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 […]
Read more...How did I miss this PM news item? It appears not to have gotten the attention it deserves. The list of aspirants to gorge themselves at the government feeding trough gets larger with every passing day. The latest addition is the bond insurers. As far as I am concerned, they are hugely undeserving. The world […]
Read more...More cheery news on the credit crunch front. Readers may recall that AIG entered into what was initially an $85 billion and was later increased by $38 billion with no further strings attached. The terms of the initial loan are pretty punitive, with the government loan having a two year term, a high coupon, and […]
Read more...Ed Harrison of Credit Writedowns alerted us to the impact on collateralized debt obligations, which have been crowded out of the headlines as a source of worry by other credit market train wrecks, like the failure of Libor to show much movement despite heroic central bank interventions. Note that the Iceland-related damage applies to a […]
Read more...The Financial Times reports that the freeze on depositor withdrawals at Russian bank Globex is leading to high levels of withdrawals at other Russian banks, which doesn’t qualify as being a run…..yet. From the Financial Times (hat tip reader Michael): Globex on Wednesday banned depositors from withdrawing their money as confidence in the Russian banking […]
Read more...The collapse in the Baltic Dry Index continues. As we have noted before, the inability of cargo shippers to secure letters of credit (and the unwillingness of banks to accept L/Cs from other banks) is play a significant role in the plunge in trade transport. From the Financial Times: The cost of shipping bulk commodities […]
Read more...Money markets showed a small improvement overseas once again today, again showing that massive central bank interventions are having an effect only around the margin. While overnight lending rates showed a fair bit of movement, rates at the three month level are still elevated, and more important, all signs are that very little in the […]
Read more...Citigroup’s $2.8 billion third-quarter loss came in at only half the expected level, while the Merrill release came in slightly worser than projected. The Citi report comes from the Wall Street Journal: Citigroup Inc. swung to a third-quarter loss — its fourth straight quarter in the red — as it wrote down another $4.4 billion […]
Read more...One of the biggest focuses of worry has been UBS, which is highly levered even by investment banking standards, a major derivatives player, and widely seen as too big for the Swiss government to rescue. The measures announced before the opening of the market in Europe are clearly hopes to put doubts about the Swiss […]
Read more...Boy, that was short lived. The massive EU and US rescue efforts to pump equity into banks, the TARP, the increase in the Term Auction Facility (from $150 billion to $900 billion), the Fed offering unlimited dollar swaps to foreign central banks, and those monetary authorities themselves engaging in liquidity operations, appears to have come […]
Read more...John Kay, in “Banks got burned by their own ‘innocent fraud’,” argues that banks got themselves and the world at large in a heap of trouble via self delusion. Had the bets embodied in their products been presented in simpler terms, they would have recognized that they were bogus and bound to lose money. But […]
Read more...Since the TARP has a very big checkbook and a very broad mandate (it can buy any kind of dud loan it chooses to, plus bona fide assets), it has become a magnet for industries that have belatedly recognized that it could provide a handout. The latest is the poster child for rust-belt hardship, the […]
Read more...Per Bloomberg, Treasury operatives have admitted, despite Henry Paulson’s protestations to the contrary, that the government can only hope for the best in how the nine banks given a collective $125 billion cash infusion early in the week make use of the loot: Treasury Secretary Henry Paulson persuaded nine major U.S. banks to accept $125 […]
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