The Wall Street Journal and the New York Times report that Citigroup obtained funding through the end of the year for $80 billion of SIVs (for background, please see here and here). This development is newsworthy, since Citigroup had indicated it faced a crunch in November as commercial paper funding SIVs mature, yet the widely […]
Read more...An article in the Financial Times reports that a meeting to get more financial institutions to join the proposed SIV rescue plan, called the Master Liquidity Enhancement Conduit, or MLEC, didn’t go very well. Two revelations are surprising. First is that, despite indications in the Wall Street Journal that a few firms, including Wachovia, Fidelity […]
Read more...The prospective SIV bailout plan, officially called the Master Liquidity Enhancement Conduit (MLEC) or informally called The Entity, retreated a bit from the public eye yesterday as the perps, whoops, organizers, seemed to be focusing their energies on firming up arrangements so that they can announce progress and have the appearance of momentum. (if you […]
Read more...An excellent post by Angel Ubide, an economist for Tudor Investments as well as for the Center for European Policy Studies, at Vox EU (you need to click through to Telos to read the full text). He starts with a simple premise, that this crisis can’t be about liquidity because aggressive injections of liquidity haven’t […]
Read more...In the absence of an announcement by Citigroup, JP Morgan, and Bank of America on the structure of their proposed SIV bailout vehicle, the MLEC, today’s news consisted mainly of reactions by interested parties, many of which were revealing. However, there were a few substantive developments (then to the commentary). First was the leaking of […]
Read more...As we have discussed, the traditional and still most attractive way to deal with troubled borrowers, including mortgage borrowers, is to ascertain whether it is more attractive to modify the terms of the loan or foreclose. Quite often if the borrower has reasonably steady income, a workout is a better solution. However, in our Brave […]
Read more...At the Economics Club of New York, Fed chairman Benjamin Bernanke, gave a nuanced speech about the economy (meaning he showed as few cards as possible without pulling a Greenspan of hiding behind tortured sentence structures). But nevertheless a few revealing statements were made. The Wall Street Journal and Bloomberg both focused on his cautionary […]
Read more...Although the details of the planned SIV rescue program, the so called Master Liquidity Enhancement Conduit (MLEC) have yet to be announced, enough has been leaked to allow us to speculate with slightly greater confidence. Since this whole enterprise has a hall of mirrors quality to it, in the spirit of Lewis Carroll, we’ll start […]
Read more...In a fine comment in today’s Financial Times, Wolfgang Munchau argues that central bankers need to straighten out our current credit mess, since they created it in the first place. He argues that many of the alleged causes are actually secondary, and the underlying source was negative real interest rates, which is guaranteed to produce […]
Read more...While it’s risky to opine about a plan described only in sketchy rumors, what we have seen so far about the possible bailout plan for structured investment vehicles, the entities responsible for the unresolved problems in the money markets, doesn’t give us a great deal of confidence that this program will come into being (see […]
Read more...The recent record highs in stock market were presupposed on the notion that the credit crisis of the summer was now history and that growth would resume its former course. Investors chose to regard large writeoffs at UBS, Citigroup, Merrill, and Deutsche Bank as signs that they were all putting the problems behind them. That […]
Read more...Northern Rock has, for the most part, slipped from the attention of most Americans, and that’s a mistake, because the bank’s failure and resoluton is a useful object lesson. Admittedly, England has a different bank regulatory regime than the US. The biggest difference, until recently, was that retail deposits were only partially guaranteed and it […]
Read more...The Journal has redeemed itself a bit with a page one story, “The United States of Subprime.,” in which it seeks to understand what type of people would up as subprime borrowers. A caveat: I’m always leery of judging the quality of analytical work if I haven’t looked at the underlying methodology. One issue confounding […]
Read more...Joseph Stiglitz, in a comment in the Guardian (hat tip Mark Thoma), tells us he would rather have been wrong about the housing bubble. And he anticipates that, since direct and indirect spending related to housing accounted for two-thirds to three-quarters of US economic expansion since the end of the tech boom, the unwinding of […]
Read more...Ah, the thankless task of endeavoring to uphold sensible principles when events conspire against you. Mervyn King, the governor of the Bank of England, had to eat quite of a bit of crow in the Northern Rock bailout, when a mere two days after a submission to Parliament in which he criticized other central bankers […]
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