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 […]
Read more...The Fed is throwing a massive lifeline to money market funds AFTER the crisis has passed and investors are entering the pool again on their own. Consider today’s story from the Financial Times: The US Federal Reserve on Tuesday said it would finance up to $540bn (€410bn) in purchases of short-term debt from money market […]
Read more...Bloomberg reports that the most closely watched measure of bank willingness to lend to each other, Libor, showed yet another decline today, a signal that money markets are continuing to mend. The article further noted that today’s is the best since the Lehman failure. That is tantamount to saying the patient is the best he’s […]
Read more...Big caveat: even though we have very strong opinions, we do not give investment advice. What we provide (aside from commentary) might be regarded as investment hazard warnings. You may nevertheless decide to go ahead after reading what we offer, but we hope you will proceed with caution. One thing most investors fail to realize […]
Read more...The blow to many Americans’ net worth via diminished home values and shrunken retirement accounts has lead to a new found insecurity and conservatism. Not only have consumers reined in spending, but they are reported to be suddenly worried about the debt levels and financial buffers. This change in sentiment is aided and abetted by […]
Read more...Hedge funds continue to create considerable dislocation as they dump positions to meet redemption requirements. For instnace, a major downdraft in gold this week occurred in a very short time frame and is almost certain to have resulted from an investor selling some large holdings. With even larger redemptions expected this quarter, all sorts of […]
Read more...South Korea announced a series of drastic measures intended to halt a run on its currency. From Bloomberg: South Korea will guarantee as much as $100 billion in bank debts and supply lenders with dollars to stabilize the financial markets. The government will also provide tax benefits for long-term equity and bond investors, while the […]
Read more...This comes from Adam Levitin at Credit Slips: There are lots and lots of differences in the financial institutions situation of the Depression and today. And yet there are some remarkable parallels in the problems and government responses. We shouldn’t overread parallels as predictive matters. But some of them are pretty astounding: Banks in the […]
Read more...What is remarkable about this forecast for deflation is that, unlike the US, which just posted flat consumer prices in September, the UK’s recent inflation reports have still been in strong positive territory. Just as its housing market went into a sudden downdraft, Britain’s retail prices are projected to go sharply into reverse. From the […]
Read more...Even though much has been made of itty bitty falls in Libor from very elevated levels, leaving Libor still at very elevated levels, we have a sign that the massive efforts of commercial banks to lubricate the money markets is finally having an effect. 30 day commercial paper rates eased meaningfully, although they still remain […]
Read more...AIG is becoming a recidivist petitioner for government largesse. First it was $85 billion, then another $38 billion, and now the giant insurer also wants access to the Fed’s commercial paper facility. From Bloomberg (hat tip reader Steve): American International Group, the insurer that agreed to a government takeover in exchange for a federal loan, […]
Read more...As we have noted often, in tightly coupled systems like our modern financial regime, efforts to contain risk typically make matters worse. As Richard Bookstaber explained in his Demon of Our Own Design, there are two reasons for this phenomenon. First is that processes move through a series of steps that cannot be interrupted, so […]
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