Happy Days

The markets euphoria over the UBS and Deutsche Bank write-downs seemed a bit odd, but perhaps the rally was more over the release of Paulson's letter:

"I support this action as appropriate and in the government's interest, and acknowledge that if any loss arises out of the special facility extended by the (New York Fed) to (JP Morgan), the loss will be treated by the (New York Fed) as an expense that may reduce the net earnings transferred by the (New York Fed) to the Treasury general fund," Paulson wrote to New York Fed President Timothy Geithner.

There's nothing like the scent of free money from the government to bring out the bulls. Just as in the Savings and Loan fiasco, it will be the Treasury to pay for all the bad bets by investment bankers (in this case). Only we can expect this bailout to be a lot more expensive.