Here we are, in the midst of the worst financial crisis since the Great Depression, and what do we see? Central banks madly pumping water out of leaky, listing vessels, some discussion of how to patch the most visible holes, but perilous little consideration of how to correct the defects of construction, poor choice of […]
Read more...The BofA/Countrywide follies continue. Earlier in the week, the Charlotte bank, in an SEC filing on the pending Countrywide acquisition, remained silent on the question of the fate of Countrywide bonds. As we had mentioned some time ago, BofA plans to use a deal structure that would leave the debt in a subsidiary so that […]
Read more...I am still recovering from the Milken Conference, and unlike my fellow blog panelists Paul Kedrosky, Felix Salmon and Mark Thoma, have not written any posts on particular sessions. In part, that was because in my other life as a consultant, I am well aware of the dangers of relying on memory even though mine […]
Read more...Because I have yet to throw my stuff back in my bags to be on a morning plane back to NY, I must be brief. I have not had the chance to think about Avinash Persaud regulatory proposals at VoxEU deeply, but at a first glance, they sound appealing. However, the devil will lie in […]
Read more...Some months ago, we had mentioned that Bank of America was keen to avoid taking on Countrywide’s liabilities (who wouldn’t be?). The possibility that the giant bank might not provide a guarantee for Countrywide’s debt came to the fore again. Without BofA backing, the Countrywide paper is a pretty dodgy proposition. From Bloomberg: Bank of […]
Read more...Still out of town, still behind the eight ball, so forgive the terseness with today’s offerings. Two items provide further evidence that lenders not only have little sense of responsibility for the problem they helped create, but worse, their unwillingness to reform in the face of considerable public pressure. As we noted, with regulators capitulating […]
Read more...When the Fed’s innovation, the Term Auction Facility, which is in effect an improved discount window, was implemented last December, its size was $40 billion, which was considered extraordinary, a sign of how desperation conditions in the money markets were. Now that several increased put the facility is $100 billion, the banking community and the […]
Read more...By happenstance, there is more than usual Fed-related news this early AM. A few weeks ago, Greg Ip of the Wall Street journal recited what some of the Fed’s options would be if it ran into balance sheet constraints. One was paying interest on bank reserves: The Fed could seek to pay interest on reserves. […]
Read more...Greg Ip of the Wall Street Journal reports on the harsh criticism of the Fed’s role in the Bear deal by Vincent Reinhart, who rcently was the Fed’s most senior staff member. What is ironic about the Fed’s bailout is that it is unpopular on the left and the right. The left does not like […]
Read more...The New York Times, in “Loan Industry Fighting Rules on Mortgages,” tells us that the real estate creditors are fighting tooth and nail to gut new rules that the Fed intends to impose. The Times, apparently reflecting the sentiment of sources in the Fed, Capitol Hill, and consumer advocates, seems surprised at the vehemence of […]
Read more...Credit Suisse, which heretofore looked somewhat immune to credit market problems, has joined its peers in having a loss-making quarter. A Sf5.3 billion writedown on leveraged loans and mortgage instruments was the proximate cause. Note the quarterly deficit was more than three times the consensus estimate. The CEO was also loath to declare the debt […]
Read more...As the housing/mortgage crisis has progressed, homeowner advocates and legislator have to get mortgage servicers to offer more loan modifications to struggling borrowers. Even though this housing recession has a far higher proportion of borrowers seriously underwater than past downturns, the logic of loss mitigation is still valid. It’s still better for the bank to […]
Read more...The numbers keep getting bigger and bigger, first of bank losses, then of capital raises to try to get things back on a semblance of an even keel. Even so, the $24 billion (£12 billion) raise is nevertheless a stunner, hugely dilutive to existing shareholders. And note this comes in addition to a dividend cut […]
Read more...Henry Kaufman, aka Dr. Doom in his heyday as Salomon’s chief economist when the firm was at the peak of its power, argues in “Finance’s upper tier needs closer scrutiny,” that the very biggest financial institutions need a regulator with the savvy and reach to supervise them effectively. Kaufman put the number at roughly the […]
Read more...We have the rare spectacle of Willem Buiter admitting he doesn’t have an answer, but in fairness, he is looking at a throny problem. Buiter considers the question of what to do about the financial sector once the crisis has passed. He provides a scathing assessment of the workings of financial capitalism, but is pessimistic […]
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