China Authorizes Massive Bailout (FT)
The Chinese have authorized a bailout package of unprecedented size: $586B. In a statement regarding the bold move, "The government said the spending plan reflected a decision to adopt an "active" fiscal policy to deal with the global financial crisis, while monetary policy would be "moderately active".

The problem inherent in China's "throw money at it until it goes away" plan is that the core of China's revenue comes from manufacturing, and unfortunately, people just aren't buying right now.

"Two recent surveys of manufacturers showed a slump in activity in October, confirming anecdotal evidence that the slowdown has accelerated in recent weeks. Some economists believe that growth, which was nearly 12 per cent last year, could fall to as low as 6 per cent next year without a substantial fiscal stimulus."

And further, China seems to be acting on the principle that 12% year over year growth is healthy, whereas a 6% annual growth rate is slow, and weak. I don't mean to be a contrarian here, but that's just stupid: the idea that any country can sustain 12% growth over any respectable period and not expect some form of economic whiplash fights against all common sense.

Circuit City's Bankruptcy Filing Affidavit (Dealbook)

Overnight Markets Gain On News of Chinese Extravagance (Reuters)
The Nikkei was up 3.6% overnight as Japan celebrated the massive spending package laid out by long time foe China; Exporters, Shippers, and Machinery companies were the biggest movers on the exchange. Other popular buys included pharmaceuticals, long seen stable in the face of economic slowdown.

As a side note, "Kawasaki ... soared 14.1 percent to 211 yen after the machinery maker said it had received orders for another 140 New York subway cars worth about $275 million."

The FTSE was also up overnight, showing a 2.9% surge (at print) with gains "across the board." The biggest impact appears to have been in Mining and Energy however, with Lonmin, Anglo American, BHP Billiton and Xstrata all up more than 10% and Energy gains over 3%.

Bloomberg Safeguards US Taxpayers, Wants To Know Where The $2T Went. (Bloomberg)
The FED, like a fat kid at a candy store, has been sneaking the goods out the back door without complete transparency, which has some people upset. The lawsuit filed by Bloomberg under the FOIA seeks to expose where 2T (outside the 700B) in funds have been allocated, claiming it's the right of the American Taxpayer to know where their tax money is being spent. Interestingly, when Dann Fuss was asked about it his objection to the lack of transparency wasn't on the Patriotic side, but rather Market side, explaining that as thin as the credit market is right now this information is pertinent.

AIG Could Have New Shareholder. (NYT)
It looks like our best and brightest were busy this weekend as they made a concerted effort to put together something for AIG that doesn't involve extortion, though unfortunately it may end up costing AIG its soul. Though details are a little sketchy (as it's not completed) it looks like the Gov could offer AIG another $40B through purchase of preferreds @10% div, the same deal offered under the 700B bailout package.

Further, and more interestingly, it appears as though the Gov is going to push AIG to set up a shell corporation so that they can buy the debt they had insured against default. The government would sponsor $30B of CDO debt at 50c/d and $20B of Residential MBS debt (presumably at the same strike) while AIG would be expected to contribute $5B on the CDO side. The move would push the debt off their balance sheet, and once wholly owned AIG wouldn't have to provide collateral, freeing up money. Nothing mentioned in the article about how the payoff of the $50B will be structured, however.

Automakers Try To Steal American Taxpayers Money. (WSJ)
The Big 3 are lobbying the US Government for money held under the TARP, and it looks like Pelosi and Obama are bowing under the pressure. The heads of the Democratic Party are looking for low cost loans the manufacturing giants in hopes that the money will prop up the ailing automotive industry. Little inside secret: it won't. Moreover, you giving money specifically allocated for financial institutions to the automotive sector is just one more example (in an endless sea) of the government lying, and the very reason no one trusted you to administer this in the first place.

I've said it before and I'll say it again: at least one of the three has to fail. I'm betting on Chrysler. If the Government agrees to take over the pension system instated by GM in 1653, and GM restructures, I could see the company being profitable. Ford is a toss up, it would take some work, but Chrysler is just gone.

A Look At Fuld, And The Last Days Of Lehman. (Bloomberg)
Highlights include talks with O cubed, how a bailout was almost hatched, and a breakdown of the Gorilla's movements in the days leading to Lehman's downfall.

--William Richards