Monthly Archives: June 2008

Senate Banking Committee Finally Sends Warning Shot Across Treasury’s, Fed’s, and SEC’s Bows

Why has taken it taken so long for Congress to try to rein in a Treasury, Fed, and now SEC that has roughshod over their prerogatives? And even odder, why do they send a shot across their bow now that the Fed and SEC are starting to work together on securities reform ideas (or more […]

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Credit Market Warnings Escalate: Barclays, Fleckenstein Sound Alarms

Alert readers pointed us to new sightings of heightened credit market worries from Barclays via the Telegraph and Bill Fleckenstein via Calculated Risk. What distinguishes them from normal patter about the debt markets is the urgency of their alarms (hat tip Dwight and doc) The irony here is that the Fed, as Tim Duy points […]

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One Method to Flush Out Oil Speculators: "Liquidation Only" Restriction

Daniel Dicker, a former oil trader writing at TheStreet.com, contends that there is a way to test the hypothesis that speculation is influencing oil prices (a view that Dicker supports). Exchanges could impost a “liquidiation only” requirement, which was last used to break the Hunt brothers’ attempted corner of the silver market in the early […]

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Fitch Says MBIA Position "Tenuous"

Yesterday, the two big bond insurers got what they wanted, but the victory now looks Pyrrhic. MBIA and Ambac both asked rating agency Fitch to stop issuing ratings after the rating agency was the first of the major scorekeepers to downgrade them below AAA. Fitch has decided to withdrew ratings, since the monolines are denying […]

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The End of Exceptionalism? IMF to Examine US Financial System

Der Spiegel, in “The Shrinking Influence of the US Federal Reserve,” (hat tip reader Saboor) discusses how the US is submitting to a detailed, comprehensive investigation of it financial system under the Financial Sector Assessment Program. While Der Spiegel claims that this program is a humiliation to the US, the real significance may be that […]

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Commodities Spike, Scarce Credit Hitting LBO Companies Hard

The Financial Times reports on a new, troubling credit crunch phenomenon. Companies carrying a lot of LBO-related borrowings walk a tightrope since the high debt burden gives them little room for error. But in this downturn features an unanticipated rises in raw materials, plus in some cases, cuts in credit facilities that were important buffers. […]

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The Economist on Hot Money and the Dramatic Growth in China’s FX Reserves

I had grumbled recently that the financial press had not paid any attention to the simply stunning rise in China’s foreign exchange reserves, which were estimated to have increased by $75 billion in April alone. Brad Setser and Michael Pettis have been reporting regularly on this beat, but it has gone undernoticed in the wider […]

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Links 6/27/08

The ‘value’ of protecting whales BBC Researchers study hidden homicide trend PhysOrg Boston Suburb’s `Taj Mahal’ Brings Ban on Luxury High Schools Bloomberg Citibank Says Credit Market Doesn’t Work Elizabeth Warren, Credit Slips Bill Gates Secret to Success: Cheating Beat the Press Why the Stock Market Had a Terrible Day Robert Reich Massachusetts Complaint Against […]

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High Fuel Prices Lead Proctor & Gamble to Shift to Local Manufacturers

Some readers have suggested increasing tariffs as a way to reduce our trade deficit and shield US workers from foreign competition. High energy prices may be having the same effect. Increased transportation costs are leading companies to rethink how they source their products and shift to local producers where possible. A Financial Times story discusses […]

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Will Ratchet Rights Produce Zombie Banks?

If you think the headline above is overly dramatic, BreakingViews ($, free trial) sees the possible outcome of ratchet right provisions in bank capital infusions as a “death spiral”. This potentially ugly situation arises out of a nasty confluence of pragmatism, greed, and desperation. Anyone who invests in bank equity now has to be concerned […]

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Fed Considering Relaxing Rules on Private Equity Investment in Banks

We’ve mentioned from time to time the Fed’s fantasy that banks could recapitalize in short order. John Dizard of the Financial Times has been the most blunt in describing the disconnect between the central bank’s wishes and reality: It is not fair to say the Fed does not have a plan. It does. The plan […]

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Investment Banks Sold Auction Rate Securities While Warning Issuers

In a revelation that will further damage the securities industry’s tarnished reputation, Bloomberg reports that Wall Street firms were touting auction rate securities to retail buyers as a safe investment at the same time it was warning issuers that the market was on the verge of serious trouble. Normally, investor disputes with brokers are subject […]

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Credit Market Worries Rising?

The Fed’s decision to stay on hold with interest rates is an indirect acknowledgment, despite some brave talk otherwise, that the banking system is plenty fragile (has everyone forgotten that the Fed facilities are a form of life support?) and the concomitant economic downturn may only be in its early innings. There have been some […]

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Did FOMC Transparency Lead to Overly Low Interest Rates?

Remarkably, a post at VoxEU, “The dangers of increased transparency in monetary policymaking,” by Ellen Meade and David Stasavage suggest in that one of the effects of the Fed’s change in 1993 to publish the minutes of FOMC meetings was less candid discussion (no surprise) which led to greater Greenspan influence over interest rate policy, […]

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