Credit Seizure
Equity markets are rallying today, in anticipation of a bailout getting done later in the week. Here is a post from the Wall Street Journal's MarketBeat blog stating that the credit markets are still not responding. I guess credit markets trade on action, not anticipation or expectations. Here is a sobering section from the post:

In short, credit is frozen, in part because institutions are hoarding liquidity for the end of the quarter. Monday’s Epic Fail on Capitol Hill would seem to be hurting too — except credit was worsening even before the $700 billion bailout bill died, notes Brian Reynolds, chief market strategist at WJB Capital.

Need more geeky proof just how little trust is around? The three-month Libor/OIS spread — which compares the rate at which banks are prepared to lend to each other to the expected benchmark interest rate set by the Fed — widened to a record 246.75 basis points from around 218 basis points Monday. And it isn’t just Wall Street. The commercial paper market, where companies raise short-term financing, also felt the pressure of tightening conditions. One trader at a primary dealer said volumes are holding up around Monday’s levels, but overnight rates on asset-backed commercial paper jumped to 6% to 7.5% from 2% for better-rated companies on Monday. It isn’t helping that today is the last day of the third quarter, bringing banks’ efforts to get their books in order to a head.

I wish there was a readily accessible way to view spreads because they will show the way out of the immediate credit crisis.

Just Thinking...
Wachovia has a loan on Wells Timberland's lone timber property. It's a mezzanine loan (that this blog has chronicled) that needs to be down to $60 million (from $90 million at the end of August) by mid-October, or the whole amount is due. I am curious how Wachovia's failure (Citigroup took over its retail bank business this morning) will impact any negotiations on the loan. Here is an interesting section from a Wall Street Journal article on Citi's takeover:

Midday Sunday, Mr. Kovacevich dropped a bombshell. Wells Fargo had developed concerns about the health of one of Wachovia's loan portfolios. Unless Wachovia could convince it otherwise, Wells Fargo wouldn't be willing to pay any more than $10 a share.

Wachovia's advisers were surprised because the portfolio in question was smaller than many of its toxic mortgage portfolios and didn't have any obvious red flags.

For the next four hours, Wachovia's team tried to ease his concerns, but Mr. Kovacevich kept repeating: "It's not my call, it's our loan people." Behind the scenes, Wachovia's advisers began to hear from regulators that Wells Fargo was getting cold feet.

I wonder what was in that portfolio of loans that gave Wells Fargo pause, especially since they "didn't have any obvious red flags."

Rethinking The Bailout
I just saw this via The Atlantic Magazines Voices (blogs) and Ross Douthat. American's opposition to the bail out is falling dramatically. Nothing like two bank failures and an 8% drop in the Dow to make people see that it's as much a bailout of Main Street as Wall Street.

What Now?
I am not sure, which is kind of a scary thought. I think some deal gets done later in the week - hopefully not before another bank failure. Congress is playing CYA. In interviews on TV and speeches on the floor and in committees, it seems that many congressmen do not understand the severity of the situation, which is why the CYA vote makes sense. As an example, I just received an email that listed how each congressman voted, and Bob Filner (D) voted No. He is from south San Diego, which has more subprime mortgages than in any part of the San Diego County. This bill should help homeowners, so I see no reason why this guy voted against this bill. Despite the rhetoric on both sides of the aisle, congressmen put their personal interest first and the country second. If non-financial firms start to fail, or start laying off people, or people start to evaluate their 401k statements, their opinion on the bill - and their congress person - will change - fast.

More Bailout
I had a long post on the bailout that was just waiting for its passage. I will hold off on it. I think the bailout is needed. As the smart guys (no snark) are saying on CNBC, it is important to watch the credit markets not the equity markets. The equity markets are tanking, as the constant Dow Jones ticker on CNBC reminds, but the yields on Treasuries show the real stress in the financial markets.

I am hearing commentators on CNBC state that congressmen (Democrats and Republicans both) voted against the bill to keep their "careers" in politics. A career in politics is like a career as a professional athlete, and should be an oxymoron. A career in government, yes, but a career in politics, no. There should be term limits for all politicians.

Update: This post from Andrew Sullivan's website confirms my suspicions:

Nate Silver plucks out this data point:

Among 38 incumbent congressmen in races rated as "toss-up" or "lean" by Swing State Project, just 8 voted for the bailout as opposed to 30 against: a batting average of .211.

