Even if we assume AIG only needs 85B, it’s still not enough. 8.5% above LIBOR is not an economical borrowing rate. I’d like to stress two numbers: AIG claims a book value of 29.04 per share with 2.69B shares outstanding. Borrowing that amount at that rate cannot be sustained. Now that assets are going to be systematically sold off, nobody is going to be paying book value. All the government has done is delay the healing process and added up to 85B to the meltdown.

I bought back my SPY puts at the end of the day yesterday (limit order was filled). I was actually expecting a short-lived rally, but am not disappointed to make money.

I just heard on CNBC “People are wondering who’s next.” That’s a load of crap. Are people really wondering? Seriously? Here’s a hint: it’s WaMu.

I listened to the Morgan Stanley conference call yesterday. They claim that they are pre-funded, and will not need to go back for funding until into 2009. Their expectations are that things will be better by then. I disagree. I think Morgan Stanley better find a buyer before they need funding in 2009, because they will collapse if they don’t. Funding is expensive right now.