wb

Maybe the economy is not quite ready to fall off a cliff quite yet, though it appears to be heading in that direction. At least, that's the message this morning coming from Dow stalwart General Electric Co. (NYSE: GE).

General Electric, whose shares have been pounded lately because of concerns about its financing unit, today reported an in-line quarter.

In a press release, GE Chief Executive Jeffrey Immelt, whose job may be in jeopardy, pointed out that the conglomerate was "on track" to meet its revised -- reduced -- guidance issued September 25. He also pointed out, "We have taken a number of steps to protect investors from the downside risk in financial services, and we have ways to mitigate potential disruptions in infrastructure and media markets, but the environment remains challenging."

GE also plans to sustain its dividend through the end of next year.

"We have big backlogs, great products, stable service revenue, strong operating discipline, an unmatched global position and multiple revenue streams. As a result, the Company is well positioned to perform in a very difficult environment, and our Board has approved our plan to sustain the GE dividend through 2009," Immelt said.

Despite the positive spin, the results were pretty dreadful. Profit from continuing operations fell 12 percent to $4.48 billion, or 45 cents a share, from $5.11 billion, or 50 cents. Many businesses including Global Finance fell by double-digit percentage points. Cash flow from operations plunged 18 percent during the first nine months of the year.

How sad is it that meeting reduced expectations is seen as great news?

One of the few things that Barack Obama and John McCain agreed on during last night's televised debate was that billionaire Warren Buffett would make a good Secretary of the Treasury.

Odds are that the universally respected Buffett won't take the job. Why does he need the headache at this point in his life? Besides, he may not be the type of government official investors would like. Much to the horror of political conservatives, the Oracle of Omaha is backing Obama. He has come out against such bedrock Republican principles as abolishing the so-called death tax on inherited wealth. The financial disclosure requirements alone probably are enough to scare Buffett away from government service.

To counter Obama's Buffett card, McCain said that former eBay Inc. (NASDAQ: EBAY) CEO Meg Whitman might be the right person for the job. I guess no one mentioned to the Arizona senator the massive layoffs planned by the online auctioneer. Interesting how another McCain supporter, ex-Hewlett Packard Co. (NASDAQ: HPQ) Chief Executive Carly Fiorina, did not merit consideration. Given her disastrous tenure, it's no wonder.

Another good potential Treasury Secretary neither brought up is Michael Bloomberg. The founder of Bloomberg LP (where I worked for seven years) clearly knows the markets. He's rich and has shown savvy in navigating New York City's political landmines that Washington should be a walk in the park. Too bad he's got his heart set on a third time as mayor.

During last night's presidential debate (which he lost badly) Republican John McCain vowed that if elected he would order the U.S. Treasury Department to purchase "bad mortgages" to help people avoid foreclosure. It's an idea that deserves consideration.

According to Bloomberg News, the McCain campaign estimates that it would cost $300 billion, some of which would be diverted from the $700 billion rescue of Wall Street. The Arizona senator did not provide specifics during the debate. Democrat Barack Obama proposed a similar idea during a press conference last month, according to Bloomberg. These proposals raise many questions.

First of all, can the government afford to purchase both mortgages and mortgage-backed securities? How will the government determine who gets help? Many people bought homes they could not afford because of criminally lax lending standards at some banks. Others were hoodwinked by unscrupulous mortgage brokers into taking adjustable-rate mortgages when they qualified for cheaper fixed-rate 30-year loans. These individuals are the most deserving of the government's help. Officials should try and help other distressed mortgagers provided that they can afford their properties. Otherwise, they should be given assistance to find affordable housing.

Republican John McCain has failed to convince the majority of Americans that Barack Obama is a tax-and-spend liberal who lacks the intestinal fortitude to face our country's enemies. In a show of desperation, the Arizona Republican and his running-mate Sarah Palin are now trying to link Obama with former Weathermen leader William Ayers, even though the New York Times and other news organizations have pointed out that the two men knew each other casually. That's why tonight's debate in Nashville is critical.

McCain, who is favored by many investors, is facing some pretty daunting odds. According to the latest NBC News/Wall Street Journal poll, 49 percent of voters said they would vote for Obama compared with 43 percent for the Arizona senator. That's up from a two-point advantage two weeks ago and mirrors other polls, according to the Journal. To be fair, the survey does have a margin of error of plus or minus 3.8 percentage points. Obama has wiped away McCain's lead with independent voters.

