The Oil Drum

[UPDATE] JP Morgan agrees to buy Bear Stearns for $2 a share (Stock closed Friday at $30).
Also, Fed cuts rates (on Sunday) from 3.5% to 3.25%.

The WSJ has a decent article describing the current financial crisis and pulling no punches:

Debt Reckoning: U.S. Receives a Margin Call

The U.S. is at the receiving end of a massive margin call: Across the economy, wary lenders are demanding that borrowers put up more collateral or sell assets to reduce debts.

The unfolding financial crisis -- one that began with bad bets on securities backed by subprime mortgages, then sparked a tightening of credit between big banks -- appears to be broadening further. For years, the U.S. economy has been borrowing from cash-rich lenders from Asia to the Middle East. American firms and households have enjoyed readily available credit at easy terms, even for risky bets. No longer.

The frame is, erm, interesting. ("It's not because we need to destroy demand, it's because we need to pay for the infrastructure to keep demand increasing.") But hey, it's a start. (Here's a link to the story.)

WASHINGTON (AP) - Federal gasoline taxes should be raised up to 40 cents per gallon over five years, a special commission urged Tuesday in calling for drastic changes to fix aging bridges and roads and reduce traffic deaths.

The two-year study by the National Surface Transportation Policy and Revenue Study Commission is the first to recommend broad changes after the devastating bridge collapse in Minneapolis last August. It warns that urgent action is needed to avoid future disasters.

Here's a link to the National Surface Transportation Policy and Revenue Study Commission, which has links to the entire report and some other interesting materials.

Will the Fed cut interest rates to alleviate the developing credit crunch, and will it have the desired effect if they do? Can lowering the cost of credit overcome risk aversion and the fear of cascading default? If not then the Fed will not be able to prevent the contraction of the money supply and the spread of contagion amid a sea of margin calls.

In Canada, oil sands fever continues unabated and a drilling frenzy may be shaping up in the Arctic. One political leader urges the defence of sovereignty in the Arctic, while another holds talks on North American Union well away from the public eye. In Ontario, businesses are paid not to consume power.

On the climate front, northern infrastructure faces a serious challenge as melting permafrost undermines it's foundations, while Australia experiences a 1000 year drought.

Finally, we remember that 62 years ago, the world was waking up to the beginning of the nuclear weapons age.

Mortgage Maze May Increase Foreclosures

And the very innovation that made mortgages so easily available — an assembly line process known on Wall Street as securitization — is creating an obstacle for troubled borrowers. As they try to restructure their loans, they are often thwarted, lawyers say, by strict protections put in place for investors who bought the mortgage pools.

This impasse could exacerbate the housing slump, pushing more homeowners into foreclosure. That would lead to a bigger glut of properties for sale, depressing home prices further.

“Securitization led to this explosion of bad loans, and now it is harder to unwind and modify them even where it is in the best interests of both the borrower and the investors,” Kurt Eggert, an associate professor at the Chapman University School of Law in Orange, Calif., said in an interview. “The thing that caused the problem is making it harder to solve the problem.”

Creating difficulties is the complex design of mortgage securities.