Wall Street has Crashed

[nitesh]

It is passed

Moneycontrol >> News >> Economy >> US Senate passes new bailout package

The US Senate on Thursday passed the much anticipated economic bailout plan. This bailout plan, with a price tag of a whopping USD700 billion is a result of continued bi-partisan efforts.

While 74 voted for, 25 voted against the bailout plan by the Senate.

This plan will allow the US Government to take over troubled assets from banks which will help to keep them afloat and avoid frozen credits. But will increase the burden for future taxpayers.

This version of the bailout plan has also increased the Federal Deposit Insurance Corp cap from 1 lakh to 2.5 lakh to help small businesses. The changes are aimed at the public perception that this bill will only help Wall Street, banks and well-heeled executives.

The previous bailout package was rejected in the House and the uncertainty had cost the Dow Jones index 200 points in the trading on Wednesday.
So, the US Senate planned to vote on a slightly revised version of the previously proposed rescue plan.

A group of representatives defended their vote on the bill on Wednesday, stating that there are other options that have not haven't been utilized.
"What we're saying is use every tool in the box that's appropriate for this situation," said Democrat from Texas, Lloyd Doggett.

But others in the Senate view the Bill's prompt passage as a necessity, not an option.

"It really is an issue that goes right to the heart of Main Street. If you don't have credit in America, then the Main Street can't function," said Republican from New Hampshire Senator Judd Gregg.

Senator Harry Reid, Democrat and the Majority Leader said, "I'm hopeful and confident that all sides, House and Senate, White House, will work together to achieve a goal that will be good for the American people."

Both Presidential nominees Barack Obama and John McCain were in support of the Senate plan which includes raising the FDIC Insurance cap from US USD100,000 to USD250,000.

But some House members on Wednesday warned that problems may persist even with Senate approval of the plan.

"If, and it's rumored that the Senate intends to jam through the same bill with only with a change on the FDIC limit. If they do that without a real pay for, I think there's still going to be tremendous problems in the House," said Oregon democrat, Peter DeFazio.

President Bush has warned that the situation is urgent and the consequences will grow each day this bill is not passed.

The bailout plan passed by the US Senate will rescue the battered US banking system and will go back to the House of Representatives.

 

[pkpatriotic]

House passes $700 billion financial bailout
Friday, 03 Oct, 2008 | 11:44 PM PST

US House Minority Leader John Boehner (R-OH), Rep. Roy Blunt (R-MO) and Rep. Adam Putnam (R-FL) speak about their efforts to rally fellow Republicans to help pass a bill to provide a $700 billion bailout on Oct 3, 2008.

WASHINGTON: The US House of Representatives on Friday passed a landmark $700 billion financial industry bailout bill, sending it now to President George W. Bush, who is expected to sign it into law.

Eyeing both the Nov. 4 elections and stock market indexes, the House voted 263-171 to approve the largest government intervention in the financial markets in decades. The measure passed the Senate on Wednesday.
Some lawmakers complained that the bailout would help big banks, but do little for troubled homeowners, while giving sweeping powers to Treasury Secretary Henry Paulson and whoever replaces him after the election.
‘This will give unprecedented, unbelievable authority to Henry Paulson, a Wall Street speculator who created the financial weapons of mass destruction and now says he knows how to disarm them,’ said Oregon Democratic Rep. Peter DeFazio.
Others said the plan was needed to prevent Wall Street's problems from causing a potential economic disaster.
Rep. Zach Wamp, a Tennessee Republican who opposed the bill on Monday but supported it on Friday, said: ‘We're out of choices, our backs are up against the wall.’

 

[pkpatriotic]

Bush swiftly signs rescue bill after House approval
Saturday, 04 Oct, 2008 | 01:33 AM PST |


President Bush signs the Emergency Economic Stabilization Act of 2008 in the Oval Office, Friday, Oct. 3, 2008. AP

WASHINGTON: US President George W Bush Friday signed an economic rescue bill just hours after the US House of Representatives reversed course and approved the historic 700-billion-dollar Wall Street bailout.

