In pre-market trading, Wachovia Bank is down 85% at $1.50. Last Thursday, it closed at 15.

Unless you’re a Wachovia shareholder, you had a happy Friday. Sellers didn’t stampede and buyers didn’t hide. (JPM shareholders even saw their holdings rise 10%.)

There are a few ways of reading this. One is that all is well, the storm has passed.

Another is that sellers, unable to contemplate the horror of no Congressional approval of the $700 billion bailout package clung, simply shut their eyes and hoped for the best. With eyes squeezed shut, shareholders ignored the Chinese banker’s embargo on trading with Western banks, the new high in initial unemployment claims, the frozen money markets.

I’m think it wasn’t good will the kept sent the market sideways Friday, but paralysis. The gravity of our situation is hard to comprehend, much less stratetize for. What do you sell? Where do you move your money? The average American, even the average American fund manager, doesn’t have goggles big enough to imagine what a post-credit world might look like.

It’s interesting to know that even as Wall Street traded sideways, Treasury officials were secretly warning Congress of a 3000 point Dow meltdown.

One Republican said that the message from government officials is that “the economy is dropping into the john.” He added: “We could see falls of 3,000 or 4,000 points on the Dow [the New York market that currently trades at around 11,000]. That could happen in just a couple of days. What’s being put around behind the scenes is that we’re looking at 1930s stuff. We’re looking at catastrophe, huge, amazing catastrophe. Everybody is extraordinarily scared. It’s going to be really, really nasty.”

Back to Wachovia. Citigroup, Wells Fargo and Spain’s Banco Santander have apparently been approached by Wachovia management after its shared traded as low as $8, down from $14, on huge volume Friday. But, as one article (can’t find it now) noted today, potential buyers are incentivized to let Wachovia wash out, like WaMu, and then, like JPM, buy the quality assets post failure. After years of chasing assets higher, buyers are learning that, once again, cash is king and time is always on the buyer’s side.

Today’s WSJ: “Top U.S. policy makers emerged from hours of tense negotiations with a clear message just after midnight Sunday morning: A deal to bailout U.S. financial markets has been agreed on and all that remains to be done is to commit the legislation to paper.”

“All that remains is putting it in writing?” Am I the only person who finds that “agreements in principle” that take 20 minutes to nail down verbally can take months to spell out in writing, once the parties start digging into the nuances and granularities in the vague words that created the initial bridge of agreement?

In today’s Times, columnist Ben Stein writes, ” Almost no one (except Mr. Buffett) saw this coming, at least not on this scale.”

Stein certainly didn’t see it coming. A year ago, he pooh poohed the mortgage crisis in a column titled “its time to take a deep breath,”

Yes, there are real problems: housing, mortgage defaults, losses at financial firms, rot in hedge funds. But over all, things will be fine. Unless there is a genuine dollar crisis or a devastating recession (very unlikely), things will work out. This economy is very big and very solid. It cannot be derailed for long by anything we have seen lately. If I were the editor of the business section for just one day, I would run one immense headline: ‘Everything Is Going to Be Fine. Go Back to Work.’At that time (in a post titled “Creeping to collapse“) I wrote, “It will be fun to watch what Stein writes when the Dow is plumetting towards 8,000, rather than 13,000.” Well, now we know.

Traditionally, banks get shut down over weekends, since the extra time gives regulators room to get into the banks and take control. Wamu’s shutdown last night suggests either that regulators wanted to put the fear of God into Congress or that there was an acceleration of the run on the bank yesterday.

That makes Wachovia’s trading today particularly dicey. Twice in the last six weeks, the stock has been down to $9 during the blackest of trading days. Last night, on the back of anticipated Congressional approval for the $700 billion bank bailout, WB closed at $15.

This morning, with the bailout apparently still weeks away, WB opened at $10, then drifted up to $11.34. But now WB has sunk back to $10.

Keep your eye on WB. Here’s a chart of trading so far.

Update: Have you lent long-term money to WB and want some insurance? It will cost you, upfront, 30 cents on the dollar and 5 cents a year. Why would anyone (except a retail account with FDIC $100k guarantee) leave money in WB?

Sellers, first in trickles and then in crowds, will meet no buyers today. Prices could drop 5%. Or 10%. Or 20%.

My bet is 12%.