Investors should not underestimate the anger in the hearts of voters. The credit crisis has wiped out tens of billions of dollars in value to the retirement nest eggs of the American people. Most people don't understand why the government needed to extend a $700 billion lifeline to the financial services industry. They become even angrier when three former chief executives of American International Group Inc. (NYSE: AIG) blame one another like a bunch of two-year-olds for the firm's collapse. The Dow Jones Industrial Average dropping below 9,500 scares them even further.

It is against this backdrop we are holding this election. Obama has been able to convince voters, including this one, that he can deliver tax relief for the middle class. But Democrats should not rejoice quite yet. McCain excels at these town hall meetings. Moreover, some of Obama's support in polls comes from people who are too embarrassed to admit that they don't want to vote for an African-American candidate.

Americans crave leadership during these times of economic crisis. Since Wall Street has failed to provide, it's unfortunately up to our elected officials.

Much as I find it hard to muster sympathy for thousands of overpaid investment bankers forced to walk to the unemployment office in their designer shoes, the news that Lehman Brothers Holdings Inc. (NYSE: LEMQ) won't be paying them severance made me feel a little sorry for them.

According to Bloomberg News, the New York-based firm recently notified employees that they will not receive a payment on October 3 or after. The company reneged on a promise to the fired workers to pay them severance until August 2009. Workers who want the rest of their compensation will have to file a claim with the bankruptcy court. It will take years for the former employees to get paid through Chapter 11 and even then they might only get a fraction of what they are owed.

Bloomberg reports that it is not clear how many former Lehman employees have been affected. You can bet that members of Congress and the Department of Justice will be interested to know if Chief Executive Richard Fuld will receive a golden parachute once Barclay's PLC (NYSE: BCS) completes its takeover of the once-storied New York investment bank.

Let it be written that on the sixth day of October in the year 2008, the irrational exuberance that defined the 1990s came screeching to a halt.

The Dow Jones Industrial Average fell below 10,000 this morning for the first time since 2004. Gosh, it seems like only yesterday that investors were as giddy as school girls when the leading stock market indicator crossed that once-unthinkable benchmark. Remember the Dow 10,000 hats? I bet the people who bought them along with other keepsakes of better times plan to unload them on eBay so they can fill up their tanks with gas. In fact, some people have already started selling bull market memorabilia. A Lehman Brothers coffee mug is available on eBay for $14.99, while the book Dow 36,000 is attracting no bidders for the bargain-basement price of $1.93.

These are lousy times. The real estate market continues to suck wind. Holiday retail sales are expected to be their worst in years. Hundreds of billions of dollars worth of federal bailouts have failed to unfreeze the credit market or provide any relief for homeowners hurt by the subprime crisis. A good part of the market's downturn can be blamed on lax corporate governance, including outrageous CEO pay.

Much of the focus in tonight's vice presidential debate will be on whether Democrat Joe Biden or Republican Sarah Palin says anything stupid. Odds are fairly good that one or both of them will stick their foot in their mouths in front of millions of TV viewers.

Though I am a political junkie, I am hoping that tonight's festivities are gaffe-free. The economy is in such a horrible state that Democrats and Republicans have to raise above partisan politics. In particular, they need to do something to address the heart of the problem -- the millions of people facing foreclosure. Many of them are there because they purchased homes they could not afford. I have heard all of the talk of letting the market correct itself and of moral hazard. That's simply not good enough.

I find it difficult to believe that the U.S. government lacks the resources or the know-how to figure out which homeowners should be helped and which should be left on their own. Why is it so impossible for the U.S. Congress to include some relief in the $700 billion bailout to Wall Street for homeowners? Housing advocates and some bankruptcy judges are arguing that judges should have the power to change the terms of mortgage contracts for people who have sought protection from their creditors. That seems like a sensible idea to me.

Unfortunately, I am not expecting much substantive talk about the economy tonight. Palin, the governor of Alaska, is being kept away from the press after making a fool of herself in some recent interviews. The Tina Fey caricature of her as a loudmouth hick appears to be taking hold. Polls indicate that most Americans believe she is not qualified to be president. John McCain is the only one who seems to think otherwise.

Everywhere I go in the suburban wonderland where I live there seems to be a new housing development. When I visited my brother- and sister-in-law in a neighboring town, I must have passed seven of them. Apparently, word of the housing slowdown has not reached Burlington County, New Jersey.

This seems like madness. After all, the housing market is in the tank. Applications for mortgages fell 23% on a seasonally adjusted basis for the week ended September 26, according to data from the Mortgage Bankers Association cited by Reuters. U.S. single-family home prices fell a record 16.3 percent in July from a year earlier, according to the Standard & Poor's/Case-Shiller Home Price Indexes.

