Apologies for the reliance on the Financial Times today, but it happened to have a lot of good material. The CEO of Harvard Management, Mohamed El-Erian, writes the occasional opinion piece, usually for the Financial Times, and I’ve always featured them because they are consistently thoughtful and well-argued. I’m highlighting his latest FT piece, “How […]
Read more...Ciitgroup CEO Charles Prince, in an exclusive interview with the Financial Times, said something I expect he will come to regret: Chuck Prince on Monday dismissed fears that the music was about to stop for the cheap credit-fuelled buy-out boom, saying Citigroup was “still dancing”. The Citigroup chief executive told the Financial Times that the […]
Read more...I’ll be brief in introducing this story on leveraged loans in today’s Financial Times, but you might also want to view its companion piece, a story on Citigroup CEO Chuck Prince’s remarks on this market. Leveraged loan prices are at their lowest point since the start of the Gulf War. Some see it as a […]
Read more...Reuters tells us that hedge funds that had previously steered clear of the Mexican mortgage backed bond market, deeming it to be too small, are now stepping up their investments there in the wake of US subprime problems. It won’t take much in the way of capital inflows to lower interest rates of Mexican MBS, […]
Read more...This story from MarketWatch describes another ugly aspect of subprime lending that is likely to get more press as foreclosures rise: minority groups with credit records that would have qualified them for prime loans were steered to subprime products at a far greater rate than their white counterparts. And the industry’s defense? Rogue brokers, of […]
Read more...It’s probably a character defect, but I get wound up when I read something that is directionally correct but then discredits itself by getting important facts wrong. The latest case in point is a Huffington Post post by Eugene Linden on “The Ecology of Toxic Mortgages.” It’s a more than usually frustrating example because 1) […]
Read more...Today’s Wall Street Journal, in “Mortgage Mess Shines Light on Brokers’ Role,” tells the sorry tale of one Altaf A. Shaikh, who frequently used the name Zak Khan and left a path of financial devastation in his wake as a subprime mortgage broker. This isn’t a great job of reporting. By focusing on one, and […]
Read more...That’s the question raised by the Financial Times’ capital markets editor Gillian Tett in a short update on rating agencies, and it’s an important one. As we discussed earlier, the credit markets have come to depend on rating agencies: If a terrorist were to blow up Moodys, S&P, and Fitch, it would have a devastating […]
Read more...As readers may know, I sometimes find marked differences in how the Financial Times and the Wall Street Journal report the same story, with the FT typically doing a much better job. In this case, I was underwhelmed by both papers’ coverage, but together they conveyed some useful information. Federal banking regulators (including credit union […]
Read more...There’s been plenty of discussion on this blog and elsewhere of the questionable role of rating agencies, particularly regarding collateralized debt obligations. Rating agencies are slow to downgrade weakening credits (if you are in the debt business, this is very old news), suffer from acute conflicts of interest in rating CDOs (they are a de […]
Read more...A Wall Street Journal article, “Subprime: Point to Where It Hurts,” endeavors to clarify the issues in modifying loans to try to save defaulting mortgage borrowers. Previous stories have mentioned that the fact that most residential mortgages go into mortgage backed securities makes it harder to change terms than in the old days, when the […]
Read more...Another day, another subprime casualty? The Caliber hedge fund was heavily exposed to 2005 subprimes, which is a new cause for pause, since heretofore, it was the 2006 subprimes that had shown the worst performance. But now troubles are showing up in the 2005 cohort. The UK fund isn’t as big as either of the […]
Read more...Barry Ritholtz gave some helpful tidbits about CDOs on his blog, The Big Picture. The source is the Bloomberg magazine (unfortunately only for those with terminals can subscribe). From Ritholtz (quoting Bloomberg); “Worldwide sales of CDOs—which are packages of securities backed by bonds, mortgages and other loans—have soared since 2003, reaching $503 billion last year, […]
Read more...We’ve been skeptical of inflation targeting, no doubt as a result of seeing Paul Volcker use monetary targets very effectively. Witness the proof of the pudding, namely, asset bubbles, deteriorating credit quality, and increasing inflation (at least in overall CPI, although core CPI is better behaved). But serious economists have only started looking into this […]
Read more...Credit Slips highlighted a recent Hudson Institute paper by Joseph Mason and Joshua Rosner, “Where Did the Risk Go? How Misapplied Bond Ratings Cause Mortgage Backed Securities and Collateralized Debt Obligation Market Disruptions.” It’s an excellent piece of work, and I recommend it to anyone who wants to understand more about the risks of mortgage […]
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