Maine Owl

But the most duplicitous and frightening aspect of the plan, as always, was to found, buried in the back of the document, located there in the hopes everyone would have fallen asleep from the legalese before they made it that far. There’s the innocuous sounding Section 128, which was in both the original and amended versions, and says simply: "Section 203 of the Financial Services Regulatory Relief Act of 2006 (12 U.S.C. 461 note) is amended by striking 'October 1, 2011' and inserting 'October 1, 2008.'"

What would this effectively do? It was intended to speed up the enactment of this section of the law from 2011 to this week.

And what is the impact of the change in this law? (Take a moment to let this sink in.) This wonderful bipartisan bailout proposal, negotiated into the wee hours of the morning by sleep-deprived members of Congress was designed to come with a furtive Trojan Horse embedded by Wall Street lawyers. Banks already in trouble for lack of capital would get to hold as little as "zero" capital for transactions.

But it does solve one giant mystery. All of Wall Street has been attempting to understand why firms like Goldman Sachs and Morgan Stanley, who have concentrated on mergers, acquisitions, stock and bond underwriting for more a cumulative 212 years, decided in a heartbeat to enter the bean counter world of retail banking and transform into bank holding companies. (That’s like asking General Motors to retool overnight for washing machines.) Now we know. Effective this week, if this bailout proposal would have passed in its current form, these firms would have had a new best friend at the Fed that was going to let them hold zero reserves for transactions. No wonder the stock of both firms sold off yesterday when Congress rejected the plan: Goldman closed down 12 per cent; Morgan down 15 per cent.