Time for another contest. Along with Fred Wilson, Mark Cuban, and Hal Varian, I am judging a competition at Slideshare. The idea: Come up with the best description/fix/forecast for the credit crisis in 30 slides -- or less.

Enter the Credit Crisis in 30 Slides Contest

With Wall Street in a financial frenzy, we’re all trying to make sense of what is happening and how it will impact us. We've noticed a lot of you uploading presentations on the topic and we want to drive the conversation with a contest.

We're looking for a variety of perspectives on the credit crisis. Why are we in this mess? How do we get out of it? You can show us a financial model or explain how the crisis will impact a specific industry, e.g. green tech.

Or a story about what the credit crisis means for the average Joe. Or take a humorous or satirical angle on the topic

The contest begins October 14th. Last day to submit entries is October 24th. The judges are Mark Cuban, Hal Varian, Paul Kedrosky and Fred Wilson. Find out how to enter.

According to an intermittently interesting WSJ story tonight, Wells Fargo was the only bank Monday to fight the idea of signing up to a preferred share deal with the U.S. Treasury. It pushed back, Treasury pushed harder and the deal got done. It is worth noting that none of the three big banks -- BofA, JPM, and Citi -- fought the idea as much as WFC apparently did.

It was Monday afternoon at 3 p.m. at the Treasury headquarters. Messrs. Paulson and Bernanke had called one of the most important gatherings of bankers in American history. For an hour, the nine executives drank coffee and water and listened to the two men paint a dire portrait of the U.S. economy and the unfolding financial crisis. As the meeting neared a close, each banker was handed a term sheet detailing how the government would take stakes valued at a combined $125 billion in their banks, and impose new restrictions on executive pay and dividend policies.
Question of the Day

The participants, among the nation's best deal makers [sic.], were in a peculiar position. They weren't allowed to negotiate. Mr. Paulson requested that each of them sign. It was for their own good and the good of the country, he said, according to a person in the room.

During the discussion, the most animated response came from Wells Fargo Chairman Richard Kovacevich, say people present. Why was this necessary? he asked. Why did the government need to buy stakes in these banks?

Morgan Stanley Chief Executive John Mack, whose company was among the most vulnerable in the group to the swirling financial crisis, quickly signed.

More here.

From the "more things change, the more they stay the same" file, an excerpt from a Thomas Jefferson letter in 1819:

Nice presentation showing the credit crisis's arrival and mutations via a series of Economist magazine covers:

The Economist Covers - The Financial Crisis Evolution

View SlideShare presentation or Upload your own. (tags: japan usa)

[via Jan Schultink]

A typically literate and lovely column from Edward Chancellor in the FT today. It is on the historical parallels and context for the current credit crisis/panic, and it is wonderfully rich historical reading.

Every panic is marked by a sense that the financial system is close to complete collapse. Never were such feelings more marked than during the panic that started in London in December 1825. “If the difficulties which existed in the money market had continued only eight-and-forty hours longer ...” William Huskisson, the president of the Board of Trade, told the House of Commons, he sincerely believed “that the effect would have been to put a stop to all dealing between man and man, except by way of barter.” Or, as a director of the Bank of England put it during the midst of the crisis: “We must ask not who is gone, but who stands?”

Yet even in 1825 the authorities belatedly succeeded in quelling the panic in that incident by borrowing money from France and distributing a stash of old banknotes found in the vaults of the Old Lady. In the 20th century, the end of the panic tended to coincide with decisive government intervention: Roosevelt’s bank holiday of March 1933, the launching of the Bank of England’s “lifeboat” in December 1974 and the nationalisation of Japan’s Long-Term Credit Bank in October 1998, which was accompanied by a $500bn capital injection into the stricken banking system.

More here.

Just curious, but is anyone planning to 'fess up on the Lehman-related CDS losses last week? As I wrote last Thursday, there was oodles of worry about the auction, with some people tossing out apocalyptic numbers, the highest of which were usually based on confusions about notional and net exposure.

Nevertheless, there seemed to be a general consensus that we would see a hit of somewhere between $250- and $400-billion, and that feeling just grew after we discovered that credit recovery at Lehman was going to be lower than expected. But the actual net transfers, according to a DTCC piece I mentioned on the weekend, may be as little as $6-billion.

Now, that's definitely non-zero, so I'm not suggesting it's just mad money for banks and hedge funds. But it's also far, far less than the ruinous figures being tossed around by some people.

I'll confess to having been surprised at the small net exposure. Anyone else want to 'fess up? (And I can think of a few high-profile people who should.) This is a very interesting data point, and I, for one, am rethinking the default swap exposure issues here, with a particular eye on select counterparties. I'll definitely be watching to see if it continues in the Washington Mutual and Icelandic bank CDS auctions over the next few weeks to see if this continues, and I can't see why it won't.

