John Cassidy, and following him, Felix Salmon. took aim at Ben Bernanke’s testimony last week at the Financial Crisis Inquiry Commission explaining why the central bank and Treasury stood aside in Lehman’s extremis. The problem is that both get two fundamental, and critical facts wrong, and that error makes the rest of their claims dubious. […]
Read more...During the global financial crisis, after each acute phase, there would be a period of relief in which conditions returned to a semblance of normalcy, and policymakers and investors carried on as if acting as if all was well would make it so. Unfortunately, positive thinking provided only temporary relief from the undertow of rising […]
Read more...This post first appeared on March 24, 2008 The comments in the Financial Times by Yoshimi Watanabe, Japan’s financial services minister, are extraordinary. He ventured to give the US advice on its credit crunch based on Japan’s experience during its post-bubble-years banking crisis. And it’s not pretty. Why are these remarks so unusual? Consider: Most […]
Read more...This post first appeared on March 13, 2008 Never expect a group with members ideologically opposed to regulation to come up with a wide ranging reform program, no matter how badly one is needed. An individual can have a Nixon-goes-to-China moment, but not a committee. Later today, no doubt with great fanfare, Hank Paulson will […]
Read more...This post first appeared on March 11, 2008 Oooh, the week has barely started and we’ve already had an overdose of adrenaline-generating news. Thornburg Mortgage and Carlyle Capital, both twisting in the wind, battered by margin calls, look unlikely to escape bankruptcy (Thornburg has already defaulted on financing agreements; Carlyle is seeking a standstill). Freddie […]
Read more...By Yeon-Koo Che, Professor of Economic Theory at Columbia University, and Rajiv Sethi, Professor of Economics, Barnard College, Columbia University, cross posted from VoxEU The role of naked credit default swaps in the global crisis is an ongoing source of controversy. This column seeks to add some formal analysis to the debate. Its model finds […]
Read more...Chris Whalen has a particularly tough-minded post at Reuters in which he explains why QE does little for the real economy (similar to the conclusions reached by the Bank of Japan regarding its own QE) and why its benefits for banks fade over time. Key sections: When interest rates are low, savers move their preference […]
Read more...The English language needs a new word to describe the nature and degree of disconnectedness from reality represented by Dick Fuld. He occupies a weird funhouse realm in which he did no wrong, those mean people in DC and the evil shorts brought down a viable enterprise. Remember, this is the man who certified financial […]
Read more...A key paragraph in a post on a new paper by Jim Hamilton: We can summarize the implications of that forecast in terms of the following scenario. Suppose that the Federal Reserve were to sell off all its Treasury securities of less than one-year maturity, and use the proceeds to buy up all the longer […]
Read more...This post first appeared on February 22, 2008 Man, not only does the Administration tell whoppers, but it is completely shameless about them. The latest sighting comes from Reuters: Treasury Undersecretary Robert Steel told the Reuters Housing Summit it is proper for homeownership to hold a special status…. “If I default on my credit card […]
Read more...It’s often the travail of a blogger, and small media generally, to have its story picked up by bigger fry without acknowledgment. But it’s one thing when a writer suspects having made a contribution to another’s story (there is, after all, the possibility of parallel inquiries bearing fruit on different timetables); quite another to have […]
Read more...A few days ago, we noted: When an economy is very slack, cheaper money is not going to induce much in the way of real economy activity. Unless you are a financial firm, the level of interest rates is a secondary or tertiary consideration in your decision to borrow. You will be interested in borrowing […]
Read more...There’s been an interesting dialogue between Streetwise Professor and Deus ex Macchiato on the matter of the practical impact of the pending Basel III rules, which will rejigger, in a pretty significant way, bank capital requirements (see here and here for details). The reason Basel III matters is that the Treasury has been touting it […]
Read more...This post first appeared on November 16, 2007 A colleague was so kind as to send me the text of a speech given at the Graham & Dodd breakfast a few weeks ago by David Einhorn, CEO of hedge fund Greenlight Capital. The speech has gotten play only in some personal-investment-oriented blogs like Seeking Alpha […]
Read more...The Jackson Hole conference starting today is expected to include a talk by Ben Bernanke on the benefits and costs of further monetary easing, which in ZIRP-land means quantitative easing. Gavyn Davies put up a good short list of arguments made against QE at the Financial Times, and most do not look terribly persuasive. One […]
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