A sign of the times: we haven’t sighted an Extreme Measure since October, and here we have two in one day (note that day was Thursday; we started on this last night but there were so many news-driven items that we are getting to this only now). By way of background, an Extreme Measure is […]
Read more...The market had taken some comfort from Lehman’s and Goldman’s first quarter better-than-expected results; these will likely be undone by the surprise warning by Credit Suisse, which heretofore had looked comparatively unscathed, by virtue of remaining profitable. That was undone today when the Swiss bank announced it expected to lose money this quarter. What is […]
Read more...Investors are so nervous that they are willing to take almost nothing in nominal terms, which is tantamount to a meaningful negative real return, to sit in the safety of three-month T-bills, which are now a mere 0.56%. One explanation is the large number of fails in the repo market, which as Alea reports, is […]
Read more...A colleague I’ve cited occasionally who has extensive contacts at the Treasury and pretty good ones at the Fed has been muttering for some time that European banks are in every bit as bad shape as US banks and he has been waiting for that shoe to drop. He also sees that as intermediate good […]
Read more...A bit of good news on the generally gloomy credit markets front: banks have managed to unload some of the LBO loans they have held on their balance sheets. Admittedly, however, they still have great deal more to place, nearly $130 billion of buyout debt. However, they have had to offer large discounts. Recent reports […]
Read more...The Wall Street Journal reports that primary dealers have been loath to use their new-found access to the discount window (technically, it’s a “temporary clone of the discount window”), despite the favorable rates on offer. Why? For commercial banks, the assumption is that only the distressed would go to the Fed for dough (the discount […]
Read more...The Fed opened the window to broker dealers. This is a shocker, a sign of the Fed’s desperation. Recall that one of the reasons the Fed was able to assure us it wasn’t taking too much risk in its Term Auction Facility was that it said the institutions involved were sound. It doesn’t supervise broker-dealer […]
Read more...Go out to the gym and big news happens. But hopefully this announcement will stop or at least slow the run on Bear. JP Morgan’s price of $2 a share represents a price of $270 million, or 1/4 the estimated value of Bear’s headquarters building. The discount reflects JPM’s leverage but also the perception that […]
Read more...The Wall Street Journal reports that JP Morgan is trying to solidify a deal for Bear before the Asian markets open: Terms of the deal were still being hammered out Sunday afternoon. Reflecting the dire situation at Bear, the company is likely to fetch considerably less on a per-share basis than its stock price of […]
Read more...Given the weekend, there was not much in the way of news on the Bear Stearns front, save further clarification of how perilous its state is. From CNBC: Department heads at Bear Stearns met with officials at J.C. Flowers and JPMorgan Chase Saturday afternoon to give an overview of their business divisions, including headcount and […]
Read more...That statement comes from Carmen Reinhart, who co-authored a paper with fellow Serious Economist Kenneth Rogoff which I had told readers earlier that they must read immediately: “Is the 2007 US Sub-Prime Financial Crisis so Different? An International Historical Comparison.” The Reinhart/Rogoff paper is elegant; it identifies 18 postwar banking crises in advanced economies and […]
Read more...This article by Jeff Randall in the Telegraph does a nice job of looking at the causes of our credit mess and articulating implications. And he quotes my hero Paul Volcker (do you know that he stayed at the Fed fixing the economy even though his wife was very sick and he was having trouble […]
Read more...Steve Waldman is on a roll. He has an excellent piece today arguing that despite contemporary notions otherwise, capitalism and character (meaning moral fiber) have not and need not be contradictory. Although Waldman makes a good case, the barriers to the return of character in commerce are more profound than he lets on. A colleague […]
Read more...Krishna Guha in the Financial Times argues that US banks need new equity ASAP to prevent the operation of a “financial accelerator,” which is basically, just as leverage feeds on itself, so to does deleveraging: falls in prices lead to margin calls, which lead to forced selling, which lead to more margin calls. We now […]
Read more...I rarely feature Wall Street Journal articles in long form because I figure most readers will find them on their own. But the Journal’s Saturday edition isn’t as widely read, and this is an exceptionally good piece, particularly given that the Journal is not the best source on credit market reporting. The ongoing crisis seems […]
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