Bloomberg reports on the coordinated effort by major and even some not-so-major central banks (Canada’s and Switzerland’s central banks are included) to tackle high interbank lending rates. One investor called it to “shock and awe,” which is a worrying comparison. In fact, the plan does not add net liquidity, but merely provides additional one-month term […]
Read more...Courtesy Doug Noland at Prudent Bear, these charts illustrate a fundamental problem: debt creation well in excess of economic growth: Now in fairness, rapid growth in debt isn’t necessarily a bad thing, provided it is funding productive investments. But much of the rise in US indebtedness is the result of overinvestment in housing, borrowing to […]
Read more...A story in today’s Financial Times discusses how Citigroup cut the size of its SIV outstandings from $83 billion to $66 billion. The details, while limited, still start to flesh out the picture. From the Financial Times: Citigroup has slashed the size of its struggling off-balance-sheet investment funds by more than $15bn in two months […]
Read more...The Wall Street Journal and Bloomberg report that Bank of America will be shuttering a $12 billion enhanced cash fund. Note that this was a fund for institutional investors, and not a money market fund. Note that we had reported on a freeze on redemptions at this fund earlier. Investors who are still in the […]
Read more...Although $4.3 billion is not a large amount of credit by large bank standards, Societe Generale’s decision to take assets of affiliated assets on to its balance sheet is further confirmation that the SIV rescue plan is coming too late to have any impact. From Bloomberg: Societe Generale SA, France’s second-biggest bank by market value, […]
Read more...When it announced its third quarter writedowns of nearly $4.7 billion, UBS had predicted a profit for the fourth quarter. The planned $10 billion writedoff of subprime-related debt announced today not only will lead to a fourth quarter loss, but may lead the Swiss bank to show losses for the full year. The bank plans […]
Read more...A story by Eric Dash in the New York Times, “Big Banks Scale Back Plan to Aid in Debt Crisis,” does a good job of explaining why the SIV salvage operation brokered by the Treasury Department and sponsored by Citigroup, Bank of America, and JP Morgan, may in the end not accomplish very much. The […]
Read more...Both Bloomberg and MarketWatch feature stories on the possibility of further mortgage-debt triggered writeoffs at UBS. Readers may recall that the markets took cheer when UBS announced its third quarter chargeoffs, believing the bank and its peers were putting their troubles behind them. However, the bank now has lower MarketWatch cited a Swiss newspaper that […]
Read more...A concise comment by Francesco Guerrera in the Financial Times on why the SIV rescue plan is misguided and therefore will be ineffective. Although some of the issues have been discussed elsewhere, Guerrera gives a crisp treatment, and takes issue with a key assumption, that the bank sponsors can’t afford to take SIV assets on […]
Read more...Once again, another example of the Wall Street Journal basically printing a press release and calling it a story, as contrasted with the Financial Times, which did some real reporting. The object lesson today is the latest news on the SIV rescue plan, which has retreated from the limelight as the Treasury’s other brainchild, the […]
Read more...The quality of debate in America has become so debased that for the most part we have become desensitized to the use of ad hominem attacks. In logic and rhetoric, an ad hominem argument, which attempts to discredit the person mounting the criticism, is considered invalid, since the substance of the charge has not been […]
Read more...We wrote earlier this week that the subprime relief deal orchestrated by the Administration was an effort to forestall a bill sponsored by Democrats that would, among other things, give judges the ability to change some mortgage terms in consumer bankruptcies. Elizabeth Warren at Credit Slips confirms this view in her assessment of the subprime […]
Read more...Dear readers, I had wanted to go through the geeky American CoreLogic Mortgage Resets study, which gives mind-numbing detail on what type of mortgages reset when to come up with a more refined guesstimate of how many borrowers might be eligible for the formerly-Paulson, now Administration subprime program. The Administration claims its program could help […]
Read more...Minyanville has a post on three potential sources of systemic risk that have been largely overlooked by the media and in the markets. Numbers two and three on the list – downgrades to monoline insurers damaging municipal credit and counterparty risk in derivatives markets – have been covered in this blog. But the first, the impact […]
Read more...Duh. Note how, nevertheless, S&P bends over backwards to look supportive…. From Bloomberg: U.S. Treasury Secretary Henry Paulson’s plan to freeze some subprime mortgage rates in an effort to stop a wave of foreclosures may lead to ratings cuts on some mortgage bonds, Standard & Poor’s said. “Simply freezing interest rates on some U.S. first-lien […]
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