Category Archives: Credit markets

Money Markets Still Stressed; Analyst Forecasts Only Small Decline in Three Month Euro Rates

This Bloomberg story tries to take an oddly cheery tone, when in fact, it reports in effect, than an analyst forecasts that the heroic measures taken to unfreeze interbank lending will not lead to much in the way of a rate reduction. However, if any lending were to take place at the three month tenor, […]

Charlie Munger: Leash and Collar Wall Street

The backlash is starting to get serious. It is one thing for the man on the street to fulminate about the excesses of financiers. And even those who try to harness that anger find themselves checked. John McCain, who has said that he is going to fix the economy by (among other things) going after […]

George Magnus on the Economic Outlook

George Magnus, a strategist for UBS, was one of the early popularizers of Hyman Minsky and was similarly one of the lonely few to worry about the financial and economic fallout of dealing with unsustainable levels of debt. His comment in today’s Financial Times, “Is there time to avert a Minsky meltdown?” is cautiously optimistic […]

WSJ Provides Sneak Preview of Treasury Bank Salvage Operations

The Treasury Department is expected to announce its bank rescue program, which entails making use of its authority under the $700 billion Trouble Assets Repurchase Program to buy pretty much anything it wants to. The Wall Street Journal provides the latest reading on what the plan might entail:The initiatives will likely supersede many of the […]

Roubini: Not Out of the Woods, Significant Risks Remain

Despite the aggressive action by the Fed and EU leaders over the last few days, Nouriel Roubini thinks a severe recession is still in the cards and worries that the financial system is not out of the woods either. From his latest report (hat tip reader Dwight, boldface ours): At this stage central banks that […]

"Fed Leads Unprecedented Push by Central Banks to Flood Market With Dollars"

The reader/investor who sent the link to this Bloomberg story provided the comments below. Not he does not resort to capital letters casually: THIS IS HARD TO BELIEVE. THOSE CB’S DON’T HAVE UNLIMITED $’S, SO IF TRUE, THEY WILL BE BORROWING THEM FROM THE FED VIA AN EXTENSION OF FED SWAP LINES, THE FOMC HAS […]

Spreads for Credit Cards and Auto Loans Widen Sharply

This table comes courtesy reader John, and with rapidly moving markets, who knows what the current week will bring, However, notice the sharp one week increase in spreads on credit cards and auto loans. Even if the tone of credit markets improves, these high spreads are likely to be slow to revert, further illustrating that […]

Soros: "How to capitalise the banks and save finance"

One can disagree with the particulars of this comment by George Soros, but his main point is sound. The financier argues that the Treasury Department’s $700 billion Troubled Asset Repurchase Facility should be used to recapitalize banks. This blog and most economists have argued that restoring depleted bank equity is the top priority for shoring […]

US to Protect Mitsubishi Investment in Morgan Stanley

Note: variants of the word “protect” as regards the US Treasury’s stance towards the pending $9 billion Mitsubishi UFJ investment in Morgan Stanley, appeared in the headline and first paragraph of the New York Times discussing the state of the deal. But the text of the article suggests the Treasury may be engaging in a […]

Officialdom to Close the Leverage Gate Now That the Horse is in the Next County

Better late than never, I suppose. Finally the powers that be acknowledge the role of leverage in our financial crisis and vow to do better next time. From the Independent: The governments of the world’s largest economies have moved decisively to prevent any recurrence of the collapse of the global financial system. The Financial Stability […]

Mitsubishi and Morgan Stanley Renegotiating Mitsubishi Equity Purchase

Oh, just when it might be looking safe to go into the pool again, by virtue of the EU putting up a substantial enough plan to possibly start calming overfrayed nerves, another source of worry appears to be deteriorating, namely Morgan Stanley. Sports fans may recall that a badly-needed cash injection into the embattled investment […]

Initial Vote of Confidence in EU Announcement: Euro Rallies

Although it is way too early to be certain, the foreign exchange markets appear to be responding positively to the plans to shore up the banking system announced by EU leaders earlier today. Since many European banks funded some of their balance sheets in dollars, a fall in the dollar would also offer some direct […]

EU Leaders Agree to Guarantee Bank Borrowings, Prevent Failures (Updated: Inject Capital Too)

The statement of intent by the EU today is progress but far short of a plan. However, measures by major countries are to be announced tomorrow. The statement, that each country will announce measures, may be greeted with disappointment, since there had been some hope that the summit would announce an EU program, as opposed […]

Good and Bad News on Lehman Credit Default Swap Settlement

The Financial Times headline reads “Bad news on Lehman CDS” when by most readers’ standards, the content is almost entirely good news. It elaborates on and generally confirms the report that we posted earlier from the DTCC, that the net exposures on Lehman credit default swaps by major protection writers was in fact minor. However, […]

DTCC Claims Lehman Credit Default Swap Worries Overblown, Net Payments Only $6 Billion

Reader Tim sent us a link to a press release from The Depository Trust and Clearing Corporation which says that the net payout on Lehman credit default swaps will be comparatively minor, a mere $6 billion, versus the gross exposure, which has been widely reported as in excess of $400 billion. If this proves correct, […]