Quoted: The software models in question estimate the level of financial risk of a portfolio for a set period at a certain confidence level. As Benoit Mandelbrot, the fractal pioneer who is a longtime critic of mainstream financial theory, wrote in Scientific American in 1999, established modeling techniques presume falsely that radically large market shifts are unlikely and that all price changes are statistically independent; today’s fluctuations have nothing to do with tomorrow’s—and one bank’s portfolio is unrelated to the next’s. Here is where reality and rocket science diverge. Try Googling “financial meltdown,” “contagion” and “2008,” a search that reveals just how wrongheaded these assumptions were.

Oops. There are some major problems here in Cali...

Quoted: Officials at Calpers confirm that it currently expects to report paper losses of 103% on its housing investments in the fiscal year ended June 30. The Wall Street Journal has a gripping story today detailing CalPers bad bets on real estate.

Indeed.

Quoted: Some of us—especially those under 60—have always wondered what it would be like to live through the kind of epochal event one reads about in books. Well, this is it. We're now living history, suffering one of the greatest financial panics of all time. It compares with the big ones—1907, 1929—and we cannot yet know its full consequences for the financial system, the economy or society as a whole.

Quoted: In this context, the economic crisis is not the driving rationale, but the occasion, for exploring whether a rescue of Detroit might help to jump-start a new national-energy strategy. Such negotiations might or might not produce a convincing plan. What might the goals of the Obama Administration include? A further increase in national fuel-efficiency standards, and, through that, an improvement in the prospects for permissive politics around future carbon and gas taxes (after economic recovery) would be enormous national achievements—considerably more than the Bush Administration has received in return for its investments on Wall Street. The package could be legislated as goal-setting and left entirely to new management to implement, or, for a limited period of years, in a model derived from the Resolution Trust Corporation of the savings and loan crisis, an autonomous federal entity could play a more active role, akin to private-equity investors on a workout timeline.

Quoted: In any event, no matter its degree of intrusion, if such a plan were crafted, it would hardly constitute the introduction of radical socialism, or a politics of government-by-Chinese-technocrats, as David Brooks put it in a column last week. In fact, we already have a system of managing our industrial policy akin to the Chinese system—read through the narrative of the Pentagon’s failed tanker contract and it would be hard to draw profound distinctions. Rather, a strategy-led package of investments in Detroit would merely involve a revision and extension of our current industrial policy. Again, this observation does not clinch the argument for federal investments in a restructured G.M.—that would depend on the terms, mechanisms, goals, timetables, costs, and risks of both action and inaction. This is, however, a more accurate and aspiration-driven context for Detroit policy, one way or the other. You can argue that you are against this particular vision of national-security policy; you cannot argue that you are against aid to Detroit because you oppose such industrial policy altogether.

Quoted: This idiot woman, this blind, shortsighted ignoramus, this pretentious clod, mocks basic research and the international research community. You damn well better believe that there is research going on in animal models — what does she expect, that scientists should mutagenize human mothers and chop up baby brains for this work? — and countries like France and Germany and England and Canada and China and India and others are all respected participants in these efforts.

Quoted: Yes, scientists work on fruit flies. Some of the most powerful tools in genetics and molecular biology are available in fruit flies, and these are animals that are particularly amenable to experimentation. Molecular genetics has revealed that humans share key molecules, the basic developmental toolkit, with all other animals, thanks to our shared evolutionary heritage (something else the wackaloon from Wasilla denies), and that we can use these other organisms to probe the fundamental mechanisms that underlie core processes in the formation of the nervous system — precisely the phenomena Palin claims are so important.

Quoted: Readers ask what I think should be done about the financial crisis. The answer is, what Gordon Brown in doing in Britain: a bailout, yes, but one that gives the government an ownership stake in the bailed-out institutions. That plus a serious fiscal stimulus plan that includes emergency aid to state and local government.

As Cheney famously told W, "Deficits don't matter." Why's that? Because it's in the best interest of the conservative moment to give democratic administrations a fucked-up budget that ties the administration's hand. Kind of like what this $700 billion bail-out is going to do.

Quoted: As you can see, there are basically two kinds of situations in which this ratio skyrockets — either World War II breaks out, or else you put representatives of the modern conservative movement in the White House.

This is my favorite part of this unfortunate story:

Quoted: In April, the vision of a white knight appeared on the scene. David Bonderman, a founder of the TPG private equity firm, and a group of institutional investors agreed to infuse $7 billion of capital into the bank. Mr. Killinger kept his job, and Mr. Bonderman, who had served as a WaMu director from 1997 to 2002, returned with board seat and 176 million WaMu shares priced at about $8.75 each — steep discount of more than 25 percent to that day’s share price.

Quoted: While the deal was sweet for Mr. Bonderman, it eroded the value for existing shareholders, enraging them. With its financial position worsening, they moved on June 2 to strip Mr. Killinger of his chairmanship. Mr. Bonderman, meanwhile, watched his golden bet turn to dross. In a statement Thursday, the fund said: “Obviously, we are dissatisfied with the loss to our partners from our investment in Washington Mutual.”

Oops!!!!