Ooh, the blood sport of watching Countrywide come under attack for its predatory mortgage practices is getting even more gripping. Gretchen Morgenson of the New York Times reports that the Illinois attorney general is suing the lender for not simply selling a toxic product, but other fraudulent practices, including falsifying borrower income and making bogus […]
Read more...When Pilate saw that he could prevail nothing, but that rather a tumult was made, he took water, and washed his hands before the multitude, saying, I am innocent of the blood of this just person: see ye to it. Matthew 27:24 It no doubt sounds extreme to compare the SEC’s proposed changes in regulation […]
Read more...Although a Bloomberg article, “Bernanke Plays `Dangerous Game’ Balancing Rate Talk With Action,” focused on the Fed’s rate dilemma, it also in passing revealed a sharp difference of opinion on the central bank’s likely actions later this year between economists and market participants: While Bernanke’s warning that the Fed will “strongly resist” a jump in […]
Read more...A comment in the Financial Times, “Our need to sustain the ‘great moderation’,”by Stephen Cecchetti, professor of global finance at Brandeis, set my teeth on edge. I suspect many readers will react the same way. Let’s start: The US housing market has collapsed, placing severe strains on the financial system and, as a direct consequence, […]
Read more...As reader Tom pointed out in comments today, perhaps the most important story in today’s Wall Street Journal didn’t get front page treatment. Banks are finding it hard to raise new equity. We’re not surprised at this outcome, in fact, we’re taken aback that this outcome was not foreseen. But despite the downturn in the […]
Read more...The grim times for Wall Street and the finance-dependent New York economy continue, as Citigroup is expected to begin”aggressive” headcount cuts in investment banking. We’ve also added an update about Goldman making similarly deep cuts in investment banking, However, it is important to note that the firms define investment banking differently. At Goldman, it consists […]
Read more...Uwe Reinhardt is a professor at Princeton whose son (the Marine mentioned below) served in Iraq. This piece first appeared in the Princetonian in April; I thank Willem Buiter for reproducing it on his blog. As the Fed and the Treasury once again staff the shovel brigade behind one of Wall Street’s periodic asset-bubble parades […]
Read more...Citigroup’s latest discussion of its business prospects belies the idea that the credit markets are on the mend. From MarketWatch: Citigroup Inc. Chief Financial Officer Gary Crittenden said Thursday that the bank faces continuing credit problems in the second quarter, with credit costs rising, provisions for bad consumer loans growing and “substantial” write-downs for subprime […]
Read more...I really wish the Bush administration was over, now. Here we have the Treasury secretary calling for the nation’s central bank, which already has internal tensions in its charter (preserving the soundness of the banking system, keeping inflation low and stable, and maintaining full employment) to also be in charge of financial stability: Mr. Paulson […]
Read more...This week’s Institutional Risk Analytics has an alarming title: “Is Risk Management Even Possible in an OTC Marketplace?” By all indications, the article points to a strong “no”. As much as I am a harsh critic of so-called financial innovation, the headline goes further than the case the article makes. OTC markets covers a large […]
Read more...It’s one thing to read an apocalyptic alarm from, say, a blogger or a newsletter writer. It’s quite another to see it coming from an analyst at a large institution, in this case AIG. Bernard Connolly is deeply critical of central banks, not just of their recent actions but also of their very existence, and […]
Read more...We’ve read from time to time that European banks have been launching deals, and not particularly good ones at that, solely for the purpose of using those securities as collateral for loans from the ECB. However, we hadn’t seen a longer-form treatment of that phenomenon. The Economist has decided to step into the breach. The […]
Read more...With the financial system on the exam table, it has been more than a bit troubling, that certain questions are neglected in serious academic/policy debates. The discussion of possible remedies focuses on regulatory solutions, everything from requiring mortgage brokers to be licensed to increasing financial institution capital requirements and having much greater harmonisation, as the […]
Read more...Institutional Risk Analytics has an informative, engaging interview with Martin Mayer, who is a professional polymath (he is the author of 34 books, former banking columnist, art critic, film critic, and currently a guest scholar at Brookings). I very much recommend reading the entire piece and provide some tidbits below. From Institutional Risk Analytics: Mayer: […]
Read more...While this Bloomberg story notes that the bath Goldman took on a leveraged loan to Dutch TV producer Endermol was considerably below recent LBO loan haircuts (27.5% versus the typical
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