Category Archives: Banking industry

New Treasury Mortgage Borrower Salvage Program: More Smoke and Mirrors?

We didn’t think much of the New Hope Alliance, the program brokered by the Treasury Department to rescue subprime borrowers facing resets. The program’s criteria targeted those who were already paying fairly high initial interest rates with very little to no equity in their house at the time of closing. In other words, this group […]

Spanish Banks’ Dependence on ECB Increases

We had commented before on the fact that Spanish banks have been going to the ECB for funding because their domestic mortgage securitization market is virtually shut. In December, Spanish banks borrowed €44 billion, more than double the average of the previous 15 months. The Financial Times story notes two troubling elements: first, that the […]

More Signs of Credit Market Stress

A front-page Wall Street Journal story picks up on an alarm sounded over the weekend by the Financial Times, namely, that the leveraged loan market (the paper used to fund LBO deals) is in serious trouble. Investment banks are sitting on sizable unsold inventories that are declining in value, thus sure to lead to further […]

G7: Subprime Losses Could Reach $400 Billion

The G7 forecast that subprime damage could total $400 billion is hardly surprising to anyone who has been following that sorryhttp://www2.blogger.com/img/gl.link.gif saga. Predictions that were once regarded as wildly pessimistic have been borne out as correct. What is noteworthy about the G7 remarks is that things have gotten so bad that there is nothing to […]

UBS Raises Concern About Negative Non-Borrowed Bank Reserves

In an earlier post, we had taken a worried look at the fact that banks’ net non-borrowed reserves went negative in January. We were only somewhat concerned because this unprecedented pattern was clearly the result of the Fed’s implementation of its TAF, the Term Auction Facility, which gives banks funding if they post collateral (and […]

Sovereign Wealth Funds Cool on Further Bailouts of Western Banks

There is an old saying, “Fool me once, shame on thee, fool me twice, shame on me.” We’ve said it was a mistake to assume that sovereign wealth funds would continue to write checks uncomplainingly to salvage our troubled financial institutions. They’ve already been through one round of fundraising and things are getting worse, not […]

Deutsche Bank CEO: Bond Insurer Downgrade Will Create Debt " Tsunami"

Deutsche Bank’s CEO Josef Ackermann issued a stark warning today: bond insurer downgrades would have catastrophic consequences, on par with the subprime crisis. Note tha this view is in contrast with teh comparatively sanguine readings that have been coming from some US analysts and the US media, which now appears to regard teh increasing possibility […]

Ambac, FGIC May Be Put in Runoff Mode

The Wall Street Journal today says that even if the efforts to raise new funding for the troubled bond insurers are successful, they are unlikely to stave off a ratings downgrade. This story, based in part on reports coming from the rescue discussions led by New York state insurance superintendent Eric Dinallo, indicates that the […]

Martin Wolf: Can We Corral the Financiers?

Readers may note we have a fair number of posts from the Financial Times today. The pink paper is having a good day, and conversely, in the US, Super Tuesday has taken pride of place in the news. Martin Wolf in today’s Financial Times argues that more aggressive reform of the financial sector is needed, […]

Warning: Credit Default Swaps May Not Work As Advertised

A very good, accessible article, “CDS market may create added risks,” by Satayjit Das appears in today’s Financial Times. We’ve sometimes discussed the fact that credit default swaps, which effectively are insurance policies against defaults, suffer from considerable counterparty risk. A policy is only as good as the entity that wrote it, and many of […]

Evidence Wachovia Knew of and Profited from Theft

This story is so heinous that I couldn’t let it go by. Court filings indicate Wachovia not only permitted telemarketers to steal from individuals, but they were aware of the practice and turned a blind eye because it was profitable to them. And the targets of the fraud were typically elderly. The suit was filed […]

Nouriel Roubini’s Doomsday Scenario

In today’s post, “The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster,” the bearish and prescient professor Nouriel Roubini sets forth how a systemic financial crisis could play out. The most troubling thing about this piece is that it is quite plausible. Of Roubini’s twelve steps, the first eight are […]

Monoline Updates: S&P Says Downgrade Will Hurt Banks; Fitch Downgrade of MBIA More Likely; XL Capital Takes Hit

Standard & Poor’s issued a research report today that stresses that bond insurer downgrades would hurt banks and in some cases could lead to reductions of their debt ratings. This report is in contrast to the comparatively cheery view of Morgan Stanley yesterday, that bond guarantor downgrades (presumably to AA; note further downgrades are possible) […]

Scary Credit Tightening Chart

Fitch was warning of lax lending practices in commercial real estate in the US starting in April of last year. The typical pattern, of going from unduly generous terms to stringent ones, with nary a stop in between, is occurring now, and with a vengeance. By happenstance, I had dinner with a colleague whose family […]

Under-the-Radar Rescue of Spanish Mortgage Banks

Spain has been in the throes of a housing bubble that is arguably worse than ours, since housing (narrowly defined) accounts for 5% of US GDP versus 18% of Spain’s. And like the US, Spain’s mortgage banks have entered a financial crisis and are making heavy use of the ECB’s discount window. But oddly, this […]