The House, which sparked market and political turmoil by rejecting an earlier version of the bailout on Monday by 228 votes to 205, voted 263 to 171 to pass the largest US government economic intervention since the 1930s.

House Democrats piled up 172 votes for the bailout, compared to 91 members of the minority party, reflecting the waning power of the Bush administration which backed the bailout during two weeks of high political drama.

Democratic leaders credited White House nominee Barack Obama for helping to win over votes of wavering Democrats to end a political crisis which became a major test of leadership between him and Republican John McCain.

‘I am hopeful that we have gone a long ways towards restoring confidence in our markets,’ said Democratic Senate Majority whip James Clyburn.

Lawmakers said that the combination of tumbling stocks, which pulled down market-linked pension plans, and a credit freeze which had bitten deep into the day-to-day economy, had changed the political calculation since Monday.

‘A delay of four days led to 60 more votes for the bill,’ said Barney Frank, the top Democratic House negotiator on the measure.

The top House Republican John Boehner said that the version of the bailout passed by the House was superior to the original version requisitioned by the Bush administration, which some critics described as a ‘blank check.’

House speaker Nancy Pelosi immediately signed the bailout package, which allows the US Treasury to buy up billions of dollars in bad mortgage debts choking the US economy, and sent it to President George W Bush for his signature.

And she paid tribute to Obama, who will take responsibility for the reeling economy, if he manages to defeat Republican McCain in the election on November 4.

The Senate passed a revised version of the bailout package 74-25 on Wednesday, including sweeteners on extending bank deposit insurance and expired tax breaks.

The amended version of the plan is laced with 150 billion dollars in tax breaks to coax reluctant lawmakers from both the Democratic and the Republican parties to get on board.

The bailout gives the US Treasury power to buy up toxic mortgage debt which has been choking the financial industry and would create a 700-billion dollar federal program to buy bad assets from banks and other financial firms.

 

[Neo]

Plan will put economy on road to recovery: Bush​

WACO, Oct 4: US President George W. Bush on Saturday praised legislators from both major parties for approving the $700 billion financial system bailout package, but warned that relief would not be instant.

The Senate approved the measure on Wednesday, while the House of Representatives approved it on Friday, after rejecting a slightly different bill on Monday. Bush immediately signed it into law.

In his weekly Saturday morning radio address, Bush acknowledged that it was a difficult vote for both Democratic and Republican legislators.

“I appreciate their willingness to work across party lines in the midst of an election season,” Bush said.

The measure “provides the necessary tools to address the underlying problem in our financial system,” the president said.

Bush said that the final cost to taxpayers will be “much lower” than the $700 billion figure, because as time passes the value of the assets the government purchased “will likely go up in price.” That means “that the government should eventually be able to recoup much, if not all, of the original expenditure,” Bush said.

The president, however, warned that the relief would take time.

“By taking all these steps, we can begin to put our economy on the road to recovery. While these efforts will be effective, they will also take time to implement.

“My administration will move as quickly as possible, but the benefits of this package will not all be felt immediately. The federal government will undertake this rescue plan at a careful and deliberate pace to ensure that your tax dollars are spent wisely.”

Bush, however, said he was confident that by “getting our markets moving” with the measure, “we will help unleash the key to our continued economic success: the entrepreneurial spirit of the American people.” —AFP

 

[Neo]

US debt set to soar, says rating agency​

NEW YORK, Oct 4: Combined US government debt is set to rise to levels unseen since the 1950s, but the US should nevertheless be able to hold onto its AAA credit rating, the Fitch ratings agency said.

“If all fiscal commitments announced to date materialise and are full by the end of 2009, the general (ie federal plus state, regional and local) government fiscal deficit would rise to 10 per cent of GDP in 2009 and general government gross debt would exceed 70 per cent of the GDP for the first time since the 1950s,” it said in a statement.

