Liquidity is to the economy what oxygen is to life.

The news from the world’s financial markets continues to be grim. Tonight, Federal regulators seized Washington Mutual, the largest seizure ever and now the nation’s largest bank failure. Federal regulators simultaneously brokered an emergency sale of virtually all of Washington Mutual — the nation’s largest savings and loan, with $307 billion in assets — to JPMorgan Chase. Shareholders will lose their investment as will some bondholders. Depositors are insured to $100,000 under the FDIC.

JPMorgan Chase will take control Friday of all of WaMu’s 2,300 plus branches, which stretch from New York to California. The New York-based bank will oversee its big portfolio of mortgage and credit card loans. It will also acquire all of WaMu’s deposits and customers with the sale. The full story in the New York Times.

That’s grim enough but even more worrisome is that while Washington fails to act with an insertion of capital to shore up the financial sector, healthy banks are tightening their lending practices and declining to take more risk as they work through whatever underperforming assets they might have on their balance sheets. Part of the problem is that many financial institutions simply do not know to what extent they are liable in subprime mortgage derivative credit swap mess. Until they are able to figure this out, they will tighten up their lending practices. As liquidity dries up, so shrinks economic growth.

More from the New York Times:

Credit Enters a Lockdown

The words coming out of Washington this week about the American financial system have been frightening. But many have raised the possibility that the Bush administration is fear-mongering to gin up support for its $700 billion bailout proposal.

In many corporate offices, in company cafeterias and around dining room tables, however, the reality of tight credit already is limiting daily economic activity.

“Loans are basically frozen due to the credit crisis,” said Vicki Sanger, who is now leaning on personal credit cards bearing double-digit interest rates to finance the building of roads and sidewalks for her residential real estate development in Fruita, Colo. “The banks just are not lending.”

With the economy already suffering the strains of plunging housing prices, growing joblessness and the new-found austerity of debt-saturated consumers, many experts fear the fraying of the financial system could pin the nation in distress for years.

Without a mechanism to shed the bad loans on their books, financial institutions may continue to hoard their dollars and starve the economy of capital. Americans would be deprived of financing to buy houses, send children to college and start businesses. That would slow economic activity further, souring more loans, and making banks tighter still. In short, a downward spiral.

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This is the sixth poll of the critical battleground state of Ohio (link to US census demographic data) but the first to show a dead heat in the Buckeye State in a month. Today’s Rasmussen Reports poll gives Senator McCain a narrow one point margin over Senator Obama, 47% to 46%.

The latest Rasmussen Reports telephone survey in Ohio finds John McCain with 47% of the vote while Barack Obama picks up 46%. That’s a slippage of three percentage points for McCain since Sunday night. In four previous surveys conducted over the past month, McCain has held an advantage ranging from three to seven points.

Similar trends have been found nationally as the recent economic crisis has unfolded: Support for McCain has declined while Obama’s totals remain steady.

Just eight percent (8%) of Ohio voters rate the U.S. economy as good or excellent while 54% say it’s poor. Only three percent (3%) say it’s getting better while 54% say it’s heading in the opposite direction.

Thirty-five percent (35%) say the housing market will get better within a year, including four percent (4%) who say it’s already getting better. However, 37% say there’s no end in sight to the housing crunch.

As the economy continues to struggle, Ohio voters say creating economic growth is more important than reducing the income gap between rich and poor. This is similar to the national average. Sixty-eight percent (68%) believe that McCain is more interested in creating growth while 64% believe Obama is more interested in reducing the gap between rich and poor.

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In the latest Rasmussen Reports poll for Pennsylvania (link is US Census demographic data), Senator Obama seems to be holding onto a narrow lead. In the Keystone State, Obama leads Senator McCain 49% to 45%, a four point margin.

Barack Obama now leads John McCain by four percentage points in Pennsylvania. The latest Rasmussen Reports telephone survey in the state finds Obama attracting 49% of the vote while McCain earns 45%.

