Unlike its US counterparts, the Financial Times has consistently been on top of the various unsavory elements of the credit market bubble: the near disappearance of risk premia, the growth of leverage on leverage, the lack of investor sophistication. A piece by John Plender does a very good job of connecting some of the dots […]
Read more...Although it’s the Dow’s new highs that get the headlines, the really speculative action is taking place in the debt markets. As we have discussed in past posts, lenders and bondholders have abandoned their customary caution and are accepting yields that many feel are inadequate for the risks involved, and are also waiving customary covenants, […]
Read more...The Financial Times appears to have scooped the Wall Street Journal, Bloomberg, and the New York Times on a Bank of International Settlements report due out today, which says that investment banks are too cozy with hedge funds and that isn’t very good for the financial system. The BIS report calls for greater disclosure of […]
Read more...Michael Panzner of Financial Armageddon provides a nice synopsis of the oft-unappreciated adverse consequences of securitization. One element that is not inherent but seems inevitable is that the profits in the transaction are front-loaded, taken more as fees and less as spreads over the cost of funding over the life of the transaction. As he […]
Read more...Last February, we questioned the wisdom of the headlong rush of Wall Street firms such as Merrill Lynch, Morgan Stanley, and Barclays to acquire subprime lenders, since it appeared that the distress in the market foretold not only a fundamental contraction but also more stringent regulation. Our skepticism appears to have been warranted. This weekend’s […]
Read more...The question of systemic risk, that is, the possibility of a generalized failure of the financial system, such as a stock market crash, is something that regulators think about a great deal and quite deliberately discuss a good bit less, since fear becomes a driving element in any market panic. The reason for the heightened […]
Read more...I am beginning to wonder whether there is a single statistic related to the state of the economy that can be trusted. The latest data point to bite the dust is the widely-quoted factoid that 13% of subprime mortgages are in default. Turns out not only is this number wrong, but the methodology used to […]
Read more...Bernanke normally adopts a measured tone and, as befits someone whose words can move markets, takes great care not to dwell too heavily on bad news. So it was suprising to see him issue a fairly pointed statement on risks to the banking system. His remarks on the perils of private equity loans, when taken […]
Read more...….and is growing, read “The Poverty Business” in BusinessWeek. The key factiod: Federal Reserve data show that in relative terms, that debt is getting more expensive. In 1989 households earning $30,000 or less a year paid an average annual interest rate on auto loans that was 16.8% higher than what households earning more than $90,000 […]
Read more...The headline above isn’t news per se, but someone reputable, in this case, Matt Fellowes and Mia Mabanta, have done the sleuth work of putting together the data to dimension the problem. The report says that the bottom quintile is “awash” with credit and now is one of the fastest growing segments. Ee found this […]
Read more...Fed Chairman Ben Bernanke has made an effort to be more transparent than his prececessor Alan Greenspan, but even Bernanke can be improved by translation. From Calculated Risk: Remarks by Fed Chairman Ben Bernanke: The Subprime Mortgage Market The recent sharp increases in subprime mortgage loan delinquencies and in the number of homes entering foreclosure […]
Read more...One of the issues facing any regulator is how to balance the interests of its various constituencies. Over the last twenty years, the pendulum has swung away from protecting consumers to promoting business interests. On some fronts, we are seeing pressures to move in the other direction. For example, the Vioxx case, which highlighted the […]
Read more...It was obvious that lenders were going to become more stringent, in a classic knee-jerk fashion, and now it is happening. From Calculated Risk:From O.C. Register: LendingTree lays off 20% of 2,200 workers LendingTree … laid off 20 percent of its 2,200 workers nationwide today, the company said. Rebecca Anderson, a spokeswoman for the company […]
Read more...That’s the bottom line of a smart and scary bit of analysis by Michael Shedlock of “Mish’s Global Trend Analysis.” And it confirms, even more dramatically than we imagined, the large and growing gap between the Fed’s reputation and its real power. The Fed is a close cousin to the Wizard of Oz. It hides […]
Read more...I happened to meet an official in the Fed’s Banking Supervision and Regulation division at a cocktail party this evening and chatted him up. He helped brief Roger Cole before met with the Senate Banking Committee last month to defend the Fed’s conduct regarding subprimes, so he is up to speed on this topic. Readers […]
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