“The US will likely overtake France and Germany to become the most indebted ‘AAA’ rated sovereign next year,” added Brian Coulton, managing director in Fitch’s sovereigns rating group.

“Nevertheless, there is sufficient headroom within the tolerances of the US AAA rating to absorb a sizeable near-term fiscal deterioration arising from measures to stabilise the financial system and prevent an excessively deep and prolonged recession.”

Fitch said US government support for the financial sector -- including the Troubled Asset Relief Programme adopted on Friday -- did not fundamentally alter its current perspective on the AAA sovereign debt rating.

The agency affirmed the AAA rating with a “stable outlook” back on Sept 7.

In Washington, the US Treasury said it had taken on Barclays Global Investors and State Street Corp to manage the mortgage debt purchased in its takeover of Fannie Mae and Freddie Mac.

Officials said they had begun purchases of the debt last week following the nationalisation a month ago of the two government-sponsored, shareholder-owned financial firms.

The contracts signed were not directly related to the financial bailout approved by Congress on Friday, but the Treasury may use outside firms to buy up distressed mortgage securities under that plan as well.

The deals were signed with British bank Barclays’ New York branch, which took over some of the operations of Lehman Brothers when it failed last month, as well as State Street Bank and Trust Company, a large asset manager.

The deals provide the firms with 0.03 per cent of the first $5 billion in assets and 0.02 per cent of the next tranche. For amounts above $10 billion, they will receive 0.01 per cent.

On September 7, the US government took over ailing mortgage giants Fannie Mae and Freddie Mac and placed them in a “conservatorship” in a bid to avert a financial system meltdown from the housing crisis.—AFP

 

[Neo]

Key points of rescue plan​

Introduction of the rescue plan will be phased, beginning with an initial authorisation for the US Treasury to purchase immediately up to $250 billion in “troubled assets.”

At the request of the president, this can be increased to $350 billion.

The plan gives Congress a veto power over purchases above that limit and sets a ceiling for all purchases of $700 billion.

Gives taxpayers an ownership stake in companies that take advantage of the bailout, raising the possibility of the public making profits if market conditions improve or of recovering some assets if participating companies.

Eventual profits from the sale of government-owned assets will be used to retire federal debt, with a portion set aside for a federal housing authority.

If the sale of assets purchased under the plan does not fully cover the cost of the bailout within five years, the shortfall will be made up by financial institutions that benefited from the bailout.

Calls on the Treasury secretary to coordinate with foreign financial authorities and central banks about establishing similar rescue programmes.

No “golden parachutes” for CEOs or other executives who lose or leave their jobs at companies participating in the plan as long as the Treasury holds equity in those firms.

Limits CEO bonuses or other compensation deemed to encourage unnecessary risk-taking.

Recovers bonuses paid based on expected gains that turn out to be false or inaccurate.

Implementation of the plan by the US Treasury will be overseen by a board, including the chairman of the Federal Reserve, the Treasury secretary and the chairman of the Securities and Exchange Commission -- the Wall Street regulator.

A presence for Congressional watchdog the General Accounting Office at the US Treasury Department to oversee the programme and conduct audits.

Gives government the power to renegotiate terms of mortgages it purchases to ease pressure on homeowners facing foreclosure.

To overcome opposition to the government’s initial Wall Street bailout plan among conservative Republicans and some Democrats, the final version of the law included $150 billion in tax break extensions for middle class families and businesses and a number of new spending initiatives.—AFP

 

[Neo]

The meaning of American financial crisis​

Is there some meaning – some lessons to be learned – for a developing country such as Pakistan of the financial meltdown in the United States? It is a fair question to ask, especially given the concerns it has raised and the damage it has already done in America and Europe.

The United States has seen the collapse of a number of investment banks and, with the demise of Washington Mutual Bank, it has also witnessed the largest bank failure in its history. Is the crisis likely to spread to the developing world, including Pakistan? This question has two answers.

