Bloomberg reports that JP Morgan analysts forecast that large bank exposure to CDO-related losses could reach as high as $77 billion. Note that they have written off more than half that amount already. They also estimated aggregate losses at $260 billion. We have come up with larger back-of-the-envelope loss estimates, but that was based on […]
Read more...From time to time, Mark Thoma features the views of his University of Oregon colleague and Fedwatcher Tim Duy. Duy got his last call wrong. He genuinely believed the Fed would not cut, basically because not cutting was the right thing to do, and misread the FOMC’s sensitivity to market reactions, or to be less […]
Read more...One not-widely-reported element of this credit mess is the sub rosa role that various organizations have played in shoring up some of the weakened players. Case in point: the Federal Home Loan banks, which during the acute phase of the credit crunch stood in for commercial paper buyers. From an earlier Bloomberg story: The FHLBs […]
Read more...Boy, the equity infusion in Citi was in some ways predictable, but it happened earlier than I anticipated. Guess the bank learned from its last rescue by Prince Alwaleed not to wait until they are desperate to find a suitor. Its alternative to shore up its weakening equity base was selling assets, but with many […]
Read more...Another day, another adverse development in the credit markets, or so it seems. Except now we are getting more than one troubling sighting a day. The latest tidings: liquidity in the credit markets is falling to the point where the European Central Bank has announced it will inject new cash. The underlying cause is worry […]
Read more...Does being a former Fed chairman mean never having to say you’re sorry? In Oslo, Greenspan maintained that the housing bubble was not due to negative real interest rates in the US, but instead was a “global phenomenon.” He is thus arguing that housing price appreciation in various markets resulted from a common source that […]
Read more...Charles W. Calomiris, the Henry Kaufman professor of financial institutions at Columbia’s business school, has an interesting but ultimately frustrating post at VoxEU in which he argues that the trouble we are seeing in the credit markets is not yet a Minsky moment (in very simplistic terms, the point at which an overlevered and highly […]
Read more...Some state governments have implemented programs to rescue mortgage borrowers in danger of losing their homes. Eight states have committed a total of $900 million to these plans, but a Boston Globe article reports that the uptake has been very low, with only 100 families getting refinancings. If you assume an average mortgage of $300,000, […]
Read more...A reader chided me for being late to this story, but it appears not to have been widely covered yet. Moreover, I would hazard that it means less than the out-of-character reporting in the Financial Times suggests (this “leak” is a PR plant). First, the FT article: BlackRock, the asset manager 49 per cent owned […]
Read more...We didn’t pay much attention to the$2 billion investment by Bank of America in mortgage lender Countrywide at the time because we didn’t like it: I will confess I haven’t studied the details of the deal for a simple reason: I’m appalled that B of A would even consider it. The two banks had reportedly […]
Read more...Henry Paulson is becoming the spokesperson for half-baked proposals, first the SIV rescue plan, and now his idea for what sounds like standard-form loan modifications for stressed mortgage borrowers. Paulson’s fondness for Big Schemes That (Purport To) Fix The Problem With A Master Stroke may be a sign of grandiosity. Doesn’t he understand that the […]
Read more...It looks like I am in the process of being proven wrong, but even if I am wrong, it is because I underestimated the stupidity of policymakers and the short-sightedness of the mortgage industry. In September, Shiela Bair, chairman of the FDIC, had called on mortgage servicers to freeze teaser loans at their introductory rates. […]
Read more...University of Oregon professor Tim Duy is featured on Mark Thoma’s Economist’s View with his latest prognostication: “Fed Watch: Headed For Another Game of Chicken?“ Readers may recall that Duy provided a great analysis prior to the Fed’s last FOMC meeting, and concluded the Fed shouldn’t cut, which he took to mead the Fed wouldn’t […]
Read more...The story, “Support for SIV superfund grows,” in today’s Financial Times, is curious. Let’s give you the key bits and then go over why it’s odd: The plan for a $75bn superfund to buy assets from cash-strapped structured investment vehicles appears to be gaining support among sceptical institutions, amid concern that SIVs might start dumping […]
Read more...Nouriel Roubini, in his latest post, “With the Recession Becoming Inevitable the Consensus Shifts Towards the Hard Landing View. And the Rising Risk of a Systemic Financial Meltdown,” takes his somber views one step further and discusses the possibility of a crisis in some detail. Even by Roubini standards this is grim reading. I have […]
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