One of the many problems we had mentioned from the outset with the proposed SIV rescue plan, the Master Liquidity Enhancement Conduit, was timing. Given that it was a new program that hadn’t even been structured, the proposed 90 day timetable to launch looked unrealistic and even then also appeared to run the risk of […]
Read more...Royal Bank of Scotland estimated that investment banks will be forced to take $100 billion in writedowns as a result of the implementation of new accounting rules that restrict their latitude in valuing financial instruments that cannot be priced readily. Citigroup alone has $135 billion in so-called Level 3 assets, and that number rose by […]
Read more...The Financial Times appears to have broken a story (nothing similar yet on Bloomberg, the Wall Street Journal, or the New York Times), “Risk of securities fire sale mounts,” reporting that the structured investment vehicle rescue plan, the so-called Master Liquidity Enhancement Conduit (MLEC) is suffering from delays and failure to expand its support beyond […]
Read more...Various analysts and reporters took keen interest in Citigroup SEC filing Tuesday that revealed that the bank had deployed $7.6 billion of a total $10 billion liquidity facility to assist its floundering structured investment vehciles (SIVs), but stated it does not believe it has to consolidate the SIVs. CreditSights estimated that Citi’s losses on asset […]
Read more...The recent excesses of the financial services industry seem to be coming home to roost at the same time. Just when the arcane paper that sold like hotcakes a mere few months ago is now languishing in dealer inventories, so to is coming accounting treatment that gives the firms far less latitude in how they […]
Read more...Breaking news over a weekend is rare indeed, so the financial press is having great fun with the demise of now former Citigroup CEO Charles Prince, speculating over his likely replacement and possible futures for the financial giant. Some are calling for a break-up, and news stories suggest that interim chairman Robert Rubin has long […]
Read more...The question posed in the headline isn’t exactly the one Gillian Tett and Paul Davies address in a long and worthwhile analysis at the Financial Times, “What’s the damage? Why banks are only starting to uncover their subprime losses.” But that’s because, as the piece make clear, we are only at the end of the […]
Read more...An excellent post at Vox EU, “Subprime crisis: the policy response and filling the information gap,” by Alberto Giovannini, Chief Executive Officer, Unifortune SGR SpA, and Luigi Spaventa, Professor of Economics at the University of Rome. The article gives a nice recap of the credit crisis and focuses on regulatory failure. It zeros in on […]
Read more...Maybe I am getting a bit burned out. I almost took a night off because I couldn’t get worked up as I normally do about the stories du jour. Yes, Chuck Prince is expected to resign on Sunday. I’m surprised he lasted this long. He was over when he made his now-infamous remark: When the […]
Read more...The National Bureau of Economic Research has just published a new paper, “Bankruptcy Reform and Credit Cards” by Michelle J. White, which has a pretty distressing set of findings. Readers may recall that that the bankruptcy law changes put into effect in October 2005 had been sought by the banking industry for years. They increased […]
Read more...The market for asset backed commercial paper continues to shrink, which does not bode well for the proposed SIV rescue plan. Commercial paper is short-term funding, less than 270 days, used by corporations and even more so by financial firms. Note that this story on MarketWatch focuses on ABCP outstadings. The dramatic Fed rate cut […]
Read more...The negative reactions on the proposed SIV rescue plan (officially known as the Master Liquidity Enhancement Conduit) have become so widespread that I haven’t been reporting as closely on this topic as I did earlier. However, some of the recent coverage has finally surfaced at least one reason for the plan that at least makes […]
Read more...I had wondered why, given the swift and brutal contraction of the commercial paper market in August and September, that there weren’t more apparent signs of distress. Outstandings fell an eyepopping $368 billion. Commercial paper is short-term borrowings, maximum 270 days, but typically much shorter. If a borrower can’t roll his commercial paper but still […]
Read more...As most readers probably know, subprime mortgage broker/lender Countrywide Financial’s CEO Angelo Mozilo, which posted a massive loss for its third quarter, predicted a return to profit this quarter. Not only did the stock rise 32% that day, but CFC’s announcement was perceived to be such good news that it gave the stock market a […]
Read more...I am beginning to feel like announcer at a prizefight where it’s obvious that one boxer is hopelessly outmatched, but the contest will still go a full twelve rounds due to the stubbornness of the underdog and the failure to land a knock-out punch. The SIV plan continues to take body blows, the supporters appear […]
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