The first is simple. Pakistan’s financial system is not sufficiently integrated with global finance to get engulfed by the spreading American crisis. As such the turmoil in the United States will not have any direct consequence for the country. The second answer needs a bit more explaining. This concerns the several lessons, the country’s central bank, the financial regulators, and the bank owners and executives must draw from the American story. I will explore some aspects of this subject.

What happened in the United States; how the financial crisis developed. It all started with a combination of what is called “the American dream” and some new economic thinking espoused by Alan Greenspan, the legendary chairman of the US Federal Reserve System, the “Fed”. The American dream relates to the desire of all households to own their own home. Houses are not bought with one’s own savings but in part with bank borrowing. When I purchased my first residence in America, the down payment was about 20 per cent. Then – some three and a half decades ago – with $20,000 of personal savings one could buy a house worth $100,000. In those days $100,000 purchased a reasonable detached family residence in a reasonably well located suburb of Washington. The remaining $80,000 was financed by a bank, mostly “savings and loan associations” whose primary function was to lend for housing.

A 30-year mortgage at five per cent a year meant a payment of about $1500 a month and if this was about a third of the household income, this was considered to be a viable option. This was the system that supported a gradual increase in home ownership until Alan Greenspan took office as Fed’s chairman.

Greenspan, as he explains at some length in his autobiography, brought some new thinking to economic management. Like all central banks, the Fed’s principal concern is to keep inflation in check. It does that by looking carefully at a number of economic trends including non-accelerating inflationary rate of unemployment (NAIRU). Rapid economic expansion would increase the demand for workers.

If the NAIRU dropped below a certain level, there was the fear that the tightening of the labour market would push up wages as the workers would be able to demand higher levels of compensation. This would cause inflation. The central bank’s response to check this development would be to raise short-term rates, the only major instrument of policy lever over which it has control. A rise in these rates normally increased the cost of doing business which in turn would reduce the demand for workers. The economy would return to a non-inflationary equilibrium.

When in the mid-1990s, the rate of economic growth picked up and the NAIRU fell below what was considered to be the acceptable level of 6.5 per cent of the labour force, Greenspan came up with the hypothesis that the United States had moved into a new economic situation. He called it the “new economy”. This was ushered in by the extensive application of information technology by the American enterprises to their processes. As a result, worker productivity had increased and the same amount of workforce could now sustain a higher rate of economic expansion.

If this was true, there was no reason to check the rate of economic expansion by increasing interest rates.

This thinking ushered in a period of easy money in the United States. Lower interest rates increased the demand for housing. The application of information technology to the sector of finance also helped the banks to develop new lines of products including mortgage-backed securities that aggregated the loans they had given into new financial products. These were made available to cash-rich institutions such as investment banks and pension and hedge funds. This development was hailed as a major advance in finance since it spread the risk banks had brought on to their books by bringing in non-commercial bank institutions into the housing market.

Intense competition among banks lowered their standards and many of them began to lend to the borrowers who could not afford to purchase mortgages. Loans were given with little or no down payment. Many borrowers were enticed into the housing market by new instruments, among them adjustable rate mortgages (ARM) that had initially low rates of interest. The ARM rates were increased later in the repayment cycle with adjustments made in line with the prevailing rates.

This kind of lending to households who were at the margin of creditworthiness came to be called “sub-prime lending”. When a couple of years ago, the Fed began to raise interest rates to cool down the economy, the terms for the home owners hardened and the amounts they needed to pay increased significantly. American households don’t have a cushion of savings to absorb these kinds of shocks and many of them began to default on their payments to the banks.

This led to hundreds of thousands of foreclosures and the properties the banks had taken over from the defaulting owners were dumped on the market. This led to sharp decline in the price of houses. The prices fell to such an extent that for many buyers the amounts they owed to banks were more than the value of the houses they owned. This situation of “negative equity” led to more defaults and a vicious cycle was in full operation.

