Monthly Archives: June 2007

Were Some CDOs Tranches Losers From the Start?

James Hamilton of Econbrowser, in “CDOs: what’s the big deal?” weighs in on the question of what went wrong in the CDO market. He makes a point I haven’t seen stated as clearly anywhere else, namely, some CDO tranches may have been been likely to lose money from the get-go: The benign view of CDOs […]

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FT and WSJ on New Regulations on Subprimes

As readers may know, I sometimes find marked differences in how the Financial Times and the Wall Street Journal report the same story, with the FT typically doing a much better job. In this case, I was underwhelmed by both papers’ coverage, but together they conveyed some useful information. Federal banking regulators (including credit union […]

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More Backstory on the Bear Stearns Hedge Funds Meltdown

I’m a bit late to this article from Friday’s Financial Times, “Bear Stearns assured investors on leverage,” which gives some new information on the formation of the Enhanced Leverage Fund, the one that went into crisis first, and how it went pear shaped. Cioffi had the bad luck to not only have some trades fall […]

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Bear Hires Lehman Vice Chair Jeff Lane to Head Asset Management Division

In a move intended to restore confidence, Bear Stearns has sidelined former asset management head Richard Marin (he remains as an advisor) and has brought in Jeffrey Lane, vice chairman of Lehman, as his replacement. Ousting Marin was pretty much required, and on paper Lane has the right stuff (Lehman is a serious bond player, […]

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Now It’s Official: Rating Agencies Hiding Risks on Mortgage Bonds

There’s been plenty of discussion on this blog and elsewhere of the questionable role of rating agencies, particularly regarding collateralized debt obligations. Rating agencies are slow to downgrade weakening credits (if you are in the debt business, this is very old news), suffer from acute conflicts of interest in rating CDOs (they are a de […]

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Schizophrenia in the Financial Times on CDOs, Subprimes, and General Woefulness

OK, schizophrenia is a bit too strong a word, but it got your attention, right? “Dissonance” is closer to the mark, and differing points of view in a plugged-in, market-savvy paper like the Financial Times is an interesting sight to behold. Both stories address the same general topic, namely, whether the current mess in subprimes […]

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Class Warfare: Some Investors Oppose Rescuing Borrowers

A Wall Street Journal article, “Subprime: Point to Where It Hurts,” endeavors to clarify the issues in modifying loans to try to save defaulting mortgage borrowers. Previous stories have mentioned that the fact that most residential mortgages go into mortgage backed securities makes it harder to change terms than in the old days, when the […]

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More CDO Factoids: Who Owns ‘Em, Why They Are Hard to Value

Barry Ritholtz gave some helpful tidbits about CDOs on his blog, The Big Picture. The source is the Bloomberg magazine (unfortunately only for those with terminals can subscribe). From Ritholtz (quoting Bloomberg); “Worldwide sales of CDOs—which are packages of securities backed by bonds, mortgages and other loans—have soared since 2003, reaching $503 billion last year, […]

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UN: 50 Million Could Be Displaced by "Desertification" in 10 Years

The BBC website has this grim story on how climate change and unsustainable farming practices is projected to produce an increase in deserts, leading to mass migration. Sub-Saharan Africa and central Asia are worse affected, but parts of Australia and the American West are also drying out. From the BBC: Tens of millions of people […]

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Worries on Valuing "Repackaged Debt"

For those of you who are relatively new to the complexities involved in the pricing of collateralized debt obligations (CDOs), this Financial Times article, “Worries grow about the true value of repackaged debt,” gives a good overview. Since the article is lengthy, and the first part covers largely familiar ground, I’ve excerpted the second half. […]

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Martin Wolf on the Workings of the Finance Brain

Apologies for being a tad late on this item, an article by the Financial Times’ lead editorial writer Martin Wolf, “Risks and rewards of today’s unshackled global finance.” Power went down in parts of Manhattan today, which put a crimp in my schedule. So I will be briefer than I might otherwise be. I was […]

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Wal-Mart’s Imports Cost US Jobs

The concept that cheap imports result in job losses should be a no-brainer, but it is still greeted with considerable resistance in some circles. Let’s be clear on a few points: while open trade in theory creates benefits to all parties, the system we have isn’t open trade, but managed trade. Most other countries negotiate […]

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