From the Washington Post….

Gasoline shortages hit towns across the southeastern United States this week, sparking panic buying, long lines and high prices at stations from the small towns of northeast Alabama to Charlotte in the wake of Hurricanes Gustav and Ike.

In Atlanta, half of the gasoline stations were closed, according to AAA, which said the supply disruptions had taken place along two major petroleum product pipelines that have operated well below capacity since the hurricanes knocked offshore oil production and several refineries out of service along the Gulf of Mexico.

Drivers in Charlotte reported lines with as many as 60 cars waiting to fill up late Wednesday night, and a community college in Asheville, N.C., where most of the 25,000 students commute, canceled classes and closed down Wednesday afternoon for the rest of the week. Shortages also hit Nashville, Knoxville and Spartanburg, S.C., AAA said.

Terrance Bragg, a chef in Charlotte, made it to work only because his grandfather drove from a town an hour away with a 5-gallon plastic container of fuel for him. Three of his co-workers called and said they couldn’t make it.

“I drove past nine or ten gasoline stations that were out of gas,” Bragg said. “I had my GPS up looking for any gas in the area, from the mom-and-pop places to the corporate gas stations. Nothing. They were all taped off.”

Liz Clasen-Kelly, associate director of a homeless assistance center in Charlotte, took the bus to work yesterday. On Wednesday night, she and her husband checked five stations that had no gas, passed a long line backed up onto the interstate highway and chose not to wait at an open gas station with 50 to 60 cars still lined up after 11 p.m.

From Forbes…

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

“It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.”

H/T Naked Capitalism

From the FDIC press release…

JPMorgan Chase acquired the banking operations of Washington Mutual Bank in a transaction facilitated by the Federal Deposit Insurance Corporation. All depositors are fully protected and there will be no cost to the Deposit Insurance Fund.

“For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks,” said FDIC Chairman Sheila C. Bair. “For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning.”

JPMorgan Chase acquired the assets, assumed the qualified financial contracts and made a payment of $1.9 billion. Claims by equity, subordinated and senior debt holders were not acquired.

This turned out a lot better then most people feared. The FDIC actually made money on this deal. But those who held shares or who had bonds from Washington Mutual were wiped out.

From the New York Times….

According to The A.P.Thursday, in the Roosevelt Room after the session, the Treasury secretary, Henry M. Paulson Jr., literally bent down on one knee as he pleaded with Nancy Pelosi, the House Speaker, not to “blow it up” by withdrawing her party’s support for the package over what Ms. Pelosi derided as a Republican betrayal.

“I didn’t know you were Catholic,” Ms. Pelosi said, a wry reference to Mr. Paulson’s kneeling, according to someone who observed the exchange. She went on: “It’s not me blowing this up, it’s the Republicans.”

Mr. Paulson sighed. “I know. I know.”

Why all the fear? I think the London Banker’s idea is plausible. He says…

The Fed is very close to being illiquid. That is the fear factor we are seeing at work, and the reason no one will discuss why the bailout is needed – only emphasise the urgency.

The Fed can always print money on a grand scale. But if it does this, the international funding that the US needs will stop. Thus, the Fed is limited in a very real way. And it is burning through its current balance sheet at a terribly fast pace. As Brad Setser says…

In the last two weeks — if I am reading the Federal Reserves’ balance sheet data correctly — the Fed has:

Increased “other loans” to the financial system by around $230 billion (from $23.56b to $262.34b);

Increased its “other assets” by about $80b (from $98.67b to $183.89b);

Increased the securities it lends out to dealers by $60b (from $117.3b to $190.5b);

That works out to the provision of something like $370b of credit to the financial system in a two week period. That may be a bit too high: the outstanding stock of repos felll by $40b (from $126b to $ 86b), leaving a $330b net change in these line items. But that is still enormous.

He sums this all up by saying…

This is a very real crisis. The Fed’s balance tells a story of extraordinary stress. I never would have expected to see the Fed lend out these kinds of sums over such a short-period.

But the question remains, is taping the world’s already quite generous central banks for another 700 billion dollars in funding really an option? The assumption behind the Paulson plan is that will not raise the interest rates the Federal government has to pay. But this is a dubious hope.

From Reuters…

BEIJING, Sept 25 (Reuters) – Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday.

What Chinese domestic banks have lent to American banks is nothing compare to what China’s central bank is lending to the US everyday. Besides, it is a little late to stop lending to US Banks.