January was a bad month for hedge funds. Depending what average you looked at (different services define strategies somewhat differently and have distinct comparison groups), a loss of 2% was a pretty typical figure, and I have heard rumors of quite a few funds, particularly quants, taking double-digit hits. The wounded are coming to light. […]
Read more...A Crisis of Faith Paul Krugman, New York Times. On the loss of confidence in fancy finance. Stuck with a bad loan, a Staten Island family fights back Staten Island Advance. A judge deems a lender in violation of New York laws against predatory lenging, voids a mortgage, and orders damages paid. Expect an appeal. […]
Read more...Ohh, the plot thickens. Investment banks are choking on unsold inventory of LBO loans that appears destined to continue to fall in value. These deals are already underwater and expected to hear further south. The interest payments float off short-term interest rates. so the widely anticipated Fed rate cuts will make them even less attractive. […]
Read more...Eliot Spitzer, former New York State attorney general, now governor, savages the Bush Administration in a Washington Post op-ed today (hat tip Mark Thoma). He discusses the measures taken by Federal banking regulators, namely the Office of the Comptroller of the Currency, to stymie state efforts to curb predatory lending. While the article is largely […]
Read more...Bloomberg gives some updates du jour on the bond insurer front. As rumored, New York insurance superintendent Eric Dinallo is considering breaking up the monolines into the muni operations versus everything else: Bond insurers may be split into two pieces to bolster credit ratings and protect municipalities and bondholders, New York’s top insurance regulator plans […]
Read more...We’ve often observed that the reason to keep the banking industry (and Wall Street, now that some firms are too big to fail) on a short leash is that it plays with the public’s money: gains go to employees and shareholders but losses are socialized. We now see a bald-faced example of that problem in […]
Read more...One of the big news items yesterday was the turmoil in the auction-rate securities market, a $330 billion corner of the muni market, which is a direct casualty of the distress with the bond insurers. The specter of Bristol Myers taking a $275 million charge on an $811 million, announced at the end of January, […]
Read more...City bonus round surprises on the upside FT Alphaville. Um, that means they were paid too much. WSJ recommends letting the poor freeze to death to combat global warming RFK Action Front Will the Mortgage Industry Fix the Mortgage Mess Itself? A Look at Project Lifeline Adam Levitin, Credit Slips. A post I wish I […]
Read more...UBS announced fourth quarter results of a loss of 12.5 billion Sfr, which was in line with its January 30 preliminary estimate. The most interesting item was the breakdown of its $13.7 billion writedown. From Bloomberg: UBS’s writedowns included $10.8 billion on subprime residential mortgages, $2 billion on so-called Alt-A mortgages, which fall between subprime […]
Read more...Brad Setser comes as close to sounding cheerful as I’ve recalled him being in quite some time in today’s post, “The worse the dollar does, the more dollars central banks want …“ I hate to take issue with the good doctor, particularly in his area of expertise, but this may be the lull before a […]
Read more...A Bloomberg story discusses that the Fed will have to lower rates further, despite January retail sales figures that came in better than expected, because lower short-term rates have not led to better terms for borrowers. The story (and perhaps even the Fed) seems to miss why lenders are demanding higher rates: the securitization mechanism […]
Read more...A story on Bloomberg highlights the seize up in the muni bond auction market, which is forcing issuers to pay as much as 20% in interest to roll short-term debt. The bonds are auctioned every seven, 28 or 35 days. If the auctions don’t attract enough bidders, the municipalities must pay rates specified in their […]
Read more...A MarketWatch story on Warren Buffet’s borderline extortionate offer to struggling monoline insurers suggested it could provide a format for a rescue New York insurance superintendent Eric Dinallo. A story by the New York Times alluded to the same notion. While I may be missing something, I don’t see how this could possibly work. First, […]
Read more...We’re going to be a bit brief this evening. The Financial Times has a useful item in its Lex column which explains why leveraged loans, despite their seemingly rich pricing, are going begging: It has been a terrible period for leveraged loan prices – worse than for high-yield bonds despite the unsecured nature of the […]
Read more...The Hope Now Alliance, a plan brokered by Treasury Secretary Hank Paulson to get mortgage servicers to freeze introductory ARM rates for a narrowly-defined set of subprime borrowers, was roundly attacked by many borrower advocate groups. Their estimates of how many people it would help ranged from 15,000 to 145,00, and were attacked by the […]
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