A few days ago, the Democrat was up by three. A week-and-a-half ago, the two candidates were tied in the Keystone State.

Pennsylvania, with 21 Electoral College votes, is one of the few traditionally Democratic states where McCain is thought to have a chance at scoring an upset.

One percent (1%) of Pennsylvania voters plan on casting their ballot for a third-party candidate while five percent (5%) remain undecided. The latter figure includes 15% of unaffiliated voters, four percent (4%) of Democrats and one percent (1%) of Republicans.

Obama leads by eight among women while the candidates are tied among men. McCain leads among those who attend church on a regular basis while Obama leads among those who don’t.

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In West Virginia (link is to US Census demographic data), the latest poll from Rasmussen Reports gives Senator McCain a comfortable eight point margin over Senator Obama. In the Mountaineer State, McCain leads 50% to 42%.

John McCain leads Barack Obama 50% to 42% in West Virginia, according to the latest Rasmussen Reports telephone survey of voters in the state.

In a previous survey, in June, McCain also had an eight-point lead, but the split was 45% to 37%, with an unusually high number of voters saying they planned to vote for an unnamed third-party candidate. It also was the first poll since Obama had defeated Hillary Clinton for the Democratic presidential nomination.

Eighty-three percent (83%) of West Virginia Republicans and 34% of Democrats support McCain. Just 60% of Democrats and 13% of GOP voters back Obama.

Men favor McCain by 14 points, but women voters give the Republican only a 46% to 44% edge over his Democratic rival.

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In Arkansas (link is to US Census demographic data), Senator McCain holds a nine point lead over Senator Obama in the latest poll from Rasmussen Reports. McCain leads Obama 51% to 42%.

John McCain’s lead over Barack Obama in Arkansas remains stable. The latest Rasmussen Reports telephone survey in the state finds the Republican leading 51% to 42%.

McCain had a 10-point lead in July and was ahead by nine points in June. His leads were nearly double that when the state’s long-serving first lady, Hillary Clinton, was still battling it out with Obama for the Democratic presidential nomination.

This month, McCain leads 56% to 31% among unaffiliated voters in Arkansas. He also has a 53% to 40% advantage among men and a 50% to 43% edge among women.

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The first poll out for the Bay State from Rasmussen Reports finds Senator Obama in cruise control. Senator Obama leads Senator McCain 58% to 38% in Massachusetts (link is to US Census demographic data).

Barack Obama is sitting comfortably on a 20-point lead in Massachusetts, according to the latest Rasmussen Reports telephone survey of voters in the state.

Obama leads his Republican opponent, John McCain, 58% to 38%. This returns the Democrat to the lead he had in June after the race narrowed to 15 points last month.

Massachusetts has gone for only one Republican presidential candidate — Ronald Reagan in 1984 — in over 50 years.

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With a deal on the Federal bailout of US Banking sector as yet incomplete and now wrapped up in partisan politicking, it is perhaps too early to fully assess where the blame for the crisis should lie. There are many leading contenders in and out of government. On the corporate side, the leadership of Fannie Mae is clearly a good place to start. Both Jim Johnson and Franklin Raines, if not yet household names they will be soon, shoulder much of the responsibility for the subprime mortgage crisis. James Cayne, the former CEO of Bear Stearns, is another.

On the government side, there’s plenty of blame to assign. Former Senator Phil Gramm and former President Bill Clinton should be taken to task over the 1999 repeal of the Glass-Steagall Act of 1933 that established the Federal Deposit Insurance Corporation (FDIC) and which prohibited commercial banks from collaborating with full-service brokerage firms or participating in investment banking activities. It’s time to separate these two businesses because there are conflicts of interests galore. I say this as a former equity analyst who on more than one occasion felt pressured to change a rating so that my bank might secure more commercial paper business. Rest assured, my ratings were nobody’s business but mine and the overwhelming number of analysts feel the same way. But that there are or were some who caved cannot be denied.

