Monthly Archives: January 2008

Non-Borrowed Bank Reserves Now Negative (Updated)

Reader Carl about ten days ago had sent me a link to a Federal Reserve data series “Aggregate Reserves of Depositary Institutions Adjusted for Reserve Requirements.” The series goes back to 1975. What caught Carl’s attention was that the “”non-borrowed reserves” column, under the “not seasonally adjusted” heading, to the right, shows negative values for […]

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Bond Insurer Update: Surprisingly Positive Noises from the FT; Egan Jones Conference Call

Despite the seeming absence of news on the bond insurer rescue front (the only development reported was the selection of the boutique M&A advisory firm Perella Weinberg to assist the State of New York in its efforts to put a deal together), the Financial Times has four articles on it today, from the neutral to […]

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Credit Crunch Collateral Damage: Deal for Credit Card Processor on the Rocks

Blackstone’s pending $6.4 billion acquisition of Alliance Data Systems, a major credit card processor, may become an unexpected victim of the credit crunch. The deal is foundering not for the usual reasons, such as difficulty in raising debt financing or a change in business conditions leading the buyer to try to renegotiate the deal. In […]

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Links 12/29/08

Phones tapped at the rate of 1,000 a day Telegraph A helpful suggestion for the Fed Willem Buiter Japan’s Long-Awaited Inflation Saps Spending, Growth Bloomberg. Be careful what you wish for. Further revelations dent SocGen’s reputation Financial Times. Eurex, a derivatives exchange, warned the bank about Kerviel last year. Dunno about you, but I could […]

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Regulatory Implications of the Failure of Quantitative Risk Management Approaches

A Bloomberg story today points out that the snowballing credit market crisis is an indictment of the use of quantitative measures of risk, particularly one of the longer established and still widely used approaches, value at risk. VAR uses historical trading patterns to determine the probability of loss to a certain percentage of certainty. Firms […]

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IMF, Larry Summers: The Wile E. Coyote Moment Has Arrived

There has been a fair bit of discussion of the so-called Minsky Moment, when an economy that has build a house of cards of speculation and over-leveraged “Ponzi units” (creditor that could never make good on their commitments, and are viable only by finding new suckers to give them new debt to pay old lenders) […]

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What Happened to the Promised S&P and Moody’s Review of MBIA and Ambac?

Why have the rating agencies failed to deliver on actions they promised to take? Remember the announcements that helped feed into the overseas market rout last Monday? This story ran January 16 on Bloomberg: Standard & Poor’s will start a new examination of bond insurers, one month after affirming the companies’ AAA ratings, because losses […]

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Trust Me, You Will Enjoy This Piece (Multitasking Edition)

A simply great piece, “The Autumn of the Multitaskers” by Walter Kirn in the Atlantic. As someone who nearly died while multitasking, Kirm is particularly well positioned to discuss the considerable downside and dubious benefits of our modern way of attempting to process inputs. It’s an informative and often funny read. A few representative paragraphs: […]

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Credit Default Swaps Increase Odds of Bankruptcy

We’ve discussed before how credit default swaps, which is in essence insurance against the default of particular issuer or index, poses risks to the financial system via counterparty failure. The notional amount of CDS is $45 trillion, but much of that is believed to be fully or nearly fully hedged via offsetting positions. The problem […]

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The Real Failure of Controls at Societe Generale

Disclosure (or apparent disclousues, who knows if we will ever learn the true story) of how equity derivatives trader Jerome Kerviel caused the biggest trading loss in banking history continues to dribble out. Today, Bloomberg in “Societe Generale Says Trader Built Up Positions of EU50 Billion,” gives more detail on how the trader caused so […]

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Robert Shiller Calls for More Encompassing Solutions to Credit Market Woes

In today’s New York Times, Yale economist and author of Irrational Exuberance Robert Shiller says, in effect, that the problems in the financial system are large enough to call for large scale, possibly even radical remedies. Shiller admits to not having a notion of what those measures should be. He does call for some changes […]

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