Let’s see, the credit default swaps market, due to some netting, is now somewhere north of $30 trillion (as opposed to its earlier “north of $60 trillion” level). Investment banks were believed to have hedged most of their exposure via offsetting contracts, but AIG wrote naked protection. And as jAIG itself is at risk of […]
Read more...Apologies for the terse posts tonight; out of town, will be lighter than usual today and tomorrow. The Financial Times has been keeping tabs on the results, or perhaps more accurately, the lack thereof, of collateralized debt obligations. A couple of weeks ago, it highlighted research by Morgan Stanley and Wachovia that concluded that nearly […]
Read more...I wish I had the time to analyze this deal, but my travel schedule is cutting into blogging time, In addition, I don’t have a feel for whether the units mentioned in this article are merely suffering in accord with the crappy financial environment, or may have suffered additional, perhaps lasting damage. Two observations: First, […]
Read more...Sports fans, your humble blogger earnestly endeavors to keep up with the machinations of of big financial firms to extract rents from the poor chump taxpayer, usually by invoking scary images of the financial version of nuclear winter. Since we seem to be heading there anyhow, I’m at a loss to explain why these tactics […]
Read more...In a post yesterday, some readers bandied about the idea of developing some reasonably thought out proposals for “nationalization” or “receivership” or “pre-privatization”, possibly on an open source model of some sort. (Aside: those who know how Linux was developed know that it wasn’t free form; Linus Torvalds exercised control, one might think of it […]
Read more...Dear readers, this is a bit of an experiment (think of it as the econblog analogy to open source). When Geithner presented his bank plan, such as it was, I was particularly disgusted by the “public/private partnership plan rubbish. It struck me as a costly way to paper over the irresolvable conundrum with Paulson’s two […]
Read more...Lordie, is this crowd in denial? From the Wall Street Journal (hat tip reader Dwight): Amid fears that Citigroup Inc. and Bank of America Corp. could be on the verge of being nationalized, the White House gave assurances that it prefers banks to remain out of the government’s hands. “This administration continues to strongly believe […]
Read more...I’ve been asserting for some time, based on the comments from mortgage counsellors, that mortgage mods that do not substantially reduce principal balances don’t make enough of a difference to the borrower to change outcomes. And with banks and servicers looking at 40%+ losses on many foreclosures, they can reduce principal a lot and still […]
Read more...Some readers may take issue with the headline, but bear me out. Within ten days of 1987 stock market crash, President Reagan established what was popularly called the Brady Commission to investigate the causes of the meltdown and recommend remedies. A little more than two months after it was created, the Commission submitted its report. […]
Read more...One of our beefs has been the lack of any progress, even interesting trial balloons, on the financial firm reform front. And that’s a serious problem. Economists like to point to the Great Depression as the textbook example that fiscal stimulus works. FDR launches a bunch of spending plans, and voila, by 1936, the economy […]
Read more...Just when you thought most of the bad news was out in the open, another ugly problem raises its head. Remember collateralized loan obligations? They last got press because investment banks were stuck with a whole bunch of them as unsold inventory, and their erosion in value was wreaking havoc on investment bank balance sheets. […]
Read more...We’ve commented from time to time that a possible financial flashpoint is countries that got themselves in the same fix as Iceland , of having a banking sector engaged in the generally risky practices that were standard form recently, and was outsized relative to the economy (Willem Buiter also points out that that precarious situation […]
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Read more...I cannot recall a major US policy initiative being met with as much immediate revulsion as the so-called Geithner plan. Even the horrific TARP, which showed utter contempt for Congress and the American public was in some ways less troubling. Paulson demanded $700 billion, nearly $200 billion bigger than the Department of Defense, via a […]
Read more...The Milken Institute has released a new report on the housing/credit crisis, which is a preview of a book to be released this spring (hat tip reader Dwight). What I found particularly interesting, given the Institute’s conservative leanings, is that the policy recommendations were on the whole, middle of the road. They acknowledged the need […]
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