Monthly Archives: January 2008

Credit Default Prices Up Sharply on MBIA Losses, Planned S&P Ratings Actions

The turn of phrase in financial reporting can sometimes be a hair misleading. Today’s Bloomberg story reporting on marked price increases in the credit default swaps market in the wake on news overnight from MBIA and Standars & Poor’s, starts out by saying, “The risk of companies defaulting soared…..” No, the risk of companies defaulting […]

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"Stop behaving as whiner of first resort"

A comment by Ricardo Hausmann in today’s Financial Times takes US policymakers to task for trying to prop up demand and stave off a recession. We’ve pointed out repeatedly, as have various economists quoted here, that consumption as a percentage of US GDP is unsustainably high and saving correspondingly too low. It can only continue […]

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Cuomo Using Martin Act to Pursue Subprime Securities Fraud

We had been wondering when subprime-related securities litigation would get going in earnest. New York attorney general, Andrew Cuomo, along with Connecticut attorney general Richard Blumenthal, has been investigating whether underwriters failed to disclose relevant information to investors in subprime deals. The latest development, according to the Wall Street Journal, is that Cuomo has issued […]

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SEC Changes Accounting Treatment to Help Subprime Lenders

Things seem to come full circle. 30% to 70% of the subprime loans issued in 2006 that later defaulted involved borrower fraud, according to the FBI, although people would say in many cases it might more accurately be called lender fraud (“oh, just sign the application, we’ll fill it out for you”). The FBI is […]

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Thain Says Industry Wide Bond Insurer Rescue Unworkable

In an interview with the Financial Times, Merrill CEO John Thain said that he didn’t believe an industry-wide approach to rescuing the bond insurers would succeed. Thain instead advocated investments on a company by company basis. But the estimates of loss exposures are now coming in so high that it is difficult to conceive that […]

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Links 1/31/08

Copy a CD, owe $1.5 million under “gluttonous” PRO-IP Act ars technica Doctor Accused of Leak to Drug Maker New York Times. Another example of how the scientific process is being corrupted. Sudden Blindsides Financial Armageddon. Why those leveraged loan default figures aren’t what they are cracked up to be. Opec’s policies will ensure oil […]

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Bond Insurer Death Watch: FGIC Loses AAA from Fitch; Ackman Estimates Losses for MBIA and Ambac Each at $11.6 Billion (Updated)

Bloomberg reports that hedge fund Pershing Square’s chief Bill Ackman has increased pressure on bond insurers and regulators by circulating a new analysis of potential losses to MBIA and Ambac, the two biggest bond insurers, that concludes the damage to each could reach $11.6 billion. This calculation is arguably more accurate than Ackman’s previous estiimates, […]

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Central Bankers: Securitization is Dead, Long Live Banking

John Dizard, in “Prepare for return of a direct lending world,” argues that central bankers believe that securitization is not coming back in any meaningful way in the foreseeable future, and banks will therefore have to roll up their sleeves and do old-fashioned lending in much greater volumes than before. That may seem like a […]

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UBS Posts Loss After $14 Billion Writedown

$14 billion? I thought I’d be inured to big negative numbers coming from investment banks by now, but I caught my breath when I read the headline of the Bloomberg story reporting that UBS is taking a further $14 billion in writedowns, resulting in a $11.4 billion loss for the fourth quarter. Remember, when UBS […]

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Links 1/30/08

Judge accuses RIAA of ‘gamesmanship’ P2Pnet FBI Probes 14 Companies Over Home Loans Huffington Post. They aren’t saying who is targeted, but the FBI is looking into fraud in the securitization process, and insider trading. FDA flawed on food, medical device safety: GAO MarketWatch It’s 2002, All Over Again: Homeownership Registers Record Drop in 2007 […]

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Yet More Cheery Housing Charts

Sometimes a picture is worth a thousand words….does that mean two are worth two thousand? From the Businomiics Blog; the underlying data comes from the Census Bureau. While local markets don’t always conform with national patterns, this is another confirmation that a housing recovery is not just around the corner.

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