James Hamilton provides a nice, succinct explanation of why the crisis in the credit markets is not a bank run (the afflicted organizations are not banks) yet has the characteristics of a bank run. It’s a useful piece for explaining, as he did at Jackson Hole, why the problem isn’t remedied by interest rate cuts. […]
Read more...As concern about tightening conditions in the credit markets and the continued erosion of the US supbrime and broader housing market has grown, so too have calls for Extreme Measures to combat these snowballing problems. The first was from Bill Gross at Pimco, who suggested that the US government “rescue” the 2 millionish homeowners who […]
Read more...Experts warn that the boom in commercial real estate prices, fueled by cheap credit, is going sharply into reverse. Fitch had noted as early as April, and again in July that commercial real estate lenders were engaging in the same lax practices that led to grief with subprimes: 0% down, overly optimistic projections, deal terms […]
Read more...It’s always dangerous for mere mortals to take issue with Serious Economists, but let’s start with Brad DeLong’s thesis (hat tip Mark Thoma): The fact that there is even a small liquidity crunch for banks implies larger liquidity crunches for less intensively regulated financial institutions, and even greater liquidity crunches for manufacturing and real-estate companies. […]
Read more...John Dizard, in today’s Financial Times, tells us why, despite the fact that a lot of fixed income paper is on offer at very cheap prices, no one seems to be stepping to the plate. And his explanation bodes ill for things turning around very soon. The simple story is that even though the buys […]
Read more...Bloomberg tells us that the Fed and the Treasury made a joint statement today asking mortgage servicers to take a more proactive stance, identify borrowers in danger of gong into default, and offer loan modification. Tanta at Calculated Risk provided a link to the “ Interagency Statement on Loss Mitigation Strategies for Servicers of Residential […]
Read more...Ah, fall is upon us, and with it comes the spectacle of renewed discussion of what to do about the snowballing subprime/housing mess. Members of Congress will compete for air time to Bemoan the Situation, Search for the Guilty, and Throw Money at the Problem. Note there may occasionally be thoughtful analysis and sensible regulatory […]
Read more...Financial Times columnist Wolfgang Munchau, in “Prepare for the credit crisis to spread,” tells us that the credit crunch is likely to get worse, since credit problems will spread to credit card receivables and car loans, both of which are typically securitized, and collateralized loan obligations (read takeover debt) also look shaky. Munchau argues that […]
Read more...Apologies for the heavy reliance on the Financial Times today, but the pickings elsewhere are meager indeed. The FT has an interesting juxtaposition of stores on its website tonight. The lead story, from the Fed’s Jackson Hole conference, reports that Bundesbank President Axel Weber described the current credit crunch as resembling a bank run, but […]
Read more...Jim Hamilton should get an award for his remarks today at the Federal Reserve’s conference at Jackson Hole. His talk sought to step away from the issue du jour, namely what if anything, to do about housing, and look at larger structural and regulatory concerns. He brought up uncomfortable issues, in particular, the rising level […]
Read more...John Authers of the Financial Times, in “Market vultures await more blood,” tells us that bottom fishers have been taking a wait-and-see attitude towards the recent market turmoil. While they’ve been able to make handsome profits on certain trades based on the (until a couple of months ago) underpricing of risk, the distressed merchandise pros […]
Read more...Bloomberg and the BBC report that Barclays, the third largest bank in the UK, borrowed “as much as ” 1.6 billion pounds ($3.2 billion) from the Bank of England. The bank claimed it fell short of caah due to an error in its trade processing system, and it discovered the need for funding too late […]
Read more...The Wall Street Journal, in “Bush Moves to Aid Homeowners,” reports that today the President will set forth a program to help stressed borrowers at risk of losing their homes. Main elements: Allowing the FHA to guarantee loans to borrowers who are at least 90 days behind on their mortgages but still living in their […]
Read more...I hope you don’t think this blog is in danger of becoming the “all Fed, all the time” channel, but this is an otherwise slow news period and central bankers are very much in the spotlight. Willem Buiter has a long post on his blog which discusses the Fed’s limited independence compared to other central […]
Read more...Bloomberg tells us that the commercial paper market is shrinking rapidly.This is a more serious issue than might appear. Commercial paper is an important, if not the most important, source of short-term funding for sizable corporations, mainly because it’s cheap and flexible. They can reading adjust the amount outstanding to reflect changes in their need […]
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