By comparison, the vote among congressmen who don't have as much to worry about was essentially even: 197 for, 198 against.

In the end, they were worried about re-election.

It's all about getting re-elected. Me first, country second. When Main Street realizes this is not a Wall Street bailout these feckless congressmen will wish they had voted for the plan.

AIG's Asset Dump
AIG is looking to sell assets to avoid its nationalization. Here is an article form the Financial Times. The article says AIG's airplane leasing business, International Lease Finance, could fetch $10 billion. I heard on CNBC before AIG's bailout that ILF could be worth $50 billion. Interesting revaluation.

I wonder what AIG is going to do with its approximately 10,000 independent financial advisors. One good thing about AIG collapsing is that its crappy ads are no longer on CNBC, at least I have not seen them.

Bailout
I guess the bailout is going to get done today - with a Congressional vote tomorrow or Saturday. Importantly, CNBC is reporting that the credit markets are reacting, albeit tentatively, in a positive manner on the assumption that the bailout will get done. This blog has stated before, and will continue to state, that the credit markets are the most important market to capital and business operations. If the bailout frees up credit it will be a success. My initial reaction is that the Government should make money on the distressed securities it acquires.

$.65 On The $1
That is what Bill Gross thinks the Government will pay for distressed mortgage debt. And he thinks it will be a good deal for the taxpayers. Here is an opinion he wrote in today's Washington Post. I agree with his assessment. I also think that when the price is set for these securities, other buyers will jump in the market and the cost to the Government may be less than is being advertised. I also think the calls for executive compensation, while populist, are missing the big picture.

Numb Nut
Some numb nut money manager on CNBC just said that the bailout will make taxes are double or triple over the next four years. What an idiot. No way taxes are going to increase that much. I would be surprised, if not shocked, if the Government does not make money on the distressed assets it's going to acquire. And, I bet the liquidation happens faster than expected. (The AIG deal is going to be a home run.) I agree with Hank Paulson's statement this morning that the cost of the bailout will be far less than the alternative.

Bailout
I am starting to think that a new RTC is what Wall Street wanted since this crisis started last year. I will post more, much more, on the bailout, but my initial reaction is that the Government will make money on its distressed assets and it will halt the slide in housing prices.

Paulson
I am sure happy that Hank Paulson is Treasury Secretary and not Paul O'Neill or John Snow. Paulson has Wall Street's respect and knows markets. Fed Chairman Ben Bernanke deserves credit, too. Bernanke is staying after November. It is time to ask who's on McCain's or Obama's short list for Treasury Secretary. I have said this before, Hank Paulson has been President Bush's best appointment by a wide margin

New RTC
CNBC's Charlie Gasparino is reporting that Hank Paulson is proposing a new RTC-type entity as part of a solution to the credit crisis. I guess when the Wall Street Journal's editorial page and Barney Frank agree on something the idea must have legs. Sen. Chuck Schumer is also going to spout some scheme, too. Gasparino just said he has had no confirmation from Treasury. My guess, and CNBC just agreed, is that Republicans want to do something quick, and the Democrats will want to wait until after the election. The initial market reaction has been positive.

AIG Loan
I was talking to a knowledgeable financial person yesterday, and he thinks the Government's loan to AIG is going to make the Government some big money. AIG has significant assets and stripping these out will easily repay the loan. I agree, and I think the loan will be repaid in less than two years, too. The loan terms show Hank Paulson's Wall Street savvy. He got a two-year loan at Libor plus 8.5%, and it controls management. What banker wouldn't like those terms. The Wall Street Journal has an article today on the unknown nature of the Government's loans and their profit potential.

TMI
There is just too much information happening now to make complete sense of what is going on in the financial markets. I don't think anyone has a complete handle on what is happening. So we are seeing panic selling. I think one thing can be said for sure. The credit default swap market is dead and gone. This was a cheap way for financial institutions to load up on risk and then off-load it under the guise that losses were insured. It skewered institutions' judgment and rendered risk management a farce. I am no insurance expert but it seems to me insurance is only as good as the insurer, and we have found out that the insurers are not that good. This, ultimately, is good for the market. Institutions that take risks should bear that risk. This leads to reasonable risk and appropriate spreads. Risk is good. Eventually proper risk management will return to the market, hopefully before it is too late.

