As readers may know, secured lenders make loans against which specific assets are pledged. For consumers, mortgages and car loans are examples. If you default, the lender can seize the asset and sell it to try to recoup. In bankruptcy, secured lenders are normally the top of the food chain, but in the Chrysler bankruptcy, […]
Read more...One of the arguments apparently being made in Washington by those who oppose regulation of credit default swaps is that it would reduce liquidity and that of course would be a terrible thing. My impression is that no one has endeavored to put metrics on this assertion (as in how and where liquidity would be […]
Read more...The latest leak, arriving curiously after the markets closed, is that the Treasury wants Citigroup to raise $10 billion as a result of the famed stress tests, which the bank is fighting tooth and nail. Another rumors circulating in the media Is that Bank of America is being asked to convert $45 billion of preferred […]
Read more...Well, that isn’t exactly how the Financial Times’ Martin Wolf put it, but his comment today does carry a sobering message. Bank balance sheets need a tremendous amount of additional shoring up. Some not too pretty factoids: We appear to be less than halfway through writedowns, and the fundraising and recapitalizations to date are falling […]
Read more...The chicanery never ends. The latest bit of looting fobbed off as a win for homeowners is a program to shovel money to second mortgage lenders: The Obama administration unveiled a new program to help borrowers with second mortgages stay out of foreclosure, offering cash to servicers, investors and borrowers who modify loan terms. Guess […]
Read more...As readers may know, I view the credit default swaps market with more than a bit of skepticism. I can point to cases where it has caused harm: 1. Bagholders. Dealers claim that CDS are really not bad at all because they haven’t been taking risk, oh no, they hedge their position with offsetting swaps. […]
Read more...One thing that has me troubled about the financial mess is the degree to which the powers that be are wedded to a system that it clearly broken. In part, that results from financial capture of the government apparatus by the banking industry. But an equally sticky problem is the attachment to a rather recent […]
Read more...The Administration is trying to look like it is not rolling over to banks’ demands on the issue of repayment of TARP money. But despite the tough-ish talk, the problem described by John Gapper remains. Whether the bank pay back the TARP or not, they and the wider world clearly know that they will not […]
Read more...James Kwak, discussing a recent Bernanke speech defending financial innovation and a Ryan Avent post parsing it, underscored Avent’s observation that Bernanke had trouble coming up with an example of the sort that the financial services had in mind these days (ie, novel products making use of derivatives and other risk slicing, dicing, and distribution […]
Read more...We’ve had plenty of company in voicing doubts about the Treasury’s so-called stress tests of the 19 biggest banks. To quickly recap the main issues: The bank will run the tests themselves, using the same risk models that caused the mess. With only ten examiners on average per bank, and most of the banks having […]
Read more...I suppose I should take anything said by Goldman in general, and its CFO David Viniar, with a fistful of salt. This is the man who during the October-November meltdown, attributed the poor performance to the fact that they were seeing “25 sigma events, several days in a row.” That show such manifest ignorance as […]
Read more...This could get interesting. The Financial Times tells us that Neil Barofsky, the special investigator general for the TARP, is looking whether banks cooked their books by overvaluing assets to qualify for TARP funding, Remember, bank had to fall into this funny construct of being sick enough to need help, but not so sick as […]
Read more...I’m late to this good post from Steve Waldman, which has some provocative ideas about how stringent bankruptcy laws should be. He contends that the current regime is too friendly to creditors, which means they can and do make overly optimistic assumptions about recovery, which in turn makes them too ready to take risks. We’ve […]
Read more...Should this even qualify as news? From the New York Times: For the last eight weeks, nearly 200 federal examiners have labored inside some of the nation’s biggest banks to determine how those institutions would hold up if the recession deepened. What they are discovering may come as a relief to both the financial industry […]
Read more...Willem Buiter takes no prisoners, In his latest post, “The green shoots are weeds growing through the rubble in the ruins of the global economy”, he dispatches the idea that recovery is around the corner (citing Carmen Reinhart and Kenneth’s latest paper on the resolution of financial crises) and points out that the fiscal state […]
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