Other legislators and government officials who find themselves in the eye of the storm will include Congressman Barney Frank, former Federal Reserve Chair Alan Greenspan and current SEC Chair Chris Cox. But perhaps none as much as Senator Chris Dodd of Connecticut. Today, the editorial board of the Waterbury Republican-American starts the arduous process of taking Senator Dodd to the woodshed.

As a member and later chairman of the Senate Banking Committee, Sen. Christopher J. Dodd shoulders a good deal of the blame for the collapse of the national housing market, the subprime-mortgage-market meltdown and the latest convulsions on Wall Street.

Reams of legislation he has written or advocated affecting the housing, lending, insurance and securities industries have drained hundreds of billions out of the economy, ballooned the federal debt, cost tens of thousands of people their jobs and driven hundreds of thousands of homeowners into foreclosure, bankruptcy or both. For his efforts, Sen. Dodd has been rewarded in the 2008 election cycle with $7.65 million in campaign contributions — he took in $11.7 million in all — from the securities, insurance, real-estate and commercial-banking industries, according to his latest Federal Election Commission filing posted at opensecrets.org.

Sen. Dodd’s list of donors reads like a who’s who of who’s in the stew: Citigroup, $310,294; SAC Capital Partners, $282,000; United Technologies, $263,400; AIG, $224,678; Bear Stearns, $205,600; St. Paul Travelers, $205,400; Royal Bank of Scotland, $203,750; Goldman Sachs, $175,600; Morgan Stanley, $155,000; Credit Suisse, $154,550; Merrill Lynch, $134,950; JPMorgan Chase, $129,150; Lehman Brothers, $128,400; KPMG, $113,100; General Electric, $108,250; Deloitte Touche, $108,000; USB, $101,900; Hartford Finance Services, $101,500; The Hartford, $94,350; Bank of America, $91,300.

With $165,400, Sen. Dodd also tops the list of members of Congress who took campaign cash from Fannie Mae and Freddie Mac since 1989. Sen. Barack Obama, the self-styled agent of change, is a distant second at $126,000 and Sen. John Kerry is third at $111,000. In the top 20 are Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi and Sen. Hillary Rodham Clinton.

Obviously, Sen. Dodd had plenty of buyers for the influence he was peddling. And without so much as a thought to the potential devastating economic consequences of his actions, he sold his soul, and sold out his constituents and country. In return, he saved $75,000 on two VIP mortgages from Countrywide Financial.

Long after the horses had left the barn, Sen. Dodd now pledges to “continue to work on solutions to help Americans weather this storm, including strengthening the housing sector, developing a second stimulus package and restructuring the regulation of the financial sector.”

To which we say: Haven’t you done enough damage?

Let’s just hope the voters of Connecticut are the next to take him to the woodshed. He next faces the voters in 2010.

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Not an endorsement of his views (though there are a number points of his with which I agree), just a community service announcement.

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Here are eight articles from both the US and international media about the US Presidential race. Highlights of each article provided with a link to the full article.

McCain Pauses Campaign
By Scott Helman in the Boston Globe.

Senator John McCain, in a high-wire political gambit six weeks from Election Day, abruptly announced yesterday that he would temporarily suspend his presidential campaign and return to Washington to help craft an emergency bailout plan for the nation’s financial system.

McCain, whose standing in the polls has slipped since the financial meltdown engulfed Wall Street 10 days ago, stunned the political world by asserting shortly before 3 p.m. that he would stop campaigning, advertising, and fund-raising until there’s a bailout deal, which he said he expected would happen by Monday morning. He called for postponing tomorrow night’s debate with rival Barack Obama, their first.

Obama’s Statement on Economy, Debate
No author noted in Real Clear Politics.

I wanted to have a chance to talk to you, because, obviously, there’s a moment of great uncertainty in America. As I mentioned at the rally today, the era of greed and irresponsibility on Wall Street and in Washington has led us to a financial crisis as serious as any we have faced since the Great Depression. And there’s much blame to go around for causing this crisis. But we’re now here. Every American has a stake in solving this crisis and saving our financial system from collapse, because, if we don’t act soon, then people’s jobs, people’s savings, the economic security of millions of Americans will be put at risk. So, the clock is ticking.