This crisis could have been contained had financial engineering not spread the risks to so many institutions that were not directly involved in lending to the stressed home owners.

The institutions that had bought the complicated products sold to them by the original lenders found that they could not put a proper value on the assets they owned.

The share holders who held positions in these institutions became concerned and dumped their holdings on the market and the value of the shares of many financial enterprises collapsed. Several large institutions found that they could not obtain credit to stay afloat. Some of the big name institutions such as Bear Sterns, Lehman Brothers, Merrill Lynch and AIG either went out of business or were effectively taken over by the government. The crisis was raging full force by the beginning of September.

There are a number of lessons to be learned from this episode even for a relatively less developed financial and banking system such as Pakistan’s. The first is that once people begin to lose confidence in the system, it can very quickly unravel. This has already happened to the stock market in Pakistan, one part of the financial system. The second is that extreme care must be exercised by banks in making loans. At this time, the Pakistani banks have high exposure to consumer finance, including credit card debt. There are many people who are not fully creditworthy but have been given loans to purchase consumer durables that have only a fraction of the value once the sale is made. As the economy weakens, personal incomes decline and unemployment increases, these borrowers may come under extreme financial stress and begin to default on their obligations.

Third, the regulatory system must always be on its toes to detect when the institutions they are responsible for have crossed the limit of prudence.

Fourth, the government must always have a contingency plan in place for dealing with financial crises. Do these conditions exist in Pakistan? My reading of the financial system of Pakistan is that it is not robust enough to withstand the shocks that may be delivered as the country continues to wrestle with difficult economic problems. Islamabad needs to turn its attention also to ensuring the health of this vital part of the economy.

 

[nitesh]

The Jokes' on US: Gallows humor in time of financial meltdown- International Business-News-The Economic Times


The Jokes' on US: Gallows humor in time of financial meltdown
11 Oct, 2008, 2330 hrs IST,Chidanand Rajghatta, TNN

WASHINGTON: When in pain, laugh. Americans are trying to follow this new prescription amid a financial conflagration that is burning up everything from their 401K retirement account to the value of their homes to pride in their market economy.

Through the hurt and the humiliation, the nation is clinging to gallows humour churned out by the late night joke factories that goes beyond the angry banner unfurled on a Wall Street building this week -- aimed at financial advisors -- which simply read: JUMP, YOU FU*KERS!

Apparently, no one is leaping out of Manhattan high-rises because all the 21st century windows are break-proof. And the 401k, goes the joke, has been reduced to 101k.

"The economy is so bad that today, Dick Cheney was waterboarding his stockbroker," jibes CBS’s David Letterman. His rival, NBC’s Jay Leno quips: "The United States has developed a new weapon that destroys people but it leaves buildings standing. It's called the stock market." Neither Leno nor Letterman have much to worry about: They are both paid in excess of $10m a year to crank out their jokes, about the only thing of value the United States still manufactures well.

Some of the jokes don’t even need manufacturing. In New York, a clock that counts the national debt ran out of digits when it ticked over $10tn. As a temporary measure, they have dropped the $ sign from the clock, while hoping the number can be passed off as the Zimbabwean dollar.

Some of America’s most famous symbols are becoming the butt of late night humor. ''President Bush's response to this economic crisis was to meet with some small business owners at a soda shop in San Antonio, Texas, this week,'' Leno related last week. ''Well, the bad news? The small business owners are now General Motors, General Electric, and Century 21.''

Bush of course is getting it in the solar plexus. ''You think he even understands what's going on?'' Leno asked. ''Like, today, they asked about the credit crunch, he said it was his favorite candy bar.'' And when the rescue bill went up to 450 pages, he joked that ''President Bush's copy is even thicker, because they had to add pictures.''

Meanwhile, email inboxes are filling with jokes like this one: What’s the difference between an investment banker and a pigeon? A pigeon can still make a deposit on a Ferrari.

