A Week Wall Street Will Never Forget

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David Weidner's Writing on the Wall

Feb. 15, 2011, 12:01 a.m. EST

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By David Weidner, MarketWatch

NEW YORK (MarketWatch) "” Es war eine Woche die die Wall Street so schnell nicht vergessen.

Sorry, got a little swept up in Deutsche Boerse AG's looming acquisition of the New York Stock Exchange. What I meant to say in English was that it was a week Wall Street won't soon forget.

Reuters Das exchange?

From potential exchange mergers to the Treasury Department's long-awaited report on Fannie Mae /quotes/comstock/11k!fnma (FNMA 0.50, +0.06, +12.30%)   and Freddie Mac /quotes/comstock/11k!fmcc (FMCC 0.53, +0.05, +10.23%) , don't be surprised if the past seven days are remembered as a pivotal point in the history of Wall Street, a watershed moment when the last ebbs of the financial crisis receded behind a new wave of speculation and exuberance. Read about the Deutsche Boerse's potential takeover of the NYSE. Read full story on Treasury Department's plan for Fannie and Freddie.

It began Feb. 9, when the market was still digesting a $3.2 billion merger announcement by the London Stock Exchange /quotes/comstock/23s!e:lse (UK:LSE 900.00, -30.00, -3.23%)  and Toronto Stock Exchange /quotes/comstock/11t!e:x (CA:X 40.65, -0.64, -1.55%) .

Not to be outdone, the Deutsche Boerse /quotes/comstock/11e!fdb1 (DE:DB1 60.08, -1.27, -2.07%)   said it was in talks to take a majority stake in NYSE Euronext Inc. /quotes/comstock/13*!nyx/quotes/nls/nyx (NYX 38.20, -1.25, -3.17%) .

/quotes/comstock/13*!nyx/quotes/nls/nyx NYX 38.20, -1.25, -3.17% /quotes/comstock/11i!dboey DBOEY 8.13, -0.13, -1.57%

The NYSE deal is more than a blow to our collective national pride. It reflects the stock exchange's inability to modernize and capture the higher premium derivatives trading that has fueled growth at the German exchange and at smaller U.S. rivals, including CME Group Inc. /quotes/comstock/15*!cme/quotes/nls/cme (CME 292.27, -10.30, -3.40%)  and CBOE Holdings Inc. /quotes/comstock/15*!cboe/quotes/nls/cboe (CBOE 26.65, -1.19, -4.27%) .

On the macro level, the deal reflects a turning of the tide in terms of financial might. Europe, especially Germany, is ascendant, while U.S. financial prowess is no longer the gold standard.

It's not a stretch to see how the financial crisis set the stage for this deal. Battered U.S. companies lost trillions in value during the crisis. NYSE shares fell 50% since the start of 2008, while Deutsche Boerse shares held even.

The NYSE, without the muscle of a strong stock price, became an involuntary target, much like Anheuser-Busch succumbing to InBev's /quotes/comstock/13*!bud/quotes/nls/bud (BUD 55.01, +0.03, +0.05%)  overtures in 2008.

The end of homeownership for all

Two days later, the Treasury Department unveiled a white paper that aimed to tackle a lingering problem from that crisis: Fannie Mae and Freddie Mac, the government-sponsored entities that have absorbed $151 billion in taxpayer dollars, easily the lion's share of losses from the $560 billion paid out in bailouts. (Banks have returned $235 billion.)

The Treasury has proposed winding down Fannie and Freddie and returning the business of home loans to banks and private investors, a process that could take several years.

$( function() { embedPlayerByVideoId('{2AB8C81F-BEA8-4E4B-AC8E-7EF65AC3628A}', 'video_2AB8C81F-BEA8-4E4B-AC8E-7EF65AC3628A', '162', '287'); }); Madigan on Facebook and Egypt

Comedian Kathleen Madigan talks with columnist David Weidner about her trips to the Middle East, what caused the financial crisis and why China isn't a threat to our economy.

Losing Fannie's and Freddie's appetite for mortgages will also change the loan market in two ways. First, it will make big banks even more essential to the financial system "” in other words: bigger when it comes to too-big-to-fail. Second, mortgages will become more expensive and harder to come by for many borrowers. Read full story on proposed wind-down of GSEs.

The second part is a game-changer. Losing government support of the mortgage markets reverses a half-century of Washington policy that began with post-World War II efforts to make homeownership accessible.

Again, it's the public paying for the sins of big finance.

