Fiscal policymakers can also promote stronger economic performance through the design of tax policies and spending programs. To the fullest extent possible, our nation’s tax and spending policies should increase incentives to work and to save, encourage investments in the skills of our workforce, stimulate private capital formation, promote research and development, and provide necessary public infrastructure. We cannot expect our economy to grow its way out of our fiscal imbalances, but a more productive economy will ease the tradeoffs that we face.

Finally, and perhaps most challenging, the country would be well served by a better process for making fiscal decisions. The negotiations that took place over the summer disrupted financial markets and probably the economy as well, and similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses. Although details would have to be negotiated, fiscal policymakers could consider developing a more effective process that sets clear and transparent budget goals, together with budget mechanisms to establish the credibility of those goals. Of course, formal budget goals and mechanisms do not replace the need for fiscal policymakers to make the difficult choices that are needed to put the country’s fiscal house in order, which means that public understanding of and support for the goals of fiscal policy are crucial.

* The MTA took the unprecedented move of setting its hurricane plan in motion, which calls for a complete shutdown of subways, trains and buses when sustained winds reach at least 39 mph.

* The mayor ordered the mandatory evacuation of nursing homes, care facilities for the elderly and hospitals in low-lying areas by 8 p.m. Friday.

* The MTA warned bridges could be closed for safety reasons due to high winds.

* More than 300 street fairs and other city permitted events scheduled for this weekend were cancelled.

Sino-Forest and certain of its officers and directors appear to have misrepresented some of its revenue and/or exaggerated some of its timber holdings by providing information to the public in documents required to be filed or furnished under Ontario securities laws which may have been false or misleading in a material respect contrary to section 122 or 126.2 of the Act and contrary to the public interest;

Sino-Forest and certain of its officers and directors including Chan appear to be engaging or participating in acts, practices or a course of conduct related to its securities which it and/or they know or reasonably ought to know perpetuate a fraud on any person or company contrary to section 126.1 of the Act and contrary to the public interest;

IT IS FURTHER ORDERED that pursuant to clauses 7 and 8 of section 127(1) of the Act that Chan, Ip, Hung, Ho and Yeung resign any and all positions that they hold as a director or officer of Sino-Forest or any other registrant and that they are prohibited from becoming or acting as director or officer of an issuer;

Berkshire’s investment in BAC reduces concerns over BAC’s liquidity/funding/confidence and capital to a lesser extent. These actions should also reduce some of the overhang for the group overall—as bank stocks have likely suffered from concerns surrounding a bank as big and as important as BAC. However, these actions don’t necessarily address the longer-term capital uncertainty at BAC, and underlying EPS power may prove to be much less than many expect.

Deal is costly and additional capital actions still a possibility

Since the preferreds are cumulative, starting in 2013, they will not count as Tier 1 capital (under the Collins amendment). This implies BAC will likely call the preferreds by the end of 2012—implying a cost of about 13% unannualized for just 16 months (plus the cost related to the warrants). It’s unclear whether these actions will address long-term capital concerns or merely act as a bridge to hopefully better macro times and a higher stock price (at which to issue common). And of course the cost of the warrants could also prove to be meaningful.

In a scenario of 0-1% GDP growth for the next 2 years, we estimate 2012 EPS of about $0.50 and 2013 of slightly less than $1.00. However, the $1.00 doesn’t assume any additional capital actions, no further business sales (we est. last week’s card actions reduces pre-provision earnings by $1.75b for example) and no longer-term negative impact to NIM from a likely recent rise in BAC’s funding costs. This implies that even the $1.00 of earnings power may be optimistic in this macro scenario.

Note that we estimate NIM could decline 20bps in 3Q/4Q11 vs. 2Q11 levels from BAC likely further boosting its asset liquidity and potentially terming out some borrowings/higher funding costs. That said, these could prove temporary and therefore we don’t include in our 2012/2013 downside estimates noted above.