This downgrade by Fitch of the junior debt on the Citi SIV Senda affects only $867 million of debt. But what makes this announcement noteworthy is it is yet more bad news about Citi, and it again illustrates how rapidly newer financial instruments, which have either high embedded leverage or high explicit leverage (SIVs rated […]
Read more...As much as I would like to leave the matter of Hank Paulson and his dubious subprime rescue plan alone, the latest developments demand comment, first my own, followed by a roundup of other views. One tidbit later on to induce you to read the entire and admittedly long post: successful implementation of the program […]
Read more...The US isn’t the only country facing a nasty inflation/deflation policy dilemma. The Financial Times gives us further detail on the worrisome conditions in the UK money markets, and a story in the Telegraph describes how the UK’s Shadow Monetary Policy Committee is troubled by the unprecedented drop in loans outstanding from August to the […]
Read more...This story, reported in the Economic Times of India (hat tip Elaine Meinel Supkis), that Indian banks are unable to draw on their dollar denominated lines of credit, isn’t as dramatic as the news that major banks are asking UK clients not to borrow. However, it serves to illustrate the disruptive effects the credit crunch […]
Read more...If you had any doubts that the credit contraction was having real-world consequences (beyond, say, the ease of getting a mortgage in the US), consider this DowJones Newswire story (hat tip Michael Panzner). Banks are not only not willing to lend to each other, but because liquidity is scarce, they are trying to dissuade UK […]
Read more...Yesterday, we posted some thoughts about the subprime rescue plan under development among the Treasury, some leading servicers, other regulators, and some investors (most notably Freddie and Fannie). A few additional items: We had commented that the plan would be limited to only borrowers who were current on payments. That appears to be incorrect, or […]
Read more...The Wall Street Journal’s page one story, “Rate Plan Has Skeptics, Fans,” offers little new information about the substance of the program (not surprising) but gives mainly positive reviews. In case readers somehow haven’t figured it out, I believe this program to be a Bad Idea in any form, although some variants could be worse […]
Read more...This story on Citi’s further SIV woes has appeared on Bloomberg; we’ll update it when the Wall Street Journal and other financial news sources weigh in. Citi had roughly $80 billion of SIVs outstanding, but a MarketWatch story that looked to be a a PR plant, put the emphasis not on the rating agency actions, […]
Read more...I am sticking my neck out a bit on this post, since the credit default swaps market doesn’t garner much coverage, so any readers who are involved in this busines are encouraged to comment. Yes, there are frequent references to what changes in CDS prices mean about the credit-worthiness of particularly names, but there is […]
Read more...Do we see a pattern here? The much-covered, little-loved SIV rescue program (formally known as the Master Liquidity Enhancement Conduit and informally called the Entity or Super SIV) was announced prematurely, didn’t clearly solve the problem it was meant to address, involved a lot of failing around to try to resolve irreconcilable interests (those of […]
Read more...The New York Times is having a good week. Today, in “Lenders’ Belt-Tightening Stifles Growth in Economy,” Peter Goodman examines the recent sharp fall in credit extension to commercial enterprises, particularly small businesses. It’s a solid piece of reporting, and reading it, one wonders why the Federal Reserve’s Vice Chairman Donald Kohn didn’t allude to […]
Read more...Ah, someone, namely jck at Alea, finally nailed the economics of the Abu Dhabi investment in Citigroup. I have to confess that when I read Andrew Clavell’s analysis, I was sufficiently chastened so as not to think about it further. But jck points out the obvious flaw: Clavell decomposed the deal in to put and […]
Read more...Martin Wolf, the well respected lead economics editor of the Financial Times, turns to a favorite topic: why banks regularly get themselves in trouble. His answer: it’s “a risk-loving industry guaranteed as a public utility.” Privatizing gains and socializing losses, particularly if the employees share in that arrangement, is a formula for reckless behavior. Wolf […]
Read more...While the Financial Times has a wealth of journalistic talent, one of its standouts is capital markets editor Gillian Tett. She reported on the signs of trouble in the credit markets when the world at large thought everything was hunky-dory. One of her many prescient pieces was an article in January that used the fact […]
Read more...The sighting of a robin does not make a spring, nor do the actions of four judges constitute a trend. Nevertheless, the fact that some courts are taking a harder look at foreclosure practices may foretell a shift in attitudes. Gretchen Morgenson, in “Foreclosures by Lender Investigated,” appears to have her facts right. Morgenson is […]
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