Nothing new there, but the loss of an American financial icon and the promise of homeownership for almost everyone? That's history, folks.

It's true that the past three years have presented us a lot of history. But the end of U.S. supremacy in the financial world, as the NYSE deal codifies, and the Treasury's admission in calling government support of the mortgage markets a failed experiment "” those are two seismic events that will reshape how the world sees us and how we see ourselves.

American financial might is being supplanted by Europe and China. The coming American generations will lose the benefits their predecessors enjoyed.

It all happened this week when we kissed it auf wiedersehen.

David Weidner covers Wall Street for MarketWatch.

Add Comment › · Recommend (5) · Post: Alert Email Print More David Weidner's Writing on the Wall Feb. 8, 2011 Meredith Whitney's muni-bond panic Feb. 1, 2011 Now it's up to Wall Street Jan. 25, 2011 Keep the "?porn' standard in the Volcker rule Jan. 11, 2011 What if your mom worked on Wall Street? Jan. 4, 2011 Why you shouldn't "?like' Goldman's Facebook deal Explore related topics Banks Tobacco Fannie Mae Freddie Mac London Stock Exchange Group Plc TMX Group Inc. Comments Screener About David Weidner

David Weidner is the Wall Street columnist for MarketWatch. He formerly covered M&A and financial services at The Daily Deal, American Banker and Dow Jones. He writes the Writing on the Wall column which appears Tuesday on MarketWatch and Thursdays on WSJ.com. He also is a regular contributor to the News Hub.

First Take Sirius finds a reason for some optimism

Sirius XM Radio should be optimistic about its subscriber growth, but the satellite-radio provider needs to watch out for Pandora, writes Jon Friedman.

29 min ago1:51 p.m. Feb. 15, 2011

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"DB-NYSE Nachtmare on Wall Street. http://www.marketwatch.com/story/db-nyse-its-even-worse-than-we-thought-2011-02-15" 10:57 a.m. EST, Feb. 15, 2011 from davidweidner

"Das exchange & auf wiedersehen American Dream http://bit.ly/gqdsCn" 5:28 a.m. EST, Feb. 15, 2011 from davidweidner

"David Weidner's Writing on the Wall: A week Wall Street won't forget: Don't be surprised if the past seven days ... http://bit.ly/h1uAl1" 12:25 a.m. EST, Feb. 15, 2011 from davidweidner

"Why is Apple $AAPL going with a lower-cost #iPhone? @Kelly_Evans and I discuss. http://on.wsj.com/ijzrv0" 10:01 a.m. EST, Feb. 14, 2011 from davidweidner

"My interview with the very funny @kathleenmadigan is finally up. On Egypt: this is what happens when you shu"¦ (cont) http://deck.ly/~nrGJJ" 7:51 p.m. EST, Feb. 12, 2011 from davidweidner

