In a bit of synchronicity, it seems that some mainstream commentators are starting to to take interest in a topic we’ve commented on in recent weeks, namely, how the difficulty in getting letters of credit is playing a significant role in the contraction in international trade (see our related post earlier today). John Dizard in […]
Read more...While none of the changes in interest rates were dramatic, and both interbank rates and stress levels remain elevated, improvement continues and all the metrics moved in the right direction. From Bloomberg: Money-market rates in London declined as cash injections by European central banks showed signs of easing the paralysis among lenders. The London interbank […]
Read more...We have written before how many of the various government interventions to try to produce specific outcomes in financial markets have either not proven very successful or produced adverse outcomes elsehwhere. The latest example is the Fed’s new program by which it is buying commercial paper, a form of short-term corporate debt, directly from companies […]
Read more...Morgan Stanley’s money market funds were hit by major redemptions in September, and the firm stepped in to fund half of the withdrawals itself, presumably out of a view that selling the underlying fund assets into a deteriorating market would only lead to distressed prices. But one has to wonder whether the positions that Morgan […]
Read more...We have noted before that the officialdom in the US has been remarkably less than candid (one might say outright dishonest) in discussing the likely trajectory of the financial crisis and economic growth. No one is willing to state the obvious, for instance, that banking crises lead to reductions in living standards, even though consumers […]
Read more...Hyperbole has become a mainstay of discourse in the US. The upcoming financial summit set for November 15 in Washington DC is being wrapped in the Bretton Woods brand, when it appears to be a different sort of beast. As a Wall Street Journal story reminds us, Bretton Woods was a three week session among […]
Read more...Ah, when you thought the news from equity markets was bad enough, we get a second helping on the interbank front. From Bloomberg: The cost of borrowing in dollars overnight in London rose as the increased likelihood of a global recession spurred banks to hoard cash even after policy makers pumped record amounts of the […]
Read more...I had warned readers against assuming that because we had a bounce in the equity markets, that life would soon return to normalcy (“It Isn’t Over Until the Fat Lady Sings“). But I didn’t expect a rout like this, particularly with no looming news trigger. The yen has gone to 91. The Nikkei was down […]
Read more...In case you weren’t keeping tabs (the number and variety of handout-recipients grows with every passing day), AIG was first given a loan (really, akin to a maximum borrowing authorization) of $85 billion with much fanfare and high drama, which was later quietly increased by another $37.8 billion. In the last ten days, AIG has […]
Read more...Regulators in Taiwan ordered insurers to limit their holdings of Freddie, Fannie, and Ginnie Mae paper. The stated reason was that they could not assess the credit risk and could not rely on published ratings. The explicit repudiation of rating agency ratings seems to be the first move of this type. and may be the […]
Read more...In theory, moving credit default swaps from over the counter trading to exchange trading should reduce systemic risk. Exchanges fail far less often than individual institutions, and when they do, the damage has less propensity to propagate into a systemic event. As keen as the authorities are to get the big, opaque CDS market on […]
Read more...The New York Times is publishing a series on the financial crisis, “The Reckoning,” and today’s installment is “Struggling to Keep Up as the Crisis Raced On.” While this is a useful recap, there are some tidbits that merit commentary, such as: “Ben said, ‘Will you go to Congress with me?’ ” said Mr. Paulson, […]
Read more...Most eyes were on the plunging equity markets today, and the rating agencies must be plenty glad for the air cover. The House Oversight Committee unearthed some real dirt today. From CNBC (hat tip reader Michael): In a hearing today before the House Oversight Committee, the credit rating agencies are being portrayed as profit-hungry institutions […]
Read more...Wow. I am going from memory, but I am pretty certain that this is the mother of all quarterly financial services losses. And remember, Wachovia is merely a pretty big US bank, not a global capital markets behemoth like UBS, Deutschebank, or Citi. From the Wall Street Journal: Wachovia Corp. swung to a large third-quarter […]
Read more...Overnight Libor showed marked improvement, but with the big worry has not been availability of funding overnight, but the willingness of banks to lend to each other at longer tenors, particularly thirty to ninety days, and the ability of corporations to sell commercial paper at those maturities. Libor continues to improve, but the gains overnight […]
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