Sitting in DCA waiting for my delayed plane back to RDU, I picked up a copy of yesterday’s Wall Street Journal. I was struck by a few things:

* Of the 18 stories the paper’s first six pages, only three weren’t detailing some new aspect of the financial maelstorm. One of these was the paper’s traditionally off-beat/ironic front page stories, this time titled “Abandoned Houses Used to Shelter Troops Often Prove Deadly in Iraq.”

* The commercial paper market has contracted 10% since July, to $1.6 trillion.

* “AT&T, which had $8.5 billion in commercial paper outstanding at the end of June, said that for a two-day period around Sept. 18, just after the bankruptcy-court filing of Lehman Brothers, it only issued overnight commercial paper. Currently, the telecommunications company says it has access to a range of maturities as long as 30 days.”

* “Fed data indicate that more than 80% of U.S. commercial paper outstanding in early October was due to mature in one to four days. In normal times, that proportion is between 40% and 50%.”

* “In limited action Tuesday the [Icelandic] krona traded well below the peg, swinging between 180.49 131.01 kronur per euro before closing at 150.16 kronur, down 22.234 kronur, or 12.9%.”

* “At the end of July, Japan held Treasury securities valued at $593 billion, slightly more than $519 billion of such securities held by China, according to Treasury Department data.”

* “About 75.5 million U.S. households own the homes they live in. After a housing slump that has pushed values down 30% in some areas, roughly 12 million households, or 16%, owe more than their homes are worth, according to Moody’s Economy.com. The comparable figures were roughly 4% under water in 2006 and 6% last year, says the firm’s chief economist, Mark Zandi, who adds that “it is very possible that there will ultimately be more homeowners under water in this period than any time in our history.” Among people who bought within the past five years, it’s worse: 29% are under water on their mortgages, according to an estimate by real-estate Web site Zillow.com.

* “Among mortgages on one- to four-family homes, 9.16% were a month or more overdue or were in foreclosure in the second quarter, according to the Mortgage Bankers Association. That compared with 6.52% a year before and was the highest level since the association began such surveys 39 years ago.”

* “Falling values have contributed to a sharp pullback in mortgage lending. In the third quarter, mortgage lending fell to the lowest level in eight years — down 44% in a year — says the publication Inside Mortgage Finance.”

* “In contrast with the 12 million home borrowers estimated to be under water, 64 million have equity in their homes. These include 24 million households who own their homes free and clear, and 40 million whose homes remain worth more than is owed on them.”

* “The Federal Reserve said total consumer borrowing contracted at a 3.7% seasonally adjusted annual rate during August to $2.577 trillion. Consumer credit, which includes most consumer loans except for real estate, had increased 2.4% in July.”

* “In the Fed’s latest data, total consumer credit declined 0.3% in August from July, or about $7.9 billion, marking the largest decline ever in dollar terms. Nonrevolving credit — such as loans for cars, vacations and education — declined at an annual rate of 5.4% to $1.61 trillion. Revolving credit — largely credit-card borrowing — declined at a 0.8% annual rate to $969 billion. Except for a sudden 4.3% annualized decline in January 1998, which partially offset a strong month before it, consumer borrowing hasn’t seen sustained declines since the period around the 1990-91 recession. At the worst point during that recession, in December 1990, consumer credit declined at an annual rate of 8%.”

* “The outlook has dimmed so quickly that economists are having a hard time keeping their projections current.”

* “Consider guitar strings. D’Addario & Co., based in Farmingdale, N.Y., is a major producer, selling strings both in retail stores across the U.S. and overseas, as well as to factories, mostly in Asia, which make guitars sold by U.S. retailers. James D’Addario, the company’s chief executive, said string exports to Asian factories surged 40% earlier this year, in part, he believes, to ramp up for the Christmas season, which had been expected to be strong for guitars. A big part of that demand is due to the latest version of the Guitar Hero videogame. But as U.S. consumers, nervous about their jobs and savings accounts, slash spending, the chances of strong holiday sales have dimmed. “I’m expecting there’ll be warehouses full of guitars at the end of this year,” said Mr. D’Addario.”

* “The events in New York have slammed the budgets of neighboring states. In Connecticut, home to many Wall Street employees, the state budget hole has more than doubled in a month to $300 million, the governor’s office announced in late September. New Jersey Gov. Jon Corzine is convening lawmakers to sift through ideas for stimulating the state’s economy and to close a $1.7 billion budget shortfall. In Wall Street’s home state, Mr. Paterson has called for lawmakers to return to the capitol for a special session Nov. 18 to close a deepening budget deficit, projected at $1.2 billion for the current year. The state’s 2008-2009 budget totals $120.9 billion.”

* “New York’s budget relies on the financial sector for 20% of overall state revenue. Wall Street bonuses and capital-gains tax revenue from the sale of stock or other assets have kept coffers flush. But the state’s budget division now projects a 43% decline in bonuses and a 35% drop in capital gains.”

* Finally, some comic relief from a VP candidate: “The [television] pundit was saying, ‘The only reason she’d be going there is ’cause they’re scared, so they gotta go there and shore up votes,'” she said. “I so wanted to reach into that TV and say, ‘No, I’m going to Nebraska because I want to go to Nebraska.'”

* “No bank is solvent in a run. No bank is solvent on a mark-to-market basis when there is little or no resale market for most loans at anything but firesale prices.”

Timothy Aeppel, the guy who penned the “consider guitar strings” line, deserves a Pulitzer in the one-line-summary-of-a-global-crisis award category.

Today key financial bellweathers of weakness Citibank and Morgan Stanley closed lower than in the pre-bailout panics of 9/17 and 9/27.

