“I think there ought to be regulation of subprime. I think there ought to be regulation of prime. I don’t think that the economy is best left to its own devices almost ever. The excesses that are permitted in the mortgage industry can and perhaps have led us into a dark hole.”- Robert Toll, Chief Executive of Toll Brothers

He sounds downright socialist, doesn’t he, saying capitalism shouldn’t be left to its own devices, eh?

Those two Bear Stearns hedge funds that invested in subprime are now virtually worthless. Golly, wasn’t it just a few weeks ago the talking heads of the financial world were assuring us everything was fine? Maybe they were trying to buy time to find a way to sell the toxic mortgage bundles they own.

Financial cancer spreading through the credit markets: subprime not contained, says SeekingAlpha, one of the best financial sites around. All mortgages, and their associated bonds, are feeling the pain now, not just subprime. This also negatively impacts credit markets too.

One big problem the hedge funds face is redemptions. When nervous investors decide to pull out their funds, the funds have to sell their quality stuff to raise the money. They literally can’t sell the mortgage bonds because a) many are worthless and b) there’s no way to determine what to price them at. Thus they are forced to sell the good stuff and end up with a portfolio of garbage. We are talking hundreds of billions of dollars here, maybe trillions.

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From Bruce Sterling, commenting on the recent deluge of rain in Texas.

In other and even weirder Texan news, Texan state officials ignore the incompetent feds and rely on big-box commercial retail outfits to respond to weather emergencies. Can secession and the Greenhouse Republic of Wal-Mart be far behind?

If the government of a nation-state isn’t the go-to organization in public emergencies, then what core function does a government serve? We’re heading for a world where Al-Qaeda thumb-wrestles Home Depot for control of the streets.

Texas Tells FEMA: Don’t Mess

Bottom line up front: “FEMA can’t compete with the private sector,” Jack Colley, Texas’ chief of emergency management, said. “They do it quicker, smarter, faster every day.”

This is a telling example of what John Robb discusses in Brave New War, that the US government is becoming hollowed out and increasingly unable to provide services to the public because of its preoccupation with terrorism and invading other countries. Such hollowing out is a stated goal of al Qaeda.

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Pakistan from the about-to-be-launched new insurgency aimed at the government and Mexico, well, the story starts with $217 million found in a drug dealer’s home he says was for the president of Mexico.

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