Rejected cover for the next edition of The Economist.

Retrenched Lehman Bros employees stage a protest by blockading the entrance to the Bank’s Headquarters

Credit crunch starts taking its toll on infrastructure.

The consortium behind the world’s biggest toll road privatisation on Tuesday night pulled out of the deal, delivering a blow to efforts to bring further private-sector money into the US’s crumbling road system. Pennsylvania Transportation Partners, led by Citigroup and Abertis, a Spanish toll road operator, pulled out of the deal to take a 75-year lease over the Pennsylvania Turnpike because of problems winning approval in the state legislature.

But Ed Rendell, the Democratic governor who signed the $12.8bn lease for the 537-mile road in May, vowed to try again to win approval for a similar private lease to the same consortium next year. “I look forward to the day when we can become true partners in financing and managing Pennsylvania’s transportation network,” he told the consortium in a statement on Tuesday night. — Financial Times

The problem with regulation is that, well, it regulates things. One of my hugely plugged in buddies has been warning that European banks are even more wobbly than US ones, and the ECB will wind up, like the Fed, cutting rates to as close to zero as it dares. Some of his grim view is based on the fact that EU banks on average are much more highly geared than their US peers, and they were buyers of the dreckiest, end of credit cycle CDOs and structured credits.

But I wonder if he knew about this item too … (hat tip reader Richard). The more information comes out, the more the financial industry looks like a house of cards. Is this the reason that the authorities have been reluctant to go in the direction of more transparency, despite the frequent calls for it? Particularly when more disclosure might reveal that they were asleep at the switch in the credit bubble? — Naked Capitalism

Loose money and the cause of the crisis.

This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper.

— T.S. Eliot, “The Hollow Men” (1925)

The world is not ending. Despite the wrenching turmoil in global financial markets and morbid allusions to the death throes of capitalism, it ain’t over. Not until people quit believing in themselves, not until people quit believing in a better future. But the whimpering is real, and justified, because it hurts to have your world come crashing down. And global financial markets are definitely crashing, even when the impact is momentarily softened through massive injections of artificial money — “artificial” because the fiat money does not represent a store of genuine value but rather an airy government claim to future wealth yet to be created. — The Wall Street Journal

Peter Fray

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