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Regulators are closely monitoring clearing and settlement systems to ensure their proper functioning as we encourage further centralized clearing for other financial instruments to bring enhanced transparency and counterparty risk management to those markets.

—US Treasury Statement

Encouragement only goes so far, but the seeds of centralized clearing of CDS via exchange and with tighter regulation have been sown.

…And this afternoon an announcement came across the wire

The last six months have made it abundantly clear that voluntary regulation does not work

—Christopher Cox, Chairman of the SEC

Agency’s ’04 Rule Let Banks Pile Up New DebtBy STEPHEN LABATONPublished: October 3, 2008A Securities and Exchange Commission decision helps explain how the financial crisis spun out of control.

The MSCI World        — down 28%, YTD — 13.2x the earnings, lowest since 1995
Europe’s Stoxx 600    — 10.4x earnings, the lowest since 2002
S&P 500                    — down 34% since 10/2007 — 20.9x earnings, and 19.5x at the end of the day

—Bloomberg

Opening Comments from Across the Curve

A global downturn in the power of the west – Dominique Moïsi

Fund                           Sept. (%)            YTD (%)

Maverick                       -19.5               -21.2
TCI                           -15                 -26 
Greenlight Capital             -12.8               -16.4 
Lone Cyprus                   -14.7               -26.5 
Third Point                    -11                 -18.4 
Atticus European            -15.8               -43.5 
Atticus Global                 – 2.8               -27.2 

Source: Investors

We are living through the type of wrenching financial crisis that comes along only once in a century. Financial markets freeze up as an excess of fear displaces a protracted period of what some might call irrational exuberance. Eventually the market freeze will thaw as frightened investors take tentative steps towards reengagement with risk.

—Alan Greenspan

Breaking the buck was the Rubicon. This was the first time in the crisis that you could see stories talking about how it was affecting real people.

—A federal official

We were saying to Treasury and the Fed, at a very high level: Pay attention to this issue. This will have an impact.

—Greg Ahern, chief communication officer, Investment Company Institute

As Credit Crisis Spiraled, Alarm Led to ActionBy JOE NOCERAPublished: October 2, 2008During a 36-hour period two weeks ago, the fissures opening in the worldwide financial system convinced policy makers that they needed to act quickly.

We look for U.S. businesses to pull back in the coming two quarters, with investment spending expected to reverse course at an 8 percent annualized pace. We also expect payroll losses to average 150,000 per month over this period, double the pace thus far this year.

—Bruce Kasman, Chief Economist, JPMorgan

The big question for Latin America is how long and deep is this cyclical downturn going to be, and how much is it going to reduce commodity prices

—Nicholas Field, who helps oversee about $18 billion in emerging-market equities at London- based Schroders

Commodities are falling because of the realization that the economic downturn is spreading to Europe and Japan. A spillover into Asia is becoming more likely, which means things will get even get worse.

—Adam Sieminski, Deutsche Bank’s chief energy economist, in Washington

The bleak economic picture is hitting equities and that’s having an impact on commodities. It looks like Europe’s economy is following ours lower and has further to drop, which is strengthening the dollar. The soaring dollar is leading to an unwinding of the commodity trade. That, coupled with deteriorating economic prospects, is putting pressure on commodities across the board.

—John Kilduff, senior vice president of risk management at MF Global