We have said more than once that a terribly misguided aspect of the Freddie and Fannie conservarorship was the elimination of dividends on the GSE’s preferred stock. Preferred was the best vehicle that struggling financial firms had for raising new capital. Eliminating the dividend lead to big losses in all financial preferred stocks, since investors […]
Read more...Readers may recall I included an excerpt of an e-mail from a Congressional staffer in our weekend takedown of the bailout bill, which got pointed to widely, including on some political sites. This in turn has elicited more observations from insiders, this one a Congressional aide. Not only do the markets not like the bill, […]
Read more...Aha, Congress isn’t being so supine after all. Christopher Dodd, who in his initial press comments seemed to be behind the Paulson bailout plan, instead appears to be supportive of the general concept of Doing Something, as opposed to the particular embodiment served up by the Administration. Dodd is circulating a draft bill of his […]
Read more...I had wondered when the Japanese would step to the fore. Japanese banks and trading companies are cash rich and undamaged by the financial crisis, having for the most part steered clear of of subprime assets. Note that the Mitsubishi group has long been close to Morgan Stanley. Indeed, it was a surprise to many […]
Read more...With banks still holding LBO loan inventory that they’d like to be rid of, and recent sales requiring seller financing, it’s no surprise that loan prices continue to decay. From the Financial Times: The value of leveraged loans fell to record lows during the past week, creating further potential mark-to-market losses for both investors and […]
Read more...The latest “Let’s do something, anything” move to rescue the financial system is yet another example of expediency trumping sound long-term measures. The motivation for making Goldman and Morgan Stanley banks seems obvious: the powers that be seem determined to prevent either firm from going under. Being banks gives the firms access to a expanded […]
Read more...Paulson has tweaked the language of the bailout bill, with the Freudian-slip acronym TARP (“Troubled Asset Relief Program”) to make some additions that in theory make it more sweeping but in practice, with no review or oversight, the Treasury can do what it bloody pleases; the rest of the language of the bill, besides the […]
Read more...A mere two weeks ago, the Fannie/Freddie rescue was called “the mother of all bailouts” by some commentators. If the plans of the Administration come to fruition, it will shortly be surpassed by the $700 billion mortgage rescue plan proposed by Hank Paulson late last week. The increase of the request from the initial $500 […]
Read more...Repeat after me: bye bye the US’s AAA rating and the dollar. Although the Paulson’s plan is only sketchy, on the surface, it is utterly ridiculous. The authorities propose to save the economy by buying mortgage paper at market prices. Why do we need the government to create a massive and costly effort to buy […]
Read more...I try to avoid quoting post in full, but this one is important, it’s been up long enough that I don’t imagine I am siphoning off any traffic, and the folks at FT Alphaville seem to be good sports. As they reported yesterday in “Truth, the flexibility of facts, and market panics“: Phone rings… FT […]
Read more...Staring in March, I’ve gotten an increasing number of “what should I do with my money>” and the not-uncommon “what should I do about my bank?” None of these were “how do I get make money?” questions. They were all oriented towards safety and showed a high degree of concern. I took these to be […]
Read more...Reader Dwight pointed out this amusing disparity in reporting. The Financial Time is definitive, It title: “No bidders come for Washington Mutual“: Hopes of finding a buyer for Washington Mutual dimmed on Thursday as an auction for the beleaguered US bank had yet to attract any bids… Goldman has approached a number of banks, including […]
Read more...Reader eh pointed out in comments today that we could see “a monster snapback rally” should the tone of news improve, and one may be in progress. Bloomberg reports that Senator Charles Schumer proposed creating a new agency to provide equity to distressed financial firms. The stock market, and financials in particular, applauded. But in […]
Read more...A sound case can be made for pro-cyclical capital requirements, that is, lowering the amount of capital that banks must hold relative to assets in bad times and increasing it in good ones. Indeed, well designed pro-cyclical rules lean against the banks’ propensity to overdo on lending to the point where they blow themselves up. […]
Read more...The independent securities firm model comes under siege as Morgan Stanley and Goldman shares took a beating today. From Bloomberg: Morgan Stanley and Goldman Sachs Group Inc., the biggest U.S. securities firms, tumbled the most ever in New York trading after a government rescue of American International Group Inc. failed to ease the credit crisis. […]
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