The shorting activity - very similar to that of style which made George Soros and his Quantum Fund famous - along with market rumors of lack of liquidity and sufficient funds, have started earlier this year with an attack on Bear Stearns, and then proceeded to spread in similar fashion to other more leveraged financial institutions (Lehman et al).
Until the end of summer Fed and Treasury were putting out fires one by one (backed BoA’s buyout of Countrywide, JPM’s takeover of Bear, later BOA’s buyout of Merrill Lynch, tried to sell Lehman etc.)
Chuck Schumer in June poured the gasoline on the fire by creating market and consumer panic by “failing” IndyMac, which could have been quietly sold out with help of Fed or even facilitated sale by FDIC, like many smaller banks since.
Oil price was kept artificially very high throughout the same period due to refusal of Democratic Congress to even consider reasonable energy policy, and instead the insistence on “carbon reducing” inefficient and expensive alternative “solutions” and punitive industry taxes etc. etc. These actions could not help but weaken the economy already strained with real estate deflation, and snowball banking losses on mortgage-related securities and derivatives.
In a war of attrition Democrats in Congress didn’t care about their approval rating as long as they (with full-on media assault) could blame George Bush and, consequently, Republicans for the economy and financial / real-estate mess, for which they themselves have been responsible.
While MBS / CDOs and other toxic papers were the primary and natural reasons for banking failures, somehow the timeline and acceleration of dominoes falling, culminating with virtual financial shutdown and credit crunch spreading fast into business and consumer areas in September, with Lehman bankruptcy and AIG’s final CDS blowup, seems eerily orchestrated.
/OK, supply of tinfoil is on order.
The timing of the panic was no accident. DUH1 had been annointed by the DBM, and all the pieces were in place. With no reasonable chance for the real story about who deserved the blame getting past the choirbox or various Conservative sites, which unfortunately became echo chambers unable to get the message out to anyone who was not willing to listen, marginalized by the orgy of Obamaworship around the dial on the MSM, cell phones, and the dark side of the internet (darkness referring to evil, not the color of the candidate).
That McCain had co-sponsored a bill which might have provided enough oversight to slow or head off the meltdown and that that bill had been killed by some of the selfsame Democrats in committee who got loans at sweetheart rates from Countrywide all went unreported, though the Countrywide scandal (if you can call it that) was reported with the intensity of officially changing the color of the toilet paper in the Rayburn Building.The primary problem, even worse than the fact that pre-Palin the Conservative message was homeopathic in its dilution, was the lack of ability to reach mom-and-pop America watching the DBM for the snooze, weather, and spurts every night between the commercials and human interest stories that pass for relevant news.
Unless and until the ability to spread the word to the unbelievers out there improves significantly, the Conservative agendae, Conservatives, and increasingly, the Republican Pary (which has been morphing away from the aforementioned as hard as the voters will accept--or not) will all be doomed to be minority positions in all but retrospect.
Little consolation for the awakened voter who will rue with "I could have had a tax cut!", today, and in incredibly amnesiac fashion vote for the same pack of idiots running the show in 4 years.
At the bottom of the financisl markets, ultimately, is faith. Faith in a bull market creates a bull market, faith in a crash, and the market does. Schumer intentionally rocked that faith, with predictable results, which had a predictable influence on the election. Shorting only bolstered that impression. After all McCain had been repeatedly equated an the third coming of 'W', and it was all "Bush's Fault".