The ECB is really opening up in terms of collateral it accepts for loans:

The Eurosystem will lower the credit threshold for marketable and non-marketable assets from A- to BBB-, with the exception of asset-backed securities (ABS), and impose a haircut add-on of 5% on all assets rated BBB-.

via Alea

Seashells, strings and small rocks are next, obviously. I'm sure this will go well.

Should have mentioned it sooner, but I was on CNBC The Call today from 11am to noon EST. This is a weekly thing for me, so I regularly forget to mention it.

The gist: We talked economics/layoffs (I argued we will have a problem reallocating people); politics (I argued the market is busy and doesn't care about Obama (or McCain (or Raelians)); and third quarter earnings (I argued it's a head fake, with the real consumer pullback hitting so late in the quarter that there is a danger we miss the severity).

The folks at SmartMoney have newly added me to their Power 30 list. That's awfully nice of them.

In all honesty, I don't feel like I warrant a full slot, maybe a fractional one, but I'll just accept the compliment and shut up.

Markets are amazing discounting machines -- they just don't always discount anything useful or important. Case in point: Their belated discovery today that not only are we in a consumer-led recession, but that said recession is going to continue and deepen into 2009.

Amazing. Truly.

As an aside, the carnage in commodities is also impressive, with copper off big, oil touching $70, etc. Turns out that during recessions people buy less raw materials. Gosh.

Nice updated graph here -- and one sure to irritate the crap out of people -- comparing the Nasdaq, oil, and oil "bubbles".

[via Bespoke Premium]

Some quick links to items of interest:

• Finger-pointing: It was the derivatives (Portfolio)
• Data Scraping Wikipedia with Google Spreadsheets (Source)
• Finger-pointing: It was the regulators' fault (WashPost)
• China calls post-Olympic time-out on commodity buying (BreakingViews)
• Citadel CDS spreads widening out (Marketwatch)
• Commodities go out of fashion for wealthy (Reuters)

Here is the quote of the day:

Our ability to trade complex assets has completely surpassed our ability to understand those assets.

    - Philip Moyer, Edgar Online

Only in securities markets would something so obvious -- and true -- require pointing out. Imagine someone saying, "Our ability to drive cars has completely surpassed our ability to keep them from exploding".

The smart and thoughtful FT columnist Martin Wolf was on Charlie Rose last night:

I mostly agree with a new OpEd from the people over at Peterson Institute. Here is the crux:

The Treasury should abandon plans to buy troubled assets (this can be handled by Fannie Mae and Freddie Mac, as necessary) and keep the full $700 billion from the Troubled Asset Relief Program for financial-sector recapitalization if needed. Congress should amend TARP rules so the full $700 billion is available at the discretion of the president.

There is so much more leverage from recapitalization, and so much uncertainty around valuing toxic assets, that this seems (mostly) sensible to me. My guess is we are going to end up (at least) doubling up anyway as assets tumble further at the big banks, so we can save ourselves the Congressional trouble by simply refocusing the TARP monies towards a more defensible use.

More here.

Nighttime skies in San Diego are less lit than in some other cities, but it's still a shock when you get outside the city at night and see the tapestry of stars overhead. There is a good piece on the subject in the current National Geographic, and it contains this fascinating observation:

For most of human history, the phrase "light pollution" would have made no sense. Imagine walking toward London on a moonlit night around 1800, when it was Earth's most populous city. Nearly a million people lived there, making do, as they always had, with candles and rushlights and torches and lanterns. Only a few houses were lit by gas, and there would be no public gaslights in the streets or squares for another seven years. From a few miles away, you would have been as likely to smell London as to see its dim collective glow.

More here.

Apparently it wasn't enough that British Prime Minister Gordon Brown took the global lead on recapitalizing the biggest banks during this credit crisis. He has also now decided to call a meeting of world leaders to create new rules for worldwide capitalism.

The Prime Minister wants dozens of world leaders to meet for a major one-off summit where they would rewrite the rules of international capitalism that have stood since 1944.

...Speaking at a summit of European Union leaders in Brussels, Mr Brown said the recent crisis proves the need for much more international co-operation on the regulation of banks and other financial insitutions

He said: "We now have global financial markets, global corporations, global financial flows. But what we do not have is anything other than national and regional regulation and supervision."

...As the first step, Mr Brown revealed that 30 of the world's biggest banks will now be supervised by what amount to global regulators.

The banks, understood to include RBS, Deutsche Bank and Credit Suisse, will each be overseen by a "college of supervision" taking in regulatory officials from each of the countries in which they operate.

In a paper circulated among EU leaders, Mr Brown proposed a range of other reforms, including: new rules to curb bankers' bonuses and salaries, stopping pay schemes that "encourage excessive and irresponsible risk-taking", common rules to make banks disclose their assets and liabilities, to prevent them hiding "toxic" loans and a crackdown on the "shadow banking system" of hedge funds and other financial institutions that trade complex financial products often based on debt.

Remarkable stuff. You want to see leadership? This is leadership. That said, it will almost certainly be applauded in many quarters, while pilloried in others as another step toward the end times.

More here.