Now that Greenspan has thrown in the towel, the free market ideologues have lost one of their most loyal advocates. From Bloomberg: Former Federal Reserve Chairman Alan Greenspan called for tighter regulation of financial companies, distancing himself from the free-market culture that he helped to create. Firms that bundle loans into securities for sale should […]
Read more...The New York Times is publishing a series on the financial crisis, “The Reckoning,” and today’s installment is “Struggling to Keep Up as the Crisis Raced On.” While this is a useful recap, there are some tidbits that merit commentary, such as: “Ben said, ‘Will you go to Congress with me?’ ” said Mr. Paulson, […]
Read more...This blog noted in May, thanks to comments from Chris Whalen of Institutional Risk Analytics, that the well publicized losses at large banks were soon to be followed by significant writedowns at mid and smaller sized banks. Whalen saw the wheels starting to come off in the June-July timeframe, meaning they would show up in […]
Read more...Wow. I am going from memory, but I am pretty certain that this is the mother of all quarterly financial services losses. And remember, Wachovia is merely a pretty big US bank, not a global capital markets behemoth like UBS, Deutschebank, or Citi. From the Wall Street Journal: Wachovia Corp. swung to a large third-quarter […]
Read more...Overnight Libor showed marked improvement, but with the big worry has not been availability of funding overnight, but the willingness of banks to lend to each other at longer tenors, particularly thirty to ninety days, and the ability of corporations to sell commercial paper at those maturities. Libor continues to improve, but the gains overnight […]
Read more...Bloomberg reports that the most closely watched measure of bank willingness to lend to each other, Libor, showed yet another decline today, a signal that money markets are continuing to mend. The article further noted that today’s is the best since the Lehman failure. That is tantamount to saying the patient is the best he’s […]
Read more...Big caveat: even though we have very strong opinions, we do not give investment advice. What we provide (aside from commentary) might be regarded as investment hazard warnings. You may nevertheless decide to go ahead after reading what we offer, but we hope you will proceed with caution. One thing most investors fail to realize […]
Read more...One of the reasons I am a fan of Willem Buiter is that he is bracingly candid about his likes and dislikes. And we happen to share a major dislike, namely, the conduct and policies of Henry Paulson. Buiter lambasts Paulson’s gift capital provided to nine large US banks. What is striking is that Buiter […]
Read more...While all eyes have been fixed on the interbank market, and the plunge in the Baltic Dry Index has also garnered some attention, the sudden decay in the loan market (meaning for the most part leveraged loans, the sort used to finance LBOs) has gotten far less commentary. Yet this will wreak havoc on bank […]
Read more...As we have noted often, in tightly coupled systems like our modern financial regime, efforts to contain risk typically make matters worse. As Richard Bookstaber explained in his Demon of Our Own Design, there are two reasons for this phenomenon. First is that processes move through a series of steps that cannot be interrupted, so […]
Read more...The Financial Times reports that the freeze on depositor withdrawals at Russian bank Globex is leading to high levels of withdrawals at other Russian banks, which doesn’t qualify as being a run…..yet. From the Financial Times (hat tip reader Michael): Globex on Wednesday banned depositors from withdrawing their money as confidence in the Russian banking […]
Read more...Money markets showed a small improvement overseas once again today, again showing that massive central bank interventions are having an effect only around the margin. While overnight lending rates showed a fair bit of movement, rates at the three month level are still elevated, and more important, all signs are that very little in the […]
Read more...Citigroup’s $2.8 billion third-quarter loss came in at only half the expected level, while the Merrill release came in slightly worser than projected. The Citi report comes from the Wall Street Journal: Citigroup Inc. swung to a third-quarter loss — its fourth straight quarter in the red — as it wrote down another $4.4 billion […]
Read more...One of the biggest focuses of worry has been UBS, which is highly levered even by investment banking standards, a major derivatives player, and widely seen as too big for the Swiss government to rescue. The measures announced before the opening of the market in Europe are clearly hopes to put doubts about the Swiss […]
Read more...John Kay, in “Banks got burned by their own ‘innocent fraud’,” argues that banks got themselves and the world at large in a heap of trouble via self delusion. Had the bets embodied in their products been presented in simpler terms, they would have recognized that they were bogus and bound to lose money. But […]
Read more...