A nice article in the Financial Times by Wolfgang Munchau, “Double jeopardy for financial policymakers,” discusses the Federal Reserve’s move to quantitative easing. There has been some mention of this in the media, as a Bloomberg story from last week indicates, but it hasn’t gotten the attention it deserves. The use of quantitative easing is […]
Read more...Ah, the US keeps inching its way into the behaviors of post-bubble Japan. The latest pending regulatory move it to reduce failures to deliver securities in the Treasury repo market, a vital source of short-term financing for banks and broker dealers. But the remedy under consideration would lead to negative rates on some repos. a […]
Read more...The New York Times has a solid bit of reporting tonight by Eric Dash and Julie Creshwell, “Citigroup Pays for a Rush to Risk,” that seeks to explain why the giant bank got itself in so much trouble. The piece points to the usual culprit, too much risk taking, but the particular Citi flavor was […]
Read more...After opening down (the Nikkei was down over 2.5%, the Hang Seng over 4%, Singapore over 1%), the specter of the US stock market blasting through two support levels in two days was treated, for now, as a thing of the past. In particular, the markets seemed to take cheer from the idea that Citigroup […]
Read more...Citibgroup’s stock price fell another 26% today to $4.71, bringing the week’s decline to 50%. The Wall Street Journal reports that the sudden decay is driving management to consider a radical restructuring of the company or an outright sale, moves that were deemed by management to be off the table as of a mere week […]
Read more...As the prospects for the economy deteriorate, the cost of default protection on corporate bonds hit a new high. From Bloomberg: The cost of protecting corporate bonds from default surged to records around the world as the prospect of U.S. automakers filing for bankruptcy protection fueled concern of more bank losses and a deeper recession. […]
Read more...Bloomberg tells us that JP Morgan has issued a report that contends that the Federal Reserve will cut its policy rate to zero by early next year. While this may prove to be correct, it certainly isn’t an obvious move. First, most central banks regard getting below 1% short term rates is dangerous territory. ZIRP […]
Read more...We’ve noted from time to time that one of the many reasons this downturn will prove to be exceptionally bad is not just that corporate defaults are likely to equal, if not exceed, past post-war peaks. Two new factors are at work that will hurt junk bond holders. First, many of the recent leveraged buyout […]
Read more...Reap what you sow. Over the last 20 years, the ever-aggressive Wall Street culture has moved even further towards prizing, and paying for, individual performance. Even at the famously team oriented Goldman, after the trading side of the firm became the dominant profit engine, top executives would reportedly describe the investment banking side as “socialist” […]
Read more...In the stone ages, when I worked for a short while at Goldman, it would have been unthinkable to trade openly against clients. But those proprieties were abandoned long ago. In 2007, the firm was unapologetic about its decision to short the subprime market (a big, perhaps the big reason for its departure from industry […]
Read more...I have not made a formal tally of Roubini’s various lists of why the economy is going (and will continue to go) to hell in a handbasket, but recent sightings suggest his typical list is eight to twelve reasons. However, in his latest missive, on the subject of why the consumer is toast, Roubini outdoes […]
Read more...It is remarkable (and admittedly late, but late is better than never) that Congress is developing a spine and pushing back at Hank Paulson’s unprecedented land grab. Even better they got mad at something that made your humble blogger nuts. Trust me, I am highly confident that no Congressional aide picked up on the issue […]
Read more...One of the underlying assumptions of the Fed’s and many other central banks’ response to the credit crisis is that it can be halted, and hopefully remedied, by having the government backstop the troubled financial sector. One template is not to repeat the supposed mistakes of the Great Depression and Japan’s post bubble era, where […]
Read more...What is intriguing about this article describing the likelihood of more synthetic CDO woes is that no one has a grip on how big a problem this might be and who might be exposed. From the Financial Times: Synthetic CDOs, the risky and complex debt products that are based on pools of corporate credit derivatives, […]
Read more...Heizo Takenaka, who held various posts in Junichiro Koizumi’s cabinet and is now director of the Global Security Research Institute at Keio University, provides a far reaching list of financial reforms. One can quibble with his count (he describes them as 11, but items one and four are two approaches to the same issue) and […]
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