* Congress, bailing with forks, thimbles and greasy palms, can’t reach a deal to support banks.
* The Chinese government has asked its banks not to trade with foreign banks.
* Interbank rates are at new highs. (LIBOR at 3.76.)
* The FDIC closed WAMU last night, after depositors pulled $17 billion out of the bank over a ten day period.
* Initial unemployment claims spiked to new highs yesterday, heading us into territory not seen in 25 years.

Any of these nuggets of news, taken alone, would sock prices 2%. Taken together, and coming on the eve of a weekend — a full 48 hours without trading!!! — sellers will take any price for their shares and potential buyers will hide their wallets.

What’s a safe haven these days? I keep calling old friends in finance and nobody has a clue. Gold? (The Chinese have just 2% of their reserves in gold, versus the US at 60%.) Oil or copper? Maybe JPM, who seems to have the Fed, FDIC and Treasury’s full confidence?

Sad sad sad.

Today’s arbitrage suggestion for you Home Depot traders: go long shotgun shells and bottled water, go short ice cream (unless you own a generator) and other extreme luxury items.

Six weeks from now you’ll reap lots of dollars. Lots.

Of course, you’ll need a wheelbarrow to transport them home to use as kindling.

It’s Thursday, so time again for my favorite economic indicator… initial unemployment claims.

In the week ending Sept. 20, the advance figure for seasonally adjusted initial claims was 493,000, an increase of 32,000 from the previous week’s revised figure of 461,000. It is estimated that the effects of Hurricane Gustav in Louisiana and the effects of Hurricane Ike in Texas added approximately 50,000 claims to the total. The 4-week moving average was 462,500, an increase of 16,000 from the previous week’s revised average of 446,500.

To get a sense of how bad this looks versus recessions of the last 50 years, look at this graph. At 493,000 claims last week, we’re headed on a straight trajectory into the territory of the horrible economy of the early eighties. We’re over the precipice into a recession with no signs visible of a bottom.

I learned last week that my friend Paul Panitz died August 29.

Paul had written earlier this year saying he had esophageal cancer. The prognosis wasn’t good, Paul wrote, and he might not live out the year. Ever wry, Paul added, “Even my German Shepherd got in on the act, with her spine putting pressure on the nerves to her legs. She was operated on at the end of January, and still can go out only on a leash, but it seems she’s making a full recovery.” Paul went on to write that his businesses — copy shops from Budapest through Moscow and out to Shanghai — were doing well. He closed, “Well, those are the “highlights”. I’m quite busy from now through the middle of next week, but after that, I’ll have time to talk.”

I got to know Paul in 1993 while I working as a business journalist in Budapest. Late one evening I was photocopying some documents in a big copy shop near our apartment. Thinking the copy shop might make an interesting story, I asked to meet the owner. Paul turned out to be there. A wiry chain-smoking American about 10 years my senior, Paul had sold his copy business in DC and moved to Eastern Europe to watch the economy be reborn. Here’s the story I wrote about Paul in the International Herald Tribune.

I didn’t know it then, but hearing about Paul’s incredible tribulations, maneuverings, craftsmanship, triumphs, parsimony and occasional losses awoke in me an entrepreneurial urge. What a life, I thought, to dream and scheme and battle to shape something from nothing.

In 1998, when I started to think about creating a business to rent websites to newspapers and magazines, Paul was one of the first people I called to share the idea with. As the idea became a plan, Paul was the first person who committed money to the idea, called Pressflex. Though Paul asked a lot of questions about the concept and market, he didn’t ask about valuation. “Let me know when you do a deal and I’ll be in,” he said. That commitment gave me the courage to round up other investors.

After a burst of initial sales, Pressflex grew very slowly, much more slowly than our funding or plans anticipated. In 2001, with our bank account dwindling towards zero, Paul asked if we were still confident we had a good idea. Yes, we said. Paul offered to loan us money. He asked for no projections, no additional logic… he just asked if we were confident we could repay him. We were confident, knowing that if we had to abandon our dream, we’d pare down the company to a skeleton and get Paul his money from residual revenues from site rentals. So Paul loaned Pressflex $75,000 and we humped along with a core staff on slashed salaries. We signed a few more newspaper clients, then some magazines and pared our burn rate enough to buy us an additional year of life. And it was during that year that we conceived Blogads.com. Today the Pressflex site rental business is solid and Blogads is thriving.

Both for his example and his unwavering support, I owe much to Paul, and I told him that when we last talked.

There was a tiny but powerful tribute to the College of Wooster in the NYTimes Magazine’s article today about philosopher Kelly Jolley.