CNBC Blogging
Some random thoughts watching CNBC:

• Richard Selby, senator from Alabama, does not get the crisis. He is worried about an $85 billion loan as a cost to taxpayers. No mention of the alternative - the cost to taxpayers of further collapse. And he is confusing AIG's insurance business with its Credit Default Swap business - too vary different businesses. He is against and RTC- like entity.
• Barney Frank (like the Wall Street Journal's editoral page) is advocating and RTC-like company to buy distressed assets.
• Maria Bartiromo is a Hank Greenberg homer.
• Rick Santelli knows what he is talking about.
• Many anchors are fanning money market fears, which is irresponsible.
• The market does not seem to like the AIG deal.
• Gold is soaring (up 10%) and Treasury yields are dropping (going to be good for housing). Falling prices and better mortgage terms are going to start helping the housing market.
• The Dow is nearing its levels when Bush took office.
• CDS focus is overblown becuase the market for CDS is so thinly traded.
  

Credit Default Swaps
I am not afraid to admit that I am not sure what they are, but I know they are some kind of insurance for financial firms that allow them to off put some of their risks. Unfortunately, not many others know what a credit default swap is or how to value one. The imploson of AIG's CDS exposure lead to AIG's takeover by the Government. CDSs are not traded and tied in large part to a firms' credit rating. When AIG's rating got cut it had to raise cash to cover its CDS requirements. There is no market for CDSs, so if a firm runs into trouble the market and ratings agencies have no have not clue about how to value the CDSs, and assume the worse.

Rick Santelli of CNBC, is making great points today. There needs to be market for CDSs. This would eliminate the need for regulation. This is a great idea. It would also get rid of the black box nature of many financial corporations' balance sheets. These black box financial statements have helped the current problems.

Fallout for TICs
The CMBS market for TIC transactions has been dead for nearly a year. It was the standard for the previous four years. After reading this article, I don't think the CMBS option for TIC deals will be available anytime soon. Here is a long quote describing the impact of Lehman's bankruptcy on the CMBS market:

Lehman's collapse was the most dramatic sign so far that the financial crisis sparked by residential real estate is spilling over into office buildings, strip malls, hotels and other commercial real estate. The firm was one of the most aggressive lenders on Wall Street, making whole loans, bridge loans and packaging debt into commercial mortgage-backed securities, or CMBS.

About $4.3 billion of Lehman's $30 billion portfolio consists of securities. The prospect of that getting liquidated sparked the latest selloff in the CMBS market, as evidenced by widening spreads between the benchmark U.S. Treasury notes and the CMBX, a credit-market index that tracks the value of the bonds.

Apartment-building investors also are likely to feel significant pressure to sell as Lehman unloads its debt and equity pieces of the $22 billion purchase of Archstone, the large multifamily company with buildings concentrated in Washington, D.C., California and New York City. For months, Archstone had tried to sell assets to reduce debt, but met mixed success. It resisted for months lowering its prices, even as buyers balked. It has sold some complexes but not as many as it hoped, according to a person familiar with Archstone.

Prices are now likely to soften. In markets with apartment buildings that compete with Archstone, "there is no question that if you need to sell assets, you will try to get ahead" of the Lehman selloff, said Jeffrey Spector, a real-estate analyst at UBS. "Every day that goes by there will be more pressure on pricing."

I think that while caution is warranted, the fear of a CMBS meltdown is overblown, at this point - unless the banks cause it. Most of the CMBS defaults have occurred in development projects and many of these were residential developments. My concern is that unwarranted fears by otherwise willing lenders will accelerate problems in the commercial real estate market. Many loans in CMBS portfolios will need to be refinanced over the next few years, and a reluctance on the part of lenders could put strong properties in jeopardy. Bankers need not be lemmings (oxymoron), but TIC sponsors better start looking for alternative financing sources.

Fed Steps in to Save AIG
Goldman and Morgan Stanley could not put together a $75 billion loan, so the Government steps in with an $85 billion loan to save AIG. I have read several articles on the loan but am still not clear what the end plan is for AIG. I am guessing its various business will be sold. AIG may need Hank Greenberg just to figure out what it owns.

The Fed and an Intervention
The Fed left interest rates unchanged, and at this point the market has reacted positively. The 10-year Treasury has been wild today. At one point it was below 3.30% and is now approaching 3.50%.

