Ah, now the script that everyone was trying to avoid, that of an institution failing, selling assets in bulk leading to distressed prices, which forces other players to mark their books down to the new market prices, leading to losses and reductions of already-scarce equity, is now playing at your local credit market. Lehman has […]
Read more...I have no idea what the morrow will bring, but if it is only as bad as Monday’s trading, we should all consider ourselves lucky. Ftich dowgraded AIG to A with a negative watch (hat tip reader Steve) S&P downgraded AIG to A-2 with a negative outlook as reported on CNBC (hat tip readers Scott […]
Read more...Boy, the adverse developments are flying so fast and furious that it’s hard to keep on top of the stories. From Bloomberg (hat tip reader Sunnny): Washington Mutual Inc., the biggest U.S. savings and loan, had its credit rating cut to junk by Standard & Poor’s because of the deteriorating housing market. S&P reduced its […]
Read more...The numbers and the measures become more and more extreme. For AIG to get permission from regulators to move $20 billion in capital from its subs to the holding company and have significant asset disposals teed up wasn’t sufficient to shore up the embattled insurer., The Fed has reportedly convened yet another emergency session to […]
Read more...Readers may recall that we were gobsmacked that the conservatorship of Fannie and Freddie involved wiping out dividends on their existing preferred stock. That was stunningly shortsighted move, guaranteed to be commemorated as a a major mistake when histories of this period are written. Fannie and Freddie preferred were held by banks, so any losses […]
Read more...The Fed made a $70 billion reserve injection today in two operations in response to a sharp increase in the Fed funds rate, indicating bank reluctance to lend to each other. One reader informed us the rate was 3.75% mid-morning after the first, $20 billion addition (versus the 2% target level) and according to Bloomberg […]
Read more...AIG appears to have fended off the immediate threat of a downgrade with the granting of permission by New York State for the parent to gain access to subsidiary capital. While certainly quite a waiver, it is also possible that AIG has overcapitlaized subs and thus this move may be defensible as far as policyholders […]
Read more...Reader Steve provided the link to Fitch’s website, which shows the announcement and apparently it’s being reported on CNBC. But what matters is what Moody’s and S&P do….
Read more...What the credit crisis gives, it also takes away. Bond giant Pimco was a huge winner on the Fannie/Freddie rescue, but Bloomberg reports that it did not fare so well with Lehman. From Bloomberg: Pimco Advisors LP, Vanguard Group Inc. and Franklin Advisers Inc. are among the investment companies that will face losses of at […]
Read more...Reader Michael M called our attention to this statement in a Financial Times article: The Fed also suspended rules that prohibit banks from using deposits to fund their investment banking subsidiaries. Was this the quid pro quo for Band of America buying Merrill? If so, the repercussions extend beyond BofA. This is a time when […]
Read more...The action overnight has been dramatic. The number for equity markets overseas seems to be four or more, as in declines of 4%-5%, with developing nation instruments suffering more.. The theme was a flight from risk and worries about further economic slowing The dollar fell, particularly versus the yen the preferred vehicle of the carry […]
Read more...The alert have taken note that the failure of Washington Mutual, which looks increasingly likely, would consume the FDICs reserves and, as in the savings and loan crisis, force the agency to go hat in hand to Congress for more money. But this is comparatively early in our burgeoning banking crisis for the bulwark of […]
Read more...Controlled drugs dumped uncontrolled into water PhysOrg Fears over privacy as police expand surveillance project Guardian The NYT Turns to the Arsonist to Analyze the Fire: Greenspan on Bank Bailouts Dean Baker Fed Widens Collateral, Banks Set Up $70 Billion Fund Bloomberg Can the Fed Help AIG? Will It? Wall Street Journal Economics Blog. An […]
Read more...This reading comes from Adam Levitin at Credit Slips: Lehman paid out around $5.7 billion in bonuses in 2007. Are those bonuses safe? Maybe not…. Thus, the key question is whether Lehman was solvent when it paid out the bonuses? (The statute of limitations goes back past 2007, fwiw.)…..on a balance sheet basis, that might […]
Read more...I guess it is now official. We no longer have functioning trading markets, at least in terms of serving their alleged purpose of giving companies access to capital. The Fed is no longer the lender of the last resort. It is increasingly becoming not merely a lender, but by adding equities to its list of […]
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