Some jokes even imitate the financial con mails that are filtered into your trash folder. ''I need to ask you to support an urgent secret busine

ss relationship with a transfer of funds of great magnitude,'' reads one. ''I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you...''

Heck, if someone paid a dollar for every joke that’s being cranked out, America might still get by...

Box: New Terms for the 2008 market

CEO --Chief Embezzlement Officer.

CFO-- Corporate Fraud Officer.

BULL MARKET -- A random market movement causing an investor to mistake himself for a financial genius.

BEAR MARKET -- A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry.

VALUE INVESTING -- The art of buying low and selling lower.

P/E RATIO -- The percentage of investors wetting their pants as the market keeps crashing.

BROKER -- What my broker has made me.

STANDARD & POOR -- Your life in a nutshell.

STOCK ANALYST -- Idiot who just downgraded your stock.

STOCK SPLIT -- When your ex-wife and her lawyer split your assets equally between themselves.

FINANCIAL PLANNER -- A guy whose phone has been disconnected.

MARKET CORRECTION -- The day after you buy stocks.

CASH FLOW-- The movement your money makes as it disappears down the toilet.

YAHOO -- What you yell after selling it to some poor sucker for $240 per share.

WINDOWS -- What you jump out of when you're the sucker who bought Yahoo @ $240 per share.

INSTITUTIONAL INVESTOR -- Past year investor who's now locked up in a nuthouse.

PROFIT -- An archaic word no longer in use.

 

[PeaceForAll]

Paulson: Protectionist policies won't solve crisis

By HARRY DUNPHY, Associated Press Writer 15 minutes ago

WASHINGTON - Appealing for global unity in a time of crisis, Treasury Secretary Henry Paulson said Sunday that isolationism and protectionism do not offer a way to contain the spreading damage.


"Although we in the United States are taking many extraordinary measures to ease the crisis, we are not pursuing policies that would limit the flow of goods, services or capital, as such measures would only intensify the risks of a prolonged crisis," he said at a meeting of the World Bank's policy-setting committee.

The bank and the International Monetary Fund, holding their annual meetings this weekend, have a vital role to play in working with governments to develop appropriate responses "and discourage inward looking policies," he said.

As a result of the downturn, developed countries are not expected to help 28 countries facing twin shocks of rising food and fuel prices, said the bank's president, Robert Zoellick. "For the poor, the costs of the crisis could be lifelong," he said.

President Bush says his administration is doing everything possible to halt the biggest market disruption since the Great Depression.

Accompanied by Paulson and Federal Reserve Chairman Ben Bernanke, Bush participated for about 25 minutes in a discussion late Saturday with the Group of 20 nations, which includes wealthy countries as well as major developing countries such as China, Brazil and India.

Bush acknowledged that problem began in the United States, but told participants that "we're all in this together," according to a White House spokesman, Tony Fratto.

"We take this seriously and we want to work with you," Bush assured the ministers, according to Fratto.

In a statement, the G-20 finance officials pledged to work together "to overcome the financial turmoil, and to deepen cooperation to improve the regulation, supervision and the overall functioning of the world's financial markets."

Other speakers at a policy meeting of the IMF echoed Bush in emphasizing the need for countries to work together to address the crisis, avoiding the go-it-alone protectionist trade strategies that worsened conditions during the Great Depression of the 1930s.

"There is a resolve in the international community that this crisis will be resolved, that no tools will be spared to address its ramifications," said Youssef Boutros Ghali, Egypt's finance minister and the new chairman of the policy panel.

At a meeting Sunday of European leaders, French President Nicolas Sarkozy said he expected an ambitious and coordinated plan to tackle the financial crisis.


Seems like they are gonna dump a lot of poor people..

 

[pkpatriotic]

The guilty men of Wall Street
Oct 14th 2008

Jail time for financial titans?[/B]

LIFE must seem terribly unfair right now for Dick Fuld, who headed Lehman Brothers when it filed for bankruptcy last month. Given the willingness of governments around the world to pump money into the banking system in a desperate bid to keep it alive, Mr Fuld must wonder how on earth he became the fall guy, in charge of the only significant firm that was allowed to fail. During testimony before Congress last week, he said that until “the day they put me in the ground, I will wonder” why AIG was rescued and Lehman not.