Consumer confidence is shaky -- heck, I am not feeling so confident even though I bought a car. Foreclosures are at record levels -- still. Banks are tightening their credit standards, making it difficult for borrowers without sterling credit to get loans or refinance their existing ones. That's what makes the rise in the home builder stocks even more baffling.

Shares of Hovnanian Enterprises Inc. (NYSE: HOV), Toll Brothers Inc. (NYSE: TOL) and Lennar Corp. (NYSE:LEN) all gained double-digit percentages in the third quarter. The reason? Investors are chomping at the bit to call a bottom in the housing market. But I sat that's premature. S&P points out that many metropolitan areas are showing double-digit declines in home values. "There are signs of a slowdown in the rate of decline across the metro areas but no evidence of a bottom," David Blitzer, chairman of S&P's index committee, said in a statement.

On the day the stock market was headed into the abyss, my wife and I were busy shopping for cars. I felt like Nero fiddling as Rome burned.

This was not a frivolous purchase. My wife, who like her father is nuts about cars, researched every make and model in our price range for a year. No, make that two. Impulsive, she is not. While we were waiting in our local Ford (NYSE: F) dealership, I checked the stock market on my iPhone (another recent purchase) and was stunned by the dramatic decline in the Dow Jones Industrial Average. My wife gasped when I told her about the Dow's record decline. We briefly wondered whether now was the right time to get a car. Ultimately, we decided to buy the Ford Edge thanks to the zero-percent financing available.

My wife and I are fortunate that we both work and have good credit scores. We live in a modest suburban house and pay off our bills regularly. My wife is a CPA and is fanatical about keeping our debt to a minimum. Until recently, we received at least a dozen offers a week for credit cards and home equity loans. I am glad that my wife insisted we toss them all in the trash. Otherwise, we would have held onto our old car for a while longer since the Big Three are tightening their credit standards.

In perhaps the shortest press conference on record, President George W. Bush confidently predicted that the government's $700 billion rescue of Wall Street will pass. I am not holding my breath.

Bush remarked that the legislative process sometimes is not "pretty." Talk about an understatement. Rhetoric on both sides of the aisle has been boiling over all week. People are angry, and who can blame them? It's a tough sell to taxpayers that there is a huge sense of urgency to rescue financial services companies that overextended themselves by lending money to people who could not afford to pay them back. The whole thing strikes many Americans, particularly those living paycheck to paycheck, as unfair.

Polls have overwhelmingly shown that most people are against the bailout. Most members of Congress have very little to gain right now by sticking out their necks for the Bush plan. If it passes, they have to explain to their constituents why they are helping out Wall Street fat cats. Voters will be angry and will demand explanations about why the value of their 401 (k) has plunged.

Pundits continue to plead on CNBC that the credit market is frozen, making it more difficult for people and businesses to get loans. They have warned of a financial apocalypse worse than the Great Depression. Maybe they are making valid economic arguments, but their message is not resonating with the public.

Members of Congress can ill-afford to alienate voters, many of whom are struggling to make ends meet. A bailout bill may pass but odds are that the process will be ugly and the end result may not be to Wall Street's liking.

JPMorgan Chase & Co. (NYSE: JPM) Chief Executive Jamie Dimon is the new king of Wall Street whose power rivals his company's namesake John Pierpont Morgan.

Over the past year, Dimon managed to steer JPMorgan away from the subprime credit crisis while managing to keep his company's stock from cratering like his competitors'. First, he absorbed Bear Stearns after it went out of business. Now, Dimon has managed to pick up Washington Mutual Inc. (NYSE: WM) -- the good parts of it anyway -- for $1.9 billion. The deal is accretive in 2009.

Dimon is proving to be Wall Street's shrewdest manager. He did not get to be so successful by being a teddy bear. Indeed, reports abound about his abrasive personality. But unlike other Wall Street CEOs, Dimon knows his job is to work for the shareholders. Dimon's zeal for cost-cutting knows no bounds. He got rid of expensive technology outsourcing contracts, figuring the company could do the work cheaper itself.

Let me get this straight: the Democrats are backing George Bush's $700 billion rescue plan that Republicans oppose. These are strange times.

House Republicans have many gripes with the plan. They are pushing to fund the recovery of financial services companies with private capital. Others are raising worries about the cost and the timing of the rescue. These are all valid questions.

