During the tense months of the crisis, every so often there would be a story on the looming threat of mounting corporate debt defaults. With more than half the corporate bonds rated junk, thanks to highly-levered takeovers, it wasn’t hard to imagine that a protracted economic bad spell could lead to a lot of defaults. […]
Read more...By George Washington of Washington’s Blog. Inside the beltway and among mainstream economists, Larry Summers has the reputation of being a genius. But Australian PhD economist Steve Keen points out a huge gap in the thinking of Summers – and all neoclassical economists. Specifically, in an essay written today, Keen explains the weakness in the […]
Read more...Reader Scott pointed out this BankImplode story, “Exclusive – Wells Fargo’s Commercial Portfolio is a ticking time bomb.” I can’t verify it, but it sounded plausible and contained some juicy details: Wachovia, which Wells purchased last fall as it teetered on the brink of collapse, was so desperate to increase revenue in the last few […]
Read more...We’ve note during the well-warranted furor over the dreadful performance of rating agencies in assigning credit grades to structured credits, a business that was handsomely profitable to them, that it was difficult to limit their impact. Ratings are enshrined in all sorts of regulations, from the Fed’s haircuts on its discount window to its alphabet […]
Read more...There is a not bad piece at the New York Times on the fates of various ex-Lehman employees a year after the collapse. The story vividly if unwittingly illustrates the old saying that fish rot from the head. The people profiled were all involved in mortgage securitization, either directly or indirectly. Most seem unable to […]
Read more...Just as Larry Summers is pushing the message that the crisis is over and Team Obama deserves credit, IMF managing director Director Dominique Strauss-Kahn is telling the media the reverse, that the crisis is far from over. From Reuters: “The global economic crisis will continue, even if Germany and France had some good figures in […]
Read more...The Financial Times tonight reports that Goldman CEO Lloyd Blankfein made “startling” remarks in Germany, for instance, that a lot of banking activity is rather thin on redeeming social value. Oh, and he admitted bankers might be paid too much, too. Gee, with revelations like that, what might he to ‘fess up to next? That […]
Read more...The Japanese approach regulation very differently from the way Americans do. First, just about nothing is codified in writing. Lawyers are few and far between (by design, the bar exam is difficult to pass). If you try to get an opinion on whether a new idea will pass muster, you are certain not to get […]
Read more...T. S. Eliot was right. Human beings cannot stand very much reality. As much as I have an appetite for bearish views (I figure the optimist case gets disproportionate air time), the headline of Ambrose Evans-Pritchard’s latest piece, “Our quarter-century penance is just starting,” is grim even by the standards of the bearish faithful. Evans-Pritchard, […]
Read more...Clearly, the spin is in. As a post earlier today discusses, the Financial Times is running a story that claims that the Fed made money on its rescue programs, then slips in all the tidbits in the body of the article to let discerning readers know that the reporter understands that the analysis is utter […]
Read more...Barney Frank is joining the “rein in the Fed” party, with a key distinction: he wants to steer clear of messing with the central bank’s independence in monetary affairs. Thus, the call for a Fed audit ex that activity is not surprising. However, a possible new front is that Frank also wants to place some […]
Read more...Even if you don’t get a thrill from looking at spectacular car wrecks, one reason to take interest in the Lehman bankruptcy is that it may get at issues that regulators seem remarkable loath to address, namely, how did a company that reported positive net worth and not a single big firm equity analyst ever […]
Read more...Paul Volcker clearly wasn’t kidding when he said the most important banking innovation in the last 30 years was the ATM. Although money market funds go back further than that, to the early 1970s, Tall Paul is not so keen about them either. This isn’t the first time he had gone after money funds, and […]
Read more...Well, Ken Rogoff does not do a Shakespearean turn, but he makes a badly needed observation in his latest piece at Project Syndicate, namely, that pinning a lot of blame for the crisis on the Lehman collapse is a faulty analysis. And he picks up a pet theme of ours, that patching up the system […]
Read more...Oh, there is nothing like a global retreat of liquidity to reveal who was wearing a swimsuit. And what wags like Warren Buffett fail to add, when a lot of people were found to be unclad, you also get to see who looks best of a typically not so fetching bunch. In this case, California […]
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