With the cavalry already here and out of bullets, what’s next?

A buddy who is tight with the hedge fund crowd writes:

One of the bigger concerns percolating is the fear that many hedge funds will soon close. A combination of factors create the perfect storm: large redemptions at the end of Q3, the SEC ban on selling stock short and efforts to reduce leverage. With your performance down significantly, many funds are way below their high water mark and won’t be earning a performance fee for months. And without leverage (or with less leverage), it’s going to be hard to even justify the 2% management fee and 20% carry you charge. Unless your fund has more than a $1 billion in assets, it will be hard to generate the management fees needed to keep talent and sustain your operations. A large consolidation of the industry and many closures could be the story over the next six months.

Many VCs will run dry, which doesn’t bode well for companies needing more funding to reach profitability:

Before the market meltdown it might have been OK for a pension fund or university endowment to park money in an underperforming VC fund as a limited partner. But going forward, all bets are off.

Venture capital operates via commitments. A limited partner pledges a certain amount to a fund, and as the VC firm needs it, it makes capital calls to get that money to fund its portfolio companies. If you don’t pony up when asked, you typically lose all your prior investment and are frozen out going forward. After the dotcom crash, capital calls came from VC firms and some limited partners simply said no – whether it was because they were wiped out in the Internet implosion, or they didn’t want to throw good money after bad.

It could be worse this time around. “My expectation is that it will start first in some private equity funds, that there will be a substantial miss on a capital call, and we’ll see it next in venture capital,” says Paul Kedrosky, an investor and academic focused on the future of risk capital and writer of the business blog Infectious Greed. “No one is going to stiff Kleiner Perkins, but the second or third-tier guys will get stiffed all day long.”

Time for some of our idiot competitors, until now coasting on greed, OPM and an association with “The Blogs,” to shutter.

Spectrum Yarn is laying of 200 textile workers because of lack of financing.

Assume this is happening in 100 other factories this week, 2 per state, that puts initial unemployment claims at 520k next week. If you see other specific reports of credit related closings, mail me or leave in the comments.

Congress today will vote on the Emergency Economic Stabilization Act of 2008.

The act was conceived as a $700 billion emergency defibrillation for an economy in cardiac arrest, but now includes a $170 billion perm, tatoo and piercing just because some moronic members of Congress thinks the patient will look better that way.

If Congress passes the act, prices will rise briefly as sellers back off and “hey, something good just happened buyers” trickle in, but then will sell off because the news was anticipated and the fundamental disfunctions of the economy — paralytic bankers, over-leveraged consumers, foreign-cash dependent Treasury — will still remain.

If Congress doesn’t pass the act — and who really believes these boobs won’t pause to at least put lipstick on the twitching patient? — then we’ll just go into an ugly slide immediately.

Sara Palin responding to “who caused the subprime meltdown?“:

PALIN: Darn right it was the predator lenders, who tried to talk Americans into thinking that it was smart to buy a $300,000 house if we could only afford a $100,000 house. There was deception there, and there was greed and there is corruption on Wall Street. And we need to stop that.

Again, John McCain and I, that commitment that we have made, and we’re going to follow through on that, getting rid of that corruption.

One thing that Americans do at this time, also, though, is let’s commit ourselves just every day American people, Joe Six Pack, hockey moms across the nation, I think we need to band together and say never again. Never will we be exploited and taken advantage of again by those who are managing our money and loaning us these dollars. We need to make sure that we demand from the federal government strict oversight of those entities in charge of our investments and our savings and we need also to not get ourselves in debt. Let’s do what our parents told us before we probably even got that first credit card. Don’t live outside of our means. We need to make sure that as individuals we’re taking personal responsibility through all of this. It’s not the American peoples fault that the economy is hurting like it is, but we have an opportunity to learn a heck of a lot of good lessons through this and say never again will we be taken advantage of.

The Charlotte Observer reports:

Inside Wachovia, executives started noticing customers withdrawing money on Friday morning, following the failure of Washington Mutual on Thursday. “The so-called silent run on the bank – it’s real,” Carlos Evans, Wachovia’s wholesale banking executive, said in an interview. “When Congress failed to pass the ($700 billion bailout) proposal, when WaMu collapsed, you could see the money flowing. My computer screen was lighting up.”

Starting Friday morning, Evans said, businesses and institutions with large accounts started withdrawing money to lower their balances to below the federally insured $100,000 limit. They weren’t closing accounts, he said, adding “they were very apologetic in saying they love the service they get from Wachovia and they weren’t leaving Wachovia. They were just moving their money until things settled down.”

Money flowed out of Wachovia throughout the weekend, said Evans who heard anecdotes and received memos and BlackBerry messages from bank employees in the field.

“What happened last week, and it literally happened that fast …You could go from being OK, hurt, weakened, there’s no question the company was weakened… but you go from being weakened to in trouble in a matter of days,” he said. “I don’t think people understand how quickly events unfolded.”

A buddy who is a corporate attorney in NYC writes:

We’ve been watching a slow motion train wreck for over a year now. What makes this so nerve-wracking is that, with the loss of trust and
confidence in the financial world and the massive deleveraging underway, there is no way to predict with confidence how bad this will get. Things which were inconceivable two years ago (15-20% unemployment for example, cannot be dismissed out of hand any more). In my small part of the world, I’m seeing a large number of portfolio companies of private equity firms in covenant default, companies that need to file for bankruptcy unable to do so because they can’t get a DIP lender and enormous redemptions from hedge funds. My business has slowed significantly and my firm is going to have to face some very difficult decisions about whether to abandon certain business lines (and fire a bunch of lawyers) in the near future.