yield Curve, International Markets, Economic Activity and Labor Markets, Banking and Financial Markets 
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Where Do We Go From Here? – John Mauldin’s Weekly E-Letter – contains Construction Lending: The Next Shoe to Drop – Lehman at the Center, Iceland Guarantees What?, Letters of Credit: Going, Going Gone?, What to Do and Where Do We Go from Here?

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Fannie, Freddie to Buy $40 Billion a Month of Troubled Assets – Dawn Kopecki – Federal regulators directed Fannie Mae and Freddie Mac to start purchasing $40 billion a month of underperforming mortgage bonds as the Bush administration expands its options to buy troubled financial assets and resuscitate the U.S. economy, according to three people briefed about the plan. – Bloomberg

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I like this one BC – Another Bailout Proposal – Mark Thoma – Everyone else seems to have a simple, idealized, infeasible bailout proposal, so I decided I should have one too. This proposal (a) removes toxic assets from balance sheets, (b) recapitalizes banks, (c) limits executive pay, and (d) gives taxpayers a share in any profits from the bailout. Here’s how it works. … – Economist’s View 

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Largest Bond ETF Trades at Massive Discount – Alan Brochstein – In a world where my average equity holding moves in a 10% daily range, very little should surprise me.  I would like to share with you, however, something that makes absolutely no sense.  The world’s largest bond ETF and one of the largest ETFs overall, iShares Lehman Aggregate Bond Fund (AGG), is trading at a 8.9% discount. – AB Analytical Services

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Mortgage last loan people pay, study finds – … When faced with the possibility of falling behind on home loans, credit card payments or car loans, borrowers are more likely to choose to let their mortgages slide than the other kinds of debt, according to a recent study conducted by Equifax, a major consumer credit rating agency. – SFGate.com
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In the study, researchers looked at thousands of borrowers who had taken out mortgages in 2002 and 2005 and tracked their payment behavior over a 24-month period. Of those in the 2002 sample who missed two payments on their mortgages during the two years, 26 percent maintained  …- Bob Tedeschi, New York Times – San Francisco Chronicle
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Some Borrowers Will Need Very Large Loan Modifications – has borrower examples – Mortgaged Future

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Donald Coxe – Homeicide: The Crime of the Century – Posted by Prieur du Plessis – has 9 summary points and link to full report – Investment Postcards from Capetown

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How Congress set the stage for a fiscal meltdown – Ken Dilanian – … 1. Not checking derivatives  … 2. Protecting Fannie, Freddie  … has details – USA Today

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Fannie, Freddie to Step Up Purchases of Troubled Mortgage Bonds – Dawn Kopecki -  Fannie Mae and Freddie Mac are ready to start purchasing $40 billion a month of underperforming mortgage bonds … Fannie and Freddie began notifying bond traders last week that each company needs to buy $20 billion a month in mostly subprime, Alt-A and non-performing prime mortgage securities … The purchases would be separate from the U.S. Treasury’s $700 billion Troubled Asset Relief Program.  – Bloomberg

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Option Arm loan program killed Washington Mutual – HeraldNet – Editor’s note: This is the second installment of a two-part series on Washington Mutual. Kerry Killinger, the former strategist at the brokerage firm …