Hank Greenberg is trying save AIG. Kind of like a parent intervening to save a child. AIG's stock has been wild today, too.

Thoughts on a Wild Day
This has been an unbelievable few days. The next few look to be more of the same. Here are some thoughts:

• It is strange day when the Wall Street Journal's editorial page calls for a new Resolution Trust Corporation to takeover and liquidate troubled assets.
• Lehman looks like it may be bought after all, sort of. Barclay's is in advanced talks to buy the "good" assets and hire most of Lehman's employees. The "bad" mortgage assets will stay in the bankrupt Lehman shell company. (I wish the press would stop calling Lehman a 160-old firm. It merged with other firms in the 1970s and was acquired by American Express in the 1984 and only spun of again as an independent company in the early 1990s.)
• This blog has been hard on AIG over the years, and today it proved why. I wonder what Warren Buffet saw that he did not like. Lucky Goldman and JP Morgan Chase who Hank Paulson strong-armed into providing up to $75 billion in emergency credit. I guess this is financing to allow an orderly liquidation of AIG assets.
• The market was down 500 points, and a big chunk of the loss happened in the last hour (when the amount of financing AIG needed was made public). I would not have been surprised with a 1,000-point drop, but the end of the session was disturbing.
• Asian markets are horrible this morning.
• Oil is approaching $90. I guess that whole speculator argument, which I always thought was BS, was just that - BS.
• The dollar is tanking, too.
• The market is now expecting a Fed rate cut tomorrow, possibly as much 50 basis points. This will add downward pressure on the dollar. Falling oil prices have given the Fed breathing room on rates.

AIG
The market seems dependent on AIG (which is a scary thought). AIG is well off its lows and is trading above $6 (but still off 50%). CNBC just flashed that AIG just got a bridge loan from New York State (20 billion) and is in some kind of talks with Warren Buffet. Markets are amazing animals, in that Lehman's collapse has been priced into the market and it has already moved on to AIG.

Update, 9:50 am pst: From CNBC, Buffet is out of AIG talks. Fed has hired Morgan Stanley to examine AIG's books in preparation of a Fed loan. The loan will allow AIG time to liquidate assets.

Market Thoughts

• The market is only down about 300 points at just before 9:00 pst, and it's off its lows. I was expecting a bigger blood bath. I would not have been surprised with a much larger sell-off.
• AIG is off more than 70% and is trading below $4 per share. This is approaching bankruptcy levels. If the smart firms, like Lehman and Merrill, could not avoid bankruptcy or selling themselves, I can't see AIG, without the brain power of other Wall Street firms, surviving.
• The ten-year Treasury is below 3.50%. This is going to help housing, especially since Freddie's and Fannie's problems seem to have been solved.
• Oil is off about 4% to under $97 a barrell. This not only helps consmers, if price reductions stick, but will ease inflation pressure and allow the Fed flexibility in cutting interest rates.
• Speaking of the Fed, it was not expected to cut rates this week, but the market is now pricing in a 33% chance of a rate cut.

WOW!
Treasury secretary Paulson could not pull a rabbit out of his hat this weekend. I just heard on CNBC that Lehman filed bankruptcy, and AIG, if it does not get a huge Fed loan ($40 billion), will likely follow Lehman's path. The situation is very fluid, but Monday is going to be a wild day for global stock markets. I saw Alan Greenspan on ABC's This Week this morning and he said the current crisis is the worst financial crisis he has ever witnessed. He should know because his blind eye over the few years of his tenure is, in part, responsible for today's mess. Unfortunately, I think the problems today are going to lead to more regulation.

The Clock's Ticking
It's Sunday morning and the Lehman sale or breakup has not been resolved. The New York Times, Wall Street Journal and Financial Times are all reporting that talks are moving forward but that no buyer has emerged, but Barclay's appears to be the front runner. There is interest in Lehman's "good" assets, but the current plan has Lehman's $30 billion of "bad" assets being spread across various Wall Street firms. And here is the rub. The Wall Street firms are not willing to take on these "bad" assets (mostly real estate related) without Government assistance. This gaffe from the Financial Times may be the key:

Hank Paulson, Treasury secretary, has been adamant that no government money would be involved this time. The US authorities may offer other help, including flexibility on regulatory issues, such as treatment of private equity firms involved in a deal.

