Monthly Archives: November 2007

"Why banking is an accident waiting to happen"

Martin Wolf, the well respected lead economics editor of the Financial Times, turns to a favorite topic: why banks regularly get themselves in trouble. His answer: it’s “a risk-loving industry guaranteed as a public utility.” Privatizing gains and socializing losses, particularly if the employees share in that arrangement, is a formula for reckless behavior. Wolf […]

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Debt Market Problems Likely to Persist

While the Financial Times has a wealth of journalistic talent, one of its standouts is capital markets editor Gillian Tett. She reported on the signs of trouble in the credit markets when the world at large thought everything was hunky-dory. One of her many prescient pieces was an article in January that used the fact […]

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Another Judge Gets Tough With Bank on Foreclosures

The sighting of a robin does not make a spring, nor do the actions of four judges constitute a trend. Nevertheless, the fact that some courts are taking a harder look at foreclosure practices may foretell a shift in attitudes. Gretchen Morgenson, in “Foreclosures by Lender Investigated,” appears to have her facts right. Morgenson is […]

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JP Morgan: Banks May Take $77 Billion in CDO Losses

Bloomberg reports that JP Morgan analysts forecast that large bank exposure to CDO-related losses could reach as high as $77 billion. Note that they have written off more than half that amount already. They also estimated aggregate losses at $260 billion. We have come up with larger back-of-the-envelope loss estimates, but that was based on […]

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Schumer Demands Investigation of FHLB Loans to Countrywide

One not-widely-reported element of this credit mess is the sub rosa role that various organizations have played in shoring up some of the weakened players. Case in point: the Federal Home Loan banks, which during the acute phase of the credit crunch stood in for commercial paper buyers. From an earlier Bloomberg story: The FHLBs […]

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Larry Summers Warns of "Deepening Crisis"

While a number of analysts, investors, and commentators have said for some time that the credit crisis is serious and is likely to damage the real economy, the only views that the Fed takes seriously are those of highly regarded economists, fellow regulators, and senior industry executives (oh, and of course, that of Fed futures […]

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