/quotes/comstock/11k!fnma Fannie Mae (FNMA) /marketstate/country/US The market is open2:19:59 pm The market is closed2:19:59 pm $ 0.50 Change +0.06 +12.30% Volume 27.17m Real time quotes var embeddedchart494255360Chart = new EmbeddedChart('#embeddedchart494255360', NormalChartStyleNoDecimals, 190, 90, '1dy', '5mi', null, null, null, 'US:FNMA'); jQuery.data($('#embeddedchart494255360').get(0), 'embeddedchart', embeddedchart494255360Chart); Add to portfolio FNMA Find a Broker Create alert /quotes/comstock/11k!fmcc Freddie Mac (FMCC) /marketstate/country/US The market is open2:19:59 pm The market is closed2:19:59 pm $ 0.53 Change +0.05 +10.23% Volume 11.00m Real time quotes var embeddedchart1051625591Chart = new EmbeddedChart('#embeddedchart1051625591', NormalChartStyleNoDecimals, 190, 90, '1dy', '5mi', null, null, null, 'US:FMCC'); jQuery.data($('#embeddedchart1051625591').get(0), 'embeddedchart', embeddedchart1051625591Chart); Add to portfolio FMCC Find a Broker Create alert /quotes/comstock/23s!e:lse London Stock Exchange Group... (LSE) /marketstate/country/UK The market is open2:19:59 pm The market is closed2:19:59 pm 900.00 p Change -30.00 -3.23% Volume 2.25m Real time quotes var embeddedchart1057350020Chart = new EmbeddedChart('#embeddedchart1057350020', NormalChartStyleNoDecimals, 190, 90, '1dy', '5mi', null, null, null, 'UK:LSE'); jQuery.data($('#embeddedchart1057350020').get(0), 'embeddedchart', embeddedchart1057350020Chart); Add to portfolio uk:LSE Find a Broker Create alert /quotes/comstock/11t!e:x TMX Group Inc. (X) /marketstate/country/CA The market is open2:19:59 pm The market is closed2:19:59 pm $ 40.65 Change -0.64 -1.55% Volume 407,082 Real time quotes var embeddedchart1207233592Chart = new EmbeddedChart('#embeddedchart1207233592', NormalChartStyleNoDecimals, 190, 90, '1dy', '5mi', null, null, null, 'CA:X'); jQuery.data($('#embeddedchart1207233592').get(0), 'embeddedchart', embeddedchart1207233592Chart); Add to portfolio ca:X Find a Broker Create alert /quotes/comstock/11e!fdb1 Deutsche Boerse AG (DB1) /marketstate/country/DE The market is open2:19:59 pm The market is closed2:19:59 pm â?¬ 60.08 Change -1.27 -2.07% Volume 34,801 Real time quotes var embeddedchart1737172126Chart = new EmbeddedChart('#embeddedchart1737172126', NormalChartStyleNoDecimals, 190, 90, '1dy', '5mi', null, null, null, 'DE:DB1'); jQuery.data($('#embeddedchart1737172126').get(0), 'embeddedchart', embeddedchart1737172126Chart); Add to portfolio de:DB1 Find a Broker Create alert /quotes/comstock/13*!nyx/quotes/nls/nyx NYSE Euronext Inc (NYX) /marketstate/country/US The market is open2:19:59 pm The market is closed2:19:59 pm $ 38.20 Change -1.25 -3.17% Volume 17.14m Real time quotes var embeddedchart1797581953Chart = new EmbeddedChart('#embeddedchart1797581953', NormalChartStyleNoDecimals, 190, 90, '1dy', '5mi', null, null, null, 'US:NYX'); jQuery.data($('#embeddedchart1797581953').get(0), 'embeddedchart', embeddedchart1797581953Chart); Add to portfolio NYX Find a Broker Create alert /quotes/comstock/15*!cme/quotes/nls/cme CME Group Inc (CME) /marketstate/country/US The market is open2:19:59 pm The market is closed2:19:59 pm $ 292.27 Change -10.30 -3.40% Volume 1.60m Real time quotes var embeddedchart1240477547Chart = new EmbeddedChart('#embeddedchart1240477547', NormalChartStyleNoDecimals, 190, 90, '1dy', '5mi', null, null, null, 'US:CME'); jQuery.data($('#embeddedchart1240477547').get(0), 'embeddedchart', embeddedchart1240477547Chart); Add to portfolio CME Find a Broker Create alert /quotes/comstock/15*!cboe/quotes/nls/cboe Cboe Holdings Inc (CBOE) /marketstate/country/US The market is open2:19:59 pm The market is closed2:19:59 pm $ 26.65 Change -1.19 -4.27% Volume 909,360 Real time quotes var embeddedchart1266693683Chart = new EmbeddedChart('#embeddedchart1266693683', NormalChartStyleNoDecimals, 190, 90, '1dy', '5mi', null, null, null, 'US:CBOE'); jQuery.data($('#embeddedchart1266693683').get(0), 'embeddedchart', embeddedchart1266693683Chart); Add to portfolio CBOE Find a Broker Create alert /quotes/comstock/13*!bud/quotes/nls/bud Anheuser-Busch Inbev Spn ADR (BUD) /marketstate/country/US The market is open2:19:59 pm The market is closed2:19:59 pm $ 55.01 Change +0.03 +0.05% Volume 720,649 Real time quotes var embeddedchart884247091Chart = new EmbeddedChart('#embeddedchart884247091', NormalChartStyleNoDecimals, 190, 90, '1dy', '5mi', null, null, null, 'US:BUD'); jQuery.data($('#embeddedchart884247091').get(0), 'embeddedchart', embeddedchart884247091Chart); Add to portfolio BUD Find a Broker Create alert Featured Commentary » Next: John Prestbo's Indexed Investor

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Writing on the Wall

david weidner A week Wall Street won't forget Don't be surprised if the past seven days represent a pivotal point in the history of Wall Street, when the last ebbs of the financial crisis receded. 128202 1238875200000 1270411200000

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