If the government loosens the regulatory constraints it may get the deal done. It may set a precedent and allow private equity firms and hedge funds to help banks. This reminds me of the saying "Be careful for what you wish for, you just may get it." If a deal is not done today, tomorrow is going to be a wild day across the world. The Asian markets will give us a preview if a deal is not done before they open.

P.G. Wodehouse
When the going gets tough, the tough turn to PG Wodehouse - well, at least I do. There has been so much bad and discouraging news lately that I am getting fatigued. A constant read of news and blogs - where I get a great deal of news - is draining. I enjoy P.G. Wodehouse and his Jeeves and Wooster characters. Wodehouse's writing is hilarious and clever. It is the perfect antidote for the ills of the market and the news cycle. Reading a Jeeves and Wooster story improves my mood and is good for several real laughs. When markets start crashing Bertie Wooster's antics are an enjoyable escape, and mentally restorative. I try to keep a collection of Wodehouse's Jeeves and Wooster stories within reach of my nightstand.

Blogging Bonanza
I have made numerous posts this week on the credit crisis. I am doing this because I believe this is the worst financial situation the US economy has seen since the Depression. The stock market crash of 1987 and the Dot Com crash of 2000 through 2002 were equity problems. And while those were painful, the current debt crisis has much larger ramifications. The deleveraging process is wiping out equity as borrowers sell and write-0ff assets to meet credit requirements. The entire global economy operates on credit and without it the global economy will slow. Equity builds wealth, but day-to-day business runs on credit. If credit is permanently altered, so to will long-term wealth accumulation through equity. The next few weeks are the key to the credit crisis - resolution or implosion - and will set the tone for the future of financial markets for at least the next five to ten years.

No Bailout, But....
The Fed and Treasury are not going to bailout Lehman with taxpayer money, but they are doing everything else to try to save it, or at least get a buyer for it that will minimize the market impact. New York Fed President, Timothy F. Geithner, along with Hank Paulson and Christopher Cox (head of the SEC) convened a meeting this afternoon with Wall Street's largest banks, including Goldman Sachs, JP Morgan, Morgan Stanley, Citigroup and Merrill Lynch, where:

Mr. Geithner told the participants that an industry solution was needed, no matter what, and that it was not about any individual bank, according to two people briefed on the meeting but who did not attend. They said he told them that if the industry failed to solve the problem their individual banks might be next.

The Fed told the bankers to rescue Lehman and develop a plan to end the credit crisis. A link here, here, and here describe the meetings in further detail. All three articles describe the talks as similar to ones ten years ago to save the hedge fund Long Term Capital Managment. I think this is significantly different (and not in a good way), and the articles touch on this, in that Lehman is in the same business as the other bankers, not a credit client like LTCM. The bankers then had a common interest, now many may have a self interest or survival interest that might supersede the common interest.

The credit crisis is entering a key phase and the next few weeks hold the key. If Lehman and AIG go away I am not sure what it means for Wall Street in the short and long term, but it is not good.

AIG - The New Lehman
AIG's stock is off nearly 30% today and is trading below $13 per share.

Update: AIG closed just above $12 and is holding a conference call Monday to discuss asset sales.

No Fed Bailout for Lehman
It looks like the government is not going to bailout Lehman. The markets have not tanked in response, which is also probably playing into the government's decision.

Echo Chamber
The Wall Street Journal today echos my concerns from last night. The government's attempts to stop the credit crisis have not stopped it, and its options are shrinking. Here is a long segment from the article detailing what the government is up against:

U.S. officials are not powerless to confront the crisis. But they are far more constrained than they were a year ago, after taking a series of steps to bolster financial markets, including slashing interest rates.

The Fed now has facilities in place to provide short-term funding to firms such as Lehman if it runs into a liquidity crisis. As of Wednesday, no firms had used the Fed's lending facility for investment since late July.

"A number of markets remain disrupted and illiquid," the Fed's Mr. Kohn said Thursday. "But I believe that they would have been even more illiquid and the risk of disruption runs even greater without our various facilities."