Since Lehman’s collapse, Mr Fuld has reportedly been attacked by an employee in the company gym. Photos of his family have been posted on the internet. His testimony in Congress probably felt more like a lynching, as his attempts to explain what actually happened were repeatedly interrupted by attacks on his enormous pay packet (no matter that a large part of that was in shares that are now worthless). At one point, a Republican congressman, John Mica, told him, “If you haven’t discovered your role, you’re the villain today. You've got to act like a villain.”

Alas, Mr Fuld may need to get used to playing this role, perhaps even in court and ultimately in jail—as indeed may some of his fellow erstwhile financial titans.

Not that there is any clear evidence that Mr Fuld or his peers have done anything unethical—much less anything to deserve a long jail term. But in the current political climate, the government will feel great pressure to punish a few of the people whom the public hold responsible for the unpopular bail-out of Wall Street. And persuading a jury to give the benefit of the doubt to a multi-millionaire banker is exceedingly difficult, making it easy for the government to win a case on thin evidence.

If you doubt it, look at the pattern of past financial crises, going back to Richard Whitney, a former president of the New York Stock Exchange, who was sent to Sing Sing in the 1930s for embezzlement. More recently, (and pertinently to today’s financiers), after Drexel Burnham Lambert collapsed and the leveraged-buyout bubble burst in the late 1980s, Ivan Boesky and “junk bond king” Michael Milken were both jailed, with Mr Milken protesting his innocence to this day.

More recently, a host of corporate scandals at the start of this decade, including the failures of Enron and WorldCom, led to former chief executives such as Jeffrey Skilling, Bernie Ebbers, Dennis Kozlowski and Conrad Black being jailed, some of them probably for the rest of their lives.

So far, government prosecutors have mostly focused on the lower level contributors to the current financial meltdown, such as mortgage brokers who approved fraudulent applications, and some hedge-fund managers at Bear Stearns who allegedly misrepresented the health of their funds. But that will probably change, as prosecutors deploy “flipping” tactics honed during racketeering trials, in which lower level employees receive leniency in return for testifying against their bosses.

One popular tactic prosecutors have used against bosses is to contrast their public statements about the health of their company with evidence that suggests they privately knew it was in trouble. This ploy led to the conviction of Kenneth Lay, Enron’s former chairman, who said the firm was in good shape as it hurtled towards bankruptcy.

Ominously, two recent stories in the Wall Street Journal have suggested that top executives at Lehman and AIG had issued public reassurances while in possession of private information to the contrary. Though it is hard to see what a chief executive is supposed to say when his firm is fighting against bankruptcy (anything other than “the firm will survive” guarantees it won’t), such inconsistency looks bad in court.

At least Mr Fuld can take comfort from the fact that, as yet, there is no evidence that he sold shares in his firm as it collapsed—unlike Lay.

What can worried Wall Street titans do? One option is to give their money away. That seemed to take the heat off Gary Winnick, boss of a bankrupt telecoms firm called Global Crossing, who in 2002 pledged $25m to former employees who lost retirement savings, and urged other chief executives in similar situations to do the same.

Another option is to skip the country, to somewhere that will not readily extradite to America. Marc Rich, an oil trader, fled to Switzerland in 1983, after being accused of tax evasion and illegal deals with Iran. He was eventually pardoned (controversially) by Bill Clinton.

Kobi Alexander, the former boss of Comverse Technology, is still fighting extradition from Namibia, to which he fled in 2006 following accusations of improper options-backdating. (There has been speculation that he is actually now in Switzerland.) It would not come as a complete surprise if Mr Fuld, a fan of big-game hunting, decided that now is the perfect time for an extended Namibian safari.