Space Exploration Technologies Corp. (SpaceX) announces that Flight 4 of the Falcon 1 launch vehicle has successfully launched and achieved Earth orbit. With this key milestone, Falcon 1 becomes the first privately developed liquid fuel rocket to orbit the Earth.

"This is a great day for SpaceX and the culmination of an enormous amount of work by a great team," said Elon Musk, CEO and CTO of SpaceX. "The data shows we achieved a super precise orbit insertion—middle of the bull's-eye — and then went on to coast and restart the second stage, which was icing on the cake."

Falcon 1 Reaches Orbit!

Europe's unmanned space cargo vehicle successfully reentered the atmosphere over the south Pacific Ocean Sept. 29, breaking up into dozens of fragments that fell into the ocean along a pre-selected path that had been cleared of maritime traffic, European Space Agency (ESA) officials said.

SPACE.com -- European Spaceship's Death Plunge Caught on Film

Video showing the destructive re-entry of Jules Verne ATV at the end of a successful mission to the International Space Station. The re-entry took place over an uninhabited area of the Pacific Ocean after two deorbit burns.

A manmade shooting star. Strangely beautiful.

ESA Portal - Jules Verne re-entry video

JPMorgan Chase & Co., the third- biggest U.S. bank by assets, agreed to acquire the deposits of Washington Mutual Inc. as the thrift was seized by regulators in the biggest bank failure in U.S. history.

Bloomberg.com: Worldwide

One of the many concerns expressed on Capitol Hill this week about the Treasury Department’s $700 billion rescue plan was how to keep the Wall Street firms that helped to create the crisis from making a killing if they are hired to help contain it.

William H. Gross, the manager of the country’s largest bond mutual fund, has a solution for that: He is offering to do it free.

“We have a large and brilliant staff that can analyze and has analyzed subprime mortgages that can help the Treasury out,” Mr. Gross, the co-chief investment officer for Pacific Investment Management Company, said Tuesday in an interview at the company’s headquarters here. “And I’d even be willing to say that if the Treasury wanted to use our help, it would come, you know, free and clear as long as every other firm would do the same.”

Managing the Bailout - He’d Do It for Nothing - NYTimes.com

So where were the quants?

That’s what has been running through my head as I watch some of the oldest and seemingly best-run firms on Wall Street implode because of what turned out to be really bad bets on mortgage securities.

Before I started covering the Internet in 1997, I spent 13 years covering trading and finance. I covered my share of trading disasters from junk bonds, mortgage securities and the financial blank canvas known as derivatives. And I got to know bunch of quantitative analysts (”quants”): mathematicians, computer scientists and economists who were working on Wall Street to develop the art and science of risk management.

They were developing systems that would comb through all of a firm’s positions, analyze everything that might go wrong and estimate how much it might lose on a really bad day.

We’ve had some bad days lately, and it turns out Bear Stearns, Lehman Brothers and maybe some others bet far too much. Their quants didn’t save them.

I called some old timers in the risk-management world to see what went wrong.

I fully expected them to tell me that the problem was that the alarms were blaring and red lights were flashing on the risk machines and greedy Wall Street bosses ignored the warnings to keep the profits flowing.

Ultimately, the people who ran the firms must take responsibility, but it wasn’t quite that simple.

In fact, most Wall Street computer models radically underestimated the risk of the complex mortgage securities, they said. That is partly because the level of financial distress is “the equivalent of the 100-year flood,” in the words of Leslie Rahl, the president of Capital Market Risk Advisors, a consulting firm.

But she and others say there is more to it: The people who ran the financial firms chose to program their risk-management systems with overly optimistic assumptions and to feed them oversimplified data. This kept them from sounding the alarm early enough.

Top bankers couldn’t simply ignore the computer models, because after the last round of big financial losses, regulators now require them to monitor their risk positions. Indeed, if the models say a firm’s risk has increased, the firm must either reduce its bets or set aside more capital as a cushion in case things go wrong.

In other words, the computer is supposed to monitor the temperature of the party and drain the punch bowl as things get hot. And just as drunken revelers may want to put the thermostat in the freezer, Wall Street executives had lots of incentives to make sure their risk systems didn’t see much risk.

“There was a willful designing of the systems to measure the risks in a certain way that would not necessarily pick up all the right risks,” said Gregg Berman, the co-head of the risk-management group at RiskMetrics, a software company spun out of JPMorgan. “They wanted to keep their capital base as stable as possible so that the limits they imposed on their trading desks and portfolio managers would be stable.”

So where were the quants? How Wall Street Lied to Its Computers...

PERSONAL HISTORY about the writer’s years as an aspiring composer in San Francisco. In 1972, several months after he graduated from Harvard and completed one of his first musical compositions (“Heavy Metal”), the writer and his new wife, Hawley, moved to the San Francisco Bay area. The writer’s plan was to live as a proletarian worker by day and an avant-garde composer at night.

This was a great read, too bad the New Yorker can't be bothered to put it's content online.

Personal History: Sonic Youth: Reporting & Essays: The New Yorker

The Securities and Exchange Commission issued a temporary ban on short sales of 799 financial stocks on Friday, a move against traders who have sought to profit from the financial crisis by betting against bank shares.

S.E.C. Temporarily Blocks Short Sales of Financial Stocks - NYTimes.com

not enough, the federal government started to put in place on Friday a sweeping plan to restore confidence in the financial markets.

The actions began to get under way on Thursday with discussions between the Treasury, Federal Reserve and Congressional leaders on what could become the biggest bailout in United States history, a plan likely to authorize the government to buy distressed mortgages at deep discounts from banks and other institutions.

Stocks Surge as U.S. Acts to Shore Up Money Funds and Limits Short Selling - NYTimes.com

Satow interviews the above quoted former SEC director, and he spits out the blunt truth: The current excess leverage now unwinding was the result of a purposeful SEC exemption given to five firms.

You read that right -- the events of the past year are not a mere accident, but are the results of a conscious and willful SEC decision to allow these firms to legally violate existing net capital rules that, in the past 30 years, had limited broker dealers debt-to-net capital ratio to 12-to-1.

Instead, the 2004 exemption -- given only to 5 firms -- allowed them to lever up 30 and even 40 to 1.

Who were the five that received this special exemption? You won't be surprised to learn that they were Goldman, Merrill, Lehman, Bear Stearns, and Morgan Stanley. 

As Mr. Pickard points out that "The proof is in the pudding — three of the five broker-dealers have blown up."

I was sure that there was something like this lurking back a few years and sure enough, here it is.

The Big Picture | How SEC Regulatory Exemptions Helped Lead to Collapse