Bloomberg is report­ing, and Drudge is blar­ing, that Ital­ian Prime Min­is­ter Silvio Berlus­coni dis­cussed a plan by the world’s polit­i­cal lead­ers to sus­pend the finan­cial mar­kets and “rewrite the rules of inter­na­tional finance.” Which would obvi­ously be rather fright­en­ing, on many levels, if it were true. But as far as I can tell, it simply isn’t.

Lay this one at the feet of Il Coglione him­self. Five min­utes after he spoke of the sup­posed plan, he was forced to admit: “Someone advanced the hypoth­e­sis of rewrit­ing the rules. We were only talk­ing about it, but there’s noth­ing yet.”

An hour later, Pier­luigi Bersani, Italy’s shadow min­is­ter of the econ­omy, said, “We already have enough prob­lems with­out Berlus­coni adding others. To speak of sus­pend­ing the mar­kets, and then, after just three min­utes, to con­fus­edly take back what you just said only adds uncer­tainty to uncertainty.”

And sure enough, it turns out that by “someone” Berlus­coni meant “someone on the radio”:

“I heard it on the radio,” Berlus­coni said about an hour after his ini­tial com­ments, his spokesman con­firmed. “The hypoth­e­sis wasn’t put for­ward by any leader, includ­ing myself.”

This morn­ing, White House spokesman Tony Fratto denied that any such plan had ever been discussed.

So, those tiny bright spots I men­tioned this morn­ing? Not so much.

From Nouriel Roubini, who titles his post “The world is at severe risk of a global sys­temic finan­cial melt­down and a severe global depression”:

The U.S. and advanced economies’ finan­cial sys­tems are now headed towards a near-​term sys­temic finan­cial melt­down as day after day stock mar­kets are in free fall, money mar­kets have shut down while their spreads are sky­rock­et­ing, and credit spreads are surg­ing through the roof. There is now the begin­ning of a gen­er­al­ized run on the bank­ing system of these economies; a col­lapse of the shadow bank­ing system

And from Bloomberg:

Things on the eco­nomic front still look very bad out there, what with a stock market in free fall, Ice­land on the verge of bank­ruptcy, and, oh, did you hear that we’re pump­ing another $38 bil­lion into AIG? It’s all ugly, and it’s prob­a­bly going to get worse and stay bad for some time.

But there’s a few little tiny bits of good news that Yves Smith res­cued from the rubble yes­ter­day.

Where are we now?

+ Reports off the Hill say that a deal is done. $700B total, greater Con­gres­sional over­sight, restric­tions on exec­u­tive pay, no bank­ruptcy law changes, no money for afford­able hous­ing, the (use­less) House GOP insur­ance pro­posal stays in but only as an option, and, most impor­tantly, the gov­ern­ment gets equity war­rants in case the toxic assets really are as bad as every­one fears. Obama and McCain are both on board.

+ Paul Krug­man and Brad DeLong are now openly favor­ing Swedish-​style nation­al­iza­tion instead of the Paul­son plan–which, for the record, Yves Smith has been push­ing since the begin­ning–even though Krug­man, at least, rec­og­nizes that a nation­al­iza­tion plan is polit­i­cal poison until at least after the election.