Doing more could lead to other problems. Fed officials are wary of pushing short-term interest rates lower. At 2%, the federal-funds rate is 3.25 percentage points lower than it was a year ago, and looks likely to stay on hold because the Fed worries that more rate cuts would worsen inflation. What's more, other interest rates, such as mortgage rates, remain elevated as previous rate cuts have been counteracted by the force of the credit crunch. It's not clear that further cuts would have much effect in bringing down other rates.

Officials are also acutely aware of the problem of "moral hazard." Bailing out too many firms, the reasoning goes, would encourage more risk taking in the future. That makes officials reluctant to be seen as rescuing another institution. The Fed made a $29 billion loan to help J.P. Morgan take over Bear Stearns. It's not clear that it would be willing to do that for another firm.

Treasury Secretary Henry Paulson has said that institutions must be allowed to fail and that markets can't expect the government to lend money or support every time there's a crisis. "For market discipline to constrain risk effectively, financial institutions must be allowed to fail," Mr. Paulson said in a speech in July.

I think the problems lie in two areas - housing and credit. If the Fed lets interest rates fall this will help the housing market, which in part, will ease the deleveraging process. I think lower rates, at this point, out weigh inflation concerns because the falling dollar and declining oil prices should ease inflation. I have said this before, but any home loan today is going to be a heck of a lot better in terms of asset quality and borrower credit quality than most loans banks made from 2002 through 2007 .

The second part, credit, is institutions lending to other institutions, individuals and corporations. The lemming mentality has inflicted the financial world. The world's business runs on credit, much of it short-term. Banks and other credit sources have constrained the credit process. The inability to rollover short-term debt, or get other sources of credit, is and will have profound impacts on the economy. This was proved in the whole auction rate debacle when banks suddenly stopped rolling over a credit facility used by many municipalities. It made no sense. While I don't see a return of the free flowing credit, some level of normalcy would help ease the credit crisis.

More Lehman
It looks like the Treasury's and Fed's assist to Lehman won't be a bailout or involve taxpayer money. They seem to be playing the role of facilitator.

Feds Helping Lehman
The Washington Post is reporting that the Fed and Treasury are helping Lehman Brothers sell itself. This blog does not normally post breaking news, but I find this surprising. After bailing out Freddie Mac and Fannie May, I thought the Fed was going to let the market take care of Lehman. I guess not. In its typical late week into weekend fashion, Fed and Treasury:

officials are hoping a deal will be in place this weekend before Asian markets open on Monday, according to sources familiar with the matter.

Hopefully this will help markets, but one has to wonder how many more tricks the Fed and Treasury have up their sleeves. The presidential candidates need to stop worrying about what pig is wearing lipstick and start talking about financial markets that may soon start to mirror Fannie, Freddie, Bear and now Lehman.

Buffet Bets Against Banks and Housing
Here is a below the fold article from the front page of today's Wall Street Journal's Money and Investing section. It states that a Berkshire Hathaway subsidiary will stop giving deposit insurance to banks above FDIC levels. I am surprised this news did not get more air play today. Buffet is clearly saying that bank failures are going to increase and this is a direct result of a housing market that continues to deteriorate. Investors should note Buffet's bearish stance on banks and housing.

Fannie and Freddie
I will be the first to admit that I am not sure of the full ramifications of the Federal takeover of the two mortgage giants. I do know that it is huge news. And I do know that the next Presidential administration and Congress will be left to fix the two firms, if there is anything left to fix. (It does not give me comfort having politicians of any political party involved.) My first impression is that if the takeover lowers mortgage rates it may not be such a bad thing given the state of the housing market. If lower rates spur home buying that will be good, too, because any loans made today will likely be of higher quality in terms of borrowers and asset valuations than loans that are going bad on Freddie's and Fannie's books. Whether this takeover is good or bad won't be known for at least six to nine months. The market's reaction (up and down) shows it has not quite figured out the takeover either.

Hedge Fund Implosions
The Ospraie commodity-based hedge fund closed earlier this week and markets today were roiled, in part, by rumors surrounding another hedge fund. It is strange that despite the artificial increase in commodity prices, "smart" money was still fooled. The commodity bull market was a combination of speculation, a commodity bubble and a weak dollar. How could commodities continue to rise when the whole global economy is slowing. Even a causal observer of the economy could see that a continued increase in commodity prices made no sense. Prices are ultimatey demand driven, and when demand drops so do prices. Something had to give, and it did. But still, some of the "smart" money got caught on the wrong side of commodity bets.