Yea, do I walk through the valley of the shadow of debt, thy DoD and Fed staff are no comfort to me

Venture Funding May Fall This Year for First Time Since 2003

U.S. startup funding may drop in the third quarter, said Tracy Lefteroff, a managing partner at PricewaterhouseCoopers LLP, which does consulting work for venture capital firms.

he number of deals closing sank last month, and the aversion to risk is even spreading to clean-energy companies, one of Silicon Valley's hottest sectors since 2006, said Greg Blonder, a partner at Morgenthaler Ventures.

"Everyone I know has had their come-to-Jesus partners meeting," said Blonder, referring to sessions where people confront unpleasant truths. "This will create another hole in the market."

Asian Markets Hammered; Nikkei Loses 9.4%

A crisis of confidence weighed on Asian shares Wednesday with several indexes slumping to multiyear lows as investors worry about the impact on corporate earnings from the financial-sector upheaval and a slowing global economy.

"Everyone is looking for a silver bullet, but we just have to ride it out," said Adrian Vance, a broker at Hamilton Hindin Greene in New Zealand.

Japan's Nikkei 225 Stock Average plummeted 9.4% to close at a five-year low on deepening fears over the global financial crisis. The Nikkei has lost 24% in the last two weeks.

Falls accelerated as the day progressed with Hong Kong's key stock index diving nearly 8.2% to end at 1372.03 points. The stock market in Australia ended down 5% while South Korea lost 5.8%, closing at a two-year low. The Shanghai Composite ended 3% lower, while India's benchmark index was down 4.5% intraday.

Trading in Indonesia's stock market was suspended after the main index skidded 10.4% -- the second time this week it has fallen by more than 10%.

Europe’s massive sell off extended

European equity markets continued their sharp decline on Wednesday, with banks again bearing the brunt of the selling on capitalisation concerns.

Overall losses were exacerbated by the impact of falling commodity prices on resource stocks. Oil fell sharply, hitting $86 a barrel – a level not seen since early December last year.

”As signs grow that we are entering a synchronized global slowdown, we should see more decoupling [of commodities] from equities and a much sharper sell-off than what we have seen thus far,” said Edward Mier at MF Global.

Britain Announces Bank Bailout Worth Hundreds of Billions

As European leaders continued to clash over measures to ease the financial crisis, Britain announced a three-part multibillion-dollar bailout for its beleaguered banks, and Spain moved to mount a separate rescue of its own banking sector.

A statement from the British Treasury said at least $350 billion “will be made available to banks under the special liquidity scheme,” doubling the size of a credit line from the Bank of England established as the financial crisis began and designed to unlock frozen lending between banks.

Additionally, the British government pledged $87 billion in direct support for eight major banks.

The move amounted to a partial nationalization of some of those institutions. Minutes after the announcement, the British stock market fell by almost 5 percent.

Mr. Brown said there would be “strings attached and conditions to be met” by the banks. “We expect to be rewarded for the support we provide.” “Our stability and restructuring program is comprehensive, specific and breaks new ground,” Mr. Brown said. “This is not the American plan. Our plan is to buy shares in the banks themselves and therefore we will have a stake in the banks.”

“We are not simply giving money,” he said.

States Seek Federal Help

Though the federal government has taken extraordinary steps to lend money to corporations in the short-term markets, and to provide more money to banks, officials have been stymied over how to assist local governments because of their status as issuers of tax-exempt bonds.

A longstanding provision of the Internal Revenue Code bars the federal government from guaranteeing tax-exempt bonds. Officials are concerned that if the federal government helps states and others without Congressional action it could put their tax exemption at risk.

While officials seek a way around this obstacle, many local governments are running into severe cash squeezes.

California has the largest and most pressing problem. The state has told the Treasury Department it might need an emergency loan of up to $7 billion to pay its day-to-day bills in coming weeks, including those to school districts and municipal governments due on Oct. 29. Massachusetts has also reached out for help.

“It’s critical,” said Jeffrey L. Esser, executive director of the Government Finance Officers Association. “There are no buyers out there for the governments....

Forget Logic; Fear Appears to Have Edge

Anybody searching for cause-and-effect logic in the daily gyrations of the market will be disappointed — even if the overarching problem of a crisis of confidence in the global economy is now becoming clear.

Instead, the market has become a case study in the psychology of crowds, many experts say. In normal times, it runs on a healthy mix of fear and greed. But fear now seems to rule, with investors often exhibiting a Wall Street version of the fight-or-flight mechanism — they are selling first, and asking questions later.

“What’s happening is people are crawling into a bunker and pulling an iron sheet over their heads because they think the sky is falling,” said William Ackman, a prominent hedge fund manager in New York.

And that bunker is getting very crowded, so much so that some analysts are starting to suggest the markets are showing signs of “capitulation” — another term of art to describe what happens when even the bullish holdouts, the unflagging optimists, throw up their hands and join the stampede out of the market.

Fear can be seen at every turn — in headlines raising questions about another Great Depression, and in the crowds gathered around office televisions to track stocks or to parse the latest pronouncements from the Federal Reserve chairman, Ben S. Bernanke, or the Treasury secretary, Henry M. Paulson Jr.

Even James Cramer, the voluble and long-bullish host of an investing show on CNBC, advised investors to sell some stock during appearances on the “Today” show Monday and Tuesday mornings.

The opposite of capitulation, of course, is investing at the height of a bubble. One oft-cited sign of the housing market’s top: when dinner parties are dominated by stories about fast profits on flipped condominiums.

During the dot-com boom in the late 1990s, it seemed everybody and their grandmothers were piling into stocks. Now they are bailing out. Tuesday was the fourth consecutive day that the S.& P. 500-stock index registered a decline of 1 percent or more. The last time that happened was October 2002, when the index reached its lowest point during the bear market that started in 2000. The S.& P. is now down 36 percent from its peak a year ago, almost to the day, on Oct. 9, 2007.

Scientists who have studied the brain function have found that the amygdala, the part of the brain that controls fear, responds faster than the parts of the brain that handle cognitive functions, he said.

“Fear is a much stronger motivational force,” Mr. Lo added. “The loss of $1,000 has a much bigger impact than the gain of a $1,000.”

'Wasn't Us,' Former AIG Chiefs Say

On Tuesday former top executives at American International Group testified before the House Oversight Committee blaming everything but themselves for the company’s problems and subsequent bailout that cost taxpayers billions of dollars.

Maurice "Hank" Greenberg, the company's largest individual shareholder, who ran the company for more than four decades, canceled his appearance because of illness, but in written testimony he pointed fingers at his successors. Former CEOs Martin Sullivan and Robert Willumstad blamed accounting rules that forced AIG to take tens of billions of dollars in losses.

Sullivan, who ran the firm from 2005 until June of this year, also testified that the company’s bonus plan was amended to exclude unrealized losses, in effect protecting executives from millions of dollars in reversals. When lawmakers criticized Sullivan for urging AIG's directors to waive pay guidelines to win a $5.0 million bonus for 2007 — even as the company lost $5.0 billion in the fourth quarter of that year -- Sullivan countered that he was mainly concerned with helping other senior executives.

“We’re not getting any accountability,” said Peter Morici, a professor at the University of Maryland School of Business and Forbes.com columnist. “The executives get to go up there and make excuses but they still get to keep their money.”

It was these kinds of compensation structures that gave rise to the current financial crisis, said Morici, and will give rise to another mess in the future.