Mortgage applications are up sharply as homeowners try to take advantage of low 30 year fixed rates. But tighter lending standards means that a fair number will be disappointed. Moreover, the surge in mortgage applications is for refinances rather than new home purchases. And while refis will indirectly help the economy by increasing consumer discretionary […]
Read more...Proponents of mortgage modifications contend that the cost of even a deep principal reduction still puts the lender ahead of foreclosure, and experience in past real estate downturns would bear that contention out. So why is this time different? Data from the Office of the Comptroller of the Currency show that 55% of mortgage mods […]
Read more...Well, what we all suspected has now been made official. From the New York Times: Mr. Paulson and other senior advisers to Mr. Bush say the administration has responded well to the turmoil, demonstrating flexibility under difficult circumstances. “There is not any playbook,” Mr. Paulson said. Why am I not surprised to see that what […]
Read more...US economists have relentlessly harangued the Japanese for their supposed mismanagement of their post bubble era, which has lead to nearly 20 years of low growth, borderline deflation, with a not-much-discussed, robust export sector. Along with others, we complained in the early days of the Fed/Treasury emergency response that they were taking one of the […]
Read more...Why is no one willing to call things by their proper names, and instead resort to euphemism and double-speak? A New York Times story today, “On Wall Street, Bonuses, Not Profits, Were Real,” makes its most important point in its headline, and managed to get some good data points on how rich investment bank compensation […]
Read more...We have from time to time chronicled how various Treasury and Federal Reserve interventions have produced unintended, undesirable consequences. The latest example: the Fed’s efforts to push Treasury rates into ZIRP-land is reducing the incentives of traders to repo Treasuries to each other. That then reduces liquidity in the Treasury market. Consider the boldfaced statement […]
Read more...The Fed made official its move to quantitative easing today, and said it will take no prisoners until it has lowered rates and credit spreads further: The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability… The focus of the Committee’s policy going forward […]
Read more...There is a rather amusing story at the Financial Times tonight, “Credit card reforms ‘to cost banks billions’”. Let’s look at the particulars. The story is based on a study by law firm Morrison & Forester which concluded that banks will suffer a world of hurt if they are forced to give up practices like […]
Read more...In more normal times, when a company faces the risk of bankruptcy but believes it has a viable business, it files for Chapter 11 and works out a deal with its various creditors. To keep functioning (and paying its lawyers) while the court proceedings are in motion, large companies have resorted to debtor-in-possession financing. The […]
Read more...The Wall Street Journal, in a typically anodyne bit of reporting, tells us that the Fed is considering selling its own debt to finance its balance sheet, Its good old buddy, the Treasury Department, which heretofore has been selling bills in part on behalf of the Fed, now has a big enough financing calendar in […]
Read more...The Wall Street Journal reports in a story frustratingly sketchy on key details that AIG has sprung another leak, or more accurately, had an ongoing leak that has just now come to light. The amount at issue, $10 billion, seems small compared to the $150 billion the insurer has already managed to extortsecure from the […]
Read more...By way of background, we posted this on November 27: How can you give cash compensation to an executive, yet claim it is not a salary or bonus? You call it a “retention bonus,” No, I am not making this up. Note that AIG chose to make this disclosure the day before Thanksgiving, selecting a […]
Read more...As credit default swaps have come in and out of focus over the last year, I have been struck by the assumption that this product would of course continue to exist. I have trouble seeing their legitimate uses. In theory, they could allow banks to diversify and hedge credit risks better, but once risks rise […]
Read more...One thing I have found troubling is the near-unanimity in the US that we must Do Something about the burgeoning economic crisis, and that Something is big time monetary and fiscal stimulus. Near unanimity is almost never a good thing in the political and policy realm, since conditions and options are sufficiently complicated so as […]
Read more...One of the arguments made by bottom-fishers is that not only are stocks “oversold” (a technical notion that reflects recent trading activity, such as trading volumes, price in relationship to various moving day averages) but are also cheap based on fundamental notions of value. We have been somewhat leery of any long-term valuation notions given […]
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