Former Fannie Mae Jim Johnson to Lead Obama Briefing
By Ben Smith writing for Politico.

Former Fannie Mae chairman Jim Johnson was dumped from Obama’s vice presidential search team, but he’s still playing a behind-the-scenes role on the campaign.

Former Senator Tom Daschle, a top Obama backer, emailed a select list this afternoon that he and Johnson would be leading a briefing intended largely for Clinton’s campaign brain trust next month.

“Jim Johnson and I have scheduled another informal breakfast discussion and update on the campaign early next month,” he wrote to a list including Senator John Kerry, James Carville, and Richard Holbrooke, as well as Clinton’s former top campaign aides, including Howard Wolfson, Geoff Garin, and Harold Ickes.

Plus c’est la meme chose, plus ça change.
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Here is the Thursday, September 25th, 2008 edition of what’s making news and interesting reads from around the world. Also please note that off to the left there are two widgets with updates on news from Asia and the world in a separate page: Around Asia & Around the World New Feeds.

President Bush: “Our entire economy is in danger”
President Bush addressed the nation today on the growing financial crisis. It was the first address of his Presidency on an economic topic. Coverage from the New York Times, Forbes and from the Wall Street Journal.

“I know that an economic rescue package will present a tough vote for many members of Congress,” Bush said. But he noted “our entire economy is in danger” and added that a bailout “will help send a signal to markets around the world that America’s financial system is back on track.”

Iraq Passes Provincial Elections Law
Iraq’s Parliament passed a crucial election law on Wednesday, but only by setting aside for future debate the most divisive political issues. The law could clear the way for provincial elections to take place in much of the country early next year. The elections are viewed by many Iraqi and American officials as crucial for the nation to heal its deep-running political and religious fissures and also to shore up the fragile security gains that have been achieved in recent months. More from the International Herald Tribune and from Euro News.

The Plight of the Poor in Indonesia
The tragic loss of 21 Indonesians who were trampled to death as they jostled outside a house in East Java to receive a cash handout of just 30,000 rupiah (US$3.20) has shocked the nation and exposed the plight of its poorest citizens. Politicians were quick to dismiss any link between the country’s chronic poverty problem and last week’s tragedy, citing a drop in the official poverty rate last year to 16.6 per cent from 17.8 per cent the previous year. More from the Asia Sentinel.

Japan Is Probably in Recession
Japan’s economy is probably in recession, Seiji Sugiyama, chairman of the Japanese Bankers Association, said today. Consumer sentiment has declined and capital expenditure by companies is falling as raw-material prices rise, said Sugiyama, who is also chief executive officer of Mizuho Financial Group Inc.’s main retail bank, Mizuho Bank Ltd.

“There is a high possibility that Japan’s economy has entered a recession,” he said at a regular press briefing in Tokyo.

More from on this from Bloomberg News. Meanwhile, Japan’s trade balance slid into deficit in August as sky-high oil prices ramped up import costs while exports slowed to a crawl, adding to the pain for an economy already teetering on the brink of recession. This story from Reuters.

Rwandan Lawyer Sentenced for Role in Rwandan Genocide
Former Rwandan lawyer, Simeon Nshamihigo, was yesterday sentenced to life imprisonment by war crimes tribunal for his role in 1994 genocide. The story from Afrol News.

End of the Anglican crown — 300 Year Bar to be Lifted
Downing Street has drawn up plans to end the 300-year-old exclusion of Catholics from the throne. The requirement that the succession automatically pass to a male would also be reformed, making it possible for a first born daughter of Prince William to become his heir. The proposals also include limiting the powers of the Privy Council, in particular its role as arbiter in disputes between Scotland or Wales and the UK government. More from the UK Guardian.

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