Then there's the presidential campaign to consider. John McCain is threatening to skip tomorrow's presidential debates unless a deal on the bailout is reached. Maybe Republicans are throwing up roadblocks so McCain can swoop in and solve the impasse, looking presidential in the process. Barack Obama is also using this bailout for his political gain.

Meanwhile, Democrats are pushing for relief for cash-strapped homeowners. So far, they are not getting much sympathy from the Bush administration.

Treasury Secretary Henry Paulson recently said "the vast majority of foreclosures in this country ... are coming from people who either don't want to stay in their home, took out loans they couldn't afford as the result of irresponsible lending practices."

That's bologna, according to the Center for Responsible Lending, which says that the vast majority of people want to stay in their homes and could afford to if the courts were allowed to modify mortgages. Consumer advocates back the idea as do most Democrats. Bankruptcy judges think it's a good idea as well. The mortgage industry and some fiscal conservatives oppose this provision, arguing that it rewards people for making bad investment decisions.

At perhaps the most critical moment in his presidency, George W. Bush looked into the teleprompter tonight and warned the American people that very bad things would happen to the economy unless Congress passed the $700 billion bailout for Wall Street.

Kudos to Bush's speech writers. He explained the credit crisis fairly succinctly. Of course, he neglected to mention that his administration's opposition to sensible regulation laid the groundwork for the financial maelstrom. That's an issue, though, which will be debated by historians for decades to come.

Details of the bill are still being hammered out. The administration has agreed to caps on executive pay on firms who seek assistance. Some sort of plan to give taxpayers an equity stake in firms that the government helps also seems likely, according to a The New York Times.

The president had little choice but to reach across party lines because members of Congress were not buying the bill of goods being sold by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. Paulson, in particular, showed remarkably poor political instincts by insisting that the bailout be approved as written. Whoever told him that Congress would give him a $700 billion blank check was crazy.

Meanwhile, the crisis is becoming the top issue of the presidential campaign. Republican John McCain today suspended his presidential campaign and called for Friday's presidential debate to be postponed. This is a stunt. McCain and Barack Obama do not sit on the relevant committees dealing with the crisis. Their presence in Washington will have little impact on the development of a deal.

Postponing the debates is an especially bad idea. The American people need to hear the plans McCain and Obama have for the economy. My colleague Peter Cohan points out that McCain has said many things about the economy such as "the fundamentals of the economy are strong" which he probably now regrets.

It's official: Main Street does not believe that Wall Street deserves a $700 billion rescue from Congress.

By a margin of 55% to 31% in a Bloomberg/Los Angeles Times poll, American said that they don't believe the government should "bail out private companies with taxpayer dollars, even if their collapse could damage the economy," according to Bloomberg News. That's a stunning rebuke to the Bush administration.

Though Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke are thumping their chests demanding that Congress act immediately to head off the worst financial crisis since the Great Depression, members of Congress are not so sure. Senate Banking Committee Chairman Chris Dodd (D-CT) indicated to reporters yesterday that passage of the bill this year was not a sure thing. Maybe that's political posturing, but it should scare investors nonetheless.

Democrats and Republicans are getting hammered by outraged constituents questioning why the government should bail out sleazy Wall Street bankers and not lift a finger to help homeowners hurt by the credit crunch. The American people have nothing against people getting rich. They do resent those, however, those who they believe cut corners, which is exactly how Wall Street got into this mess. Anti-bailout sentiment is so thick you can cut it with a knife.

One of the many lingering questions about the government's $700 billion buyout of the financial services industry is what to do about Washington Mutual Inc. (NYSE: WM).

The Seattle-based bank, which under former Chief Executive Kerry Killinger racked up billions of dollars in losses following a disastrous acquisition and lending strategy, is reportedly trying to sell itself. Officials with the Office of Thrift Supervision are eager for a "speedy" sale, according to the Financial Times. JPMorgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co. (NYSE: WFC), Citigroup Inc. (NYSE: C), HSBC and Banco Santander all have expressed an interest in WaMu, the paper said.

More speficially, they are probably most interested in Washington Mutual's network of more than 2,300 "consumer and small business banking stores" throughout the country. And what about the company's radioactive loan portfolio? That, fellow taxpayers, is all yours.

How much subprime sludge is on WaMu's books is not clear. As of June 30, it had assets of more than $309.7 billion. WaMu is expecting $19 billion $4.5 in loan losses during the quarter. The losses may lost as much as $19 billion over the next two-and-a-half years though analysts are expecting the red ink to be more like $28 billion, according to BusinessWeek. To make matters worse, WaMu does about half of its lending in California, one of the states hit hardest by the subprime crisis.