Krishna Guha in the Financial Times argues that US banks need new equity ASAP to prevent the operation of a “financial accelerator,” which is basically, just as leverage feeds on itself, so to does deleveraging: falls in prices lead to margin calls, which lead to forced selling, which lead to more margin calls. We now […]
Read more...The Bear Necessities Roger Ehrenberg Millionaire Call Girl: Spitzer’s Hooker Rakes In A Fortune Online From Her Music Huffington Post Robert Rubin Still Doesn’t Know that People Warned About the Bubble Dean Baker. It was and is convenient for Rubin not to know that such people existed…. Calls for 1-point rate reduction grow louder MarketWatch. […]
Read more...I rarely feature Wall Street Journal articles in long form because I figure most readers will find them on their own. But the Journal’s Saturday edition isn’t as widely read, and this is an exceptionally good piece, particularly given that the Journal is not the best source on credit market reporting. The ongoing crisis seems […]
Read more...As I am sure you all know by now, Bear Stearns started coming spectacularly unglued last night, and called JP Morgan, who in turn tapped the Fed, who sent examiners who stayed at the firm all night. In the morning, a plan was announced by which the central bank would assume the risk of lending […]
Read more...The news that Bear had to run to the Fed for help with its rapidly deteriorating cash position, and JP Morgan has been muscled into assisting in the rescue is a sign that Bear was deemed too big to fail. The Fed is lending against Bear’s collateral (I haven’t seen an estimate as to how […]
Read more...Krugman, in his New York Times op-ed today, “Betting the Bank,” reminds us that the Fed is much like the Wizard of Oz: the perception of its power vastly exceeds reality. In normal times, the limited tools central bankers have at their disposal can be used to great effect, but extreme conditions reveal their impotence. […]
Read more...Gillian Tett ponders the conundrum that, given the dearth of logical suspects to replenish US bank equity if credit markets continue to deteriorate, the Federal government will have to step into the breach. But bailouts are profoundly unpopular even in the best of times, and an election year is a particularly ill-fated juncture for this […]
Read more...The Fed’s Bank Bailout The Onion Bear convicted for theft of honey BBC Drug Import Mess Getting Deeper and Deeper All Things Whistleblower. This is pretty scary. There is no way to insure the safety of drugs imported from China. My advice: stay healthy. Central bank intervention … unprecedented in scale and scope Brad Setser. […]
Read more...Joseph Stiglitz gives the high point of the findings of his new book, The Three Trillion Dollar War, in a comment today in the Guardian. I wish Stiglitz has gone on at more length about the horrific corruption and featherbedding in the Iraq contracting process. All the traditional rules were thrown out the window. This […]
Read more...The market rallied on the news that S&P reported that the end was in sight for subprime writedowns, with the firm placing the total damage at $285 billion, with $150 billion realized so far. The need to believe is stronger than I realized. “End is sight” is not the same as “end is nigh” but […]
Read more...Never expect a group with members ideologically opposed to regulation to come up with a wide ranging reform program, no matter how badly one is needed. An individual can have a Nixon-goes-to-China moment, but not a committee. Later today, no doubt with great fanfare, Hank Paulson will announce the plans devised by the President’s Working […]
Read more...Wolfgang Munchau, who writes for the Financial Times as well as the blog Eurointelligence, ruminates about inflation statistics and argues that economists and statisticians may be going down the wrong path in dismissing consumers’ subjective perceptions. He also has considerable doubts about hedonic adjustments (basically, the methodology for adjusting for the fact that computers and […]
Read more...Asian markets opened lower, then took a nosedive after the release of a report that troubled mortgage bond hedge fund to Carlyle Capital failed to reach a standstill with creditors (hat tip reader cb). The Nikkei fell 3.5% to 12,400. The dollar dropped to 100 to the yen. I bought yen at around 111 in […]
Read more...The credit default swaps market suffers more dislocation with every passing day. It seems everyone and their uncle wants to buy protection, and with a shortage of sellers (despite the high prices), CDS spreads keep rising and rising, which in turn wreaks havoc with anyone who wants to raise funds right now (cash market prices […]
Read more...Paulson, Bernanke Plan Tougher Scrutiny of U.S. Banks Bloomberg. Don’t hold your breath. Two of the four members of the President’s Working Group on Financial Markets, Henry Paulson and Christopher Cox (chairman of the SEC) are ideologically opposed to regulation; Bernanke tends to follow others’ lead. Expect any proposal to be more heat than light. […]
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