Reader Saboor pointed to a BBC report on grim words from IMF chief Dominique Strauss-Kahn about the state of the global financial system; reader Dwight later sent a link to a bit more detailed Reuters report. First from the BBC, “IMF in global ‘meltdown’ warning“: The world financial system is teetering on the “brink of […]
Read more...Britain is moving quickly to use the its new bank rescue facility, which was increased from £59 billion to £75 billion. Note the article suggests that stock market trading may be suspended in connection with the rescues. From the Times Online (hat tip reader Tim): The government will tomorrow launch the biggest rescue of Britain’s […]
Read more...One troubling aspect of the banking crisis was that European banks, like their US peers, are at risk of failure, and some of them are sufficiently large that they are beyond the capacity of any one country to save. While Fortis was bailed out by three countries, ad hoc arrangements are risky. As Keynes said, […]
Read more...We’ve said for some time that European banks are (believe it or not) in even worse shape on average than their US peers, although the public at large is far more aware of the problems here by virtue of our financial system having hit the wall so spectacularly. While US firms waded into risky waters […]
Read more...Equity analyst and market commentator James Bianco of Arbor Research e-maileda a discussion of the breakdown of interbank lending to us along with a few others, His note illustrates a point made by FT Alphaville a couple of weeks ago that we have harped on since, namely, that central banks’ efforts to provide liquidity to […]
Read more...Oh boy, MetLife has just put a huge bull’s eye on itself saying “We cannot afford to be downgraded!” While the role of evil shorts in driving down financial company price is overdone (many firms’ shares should be trading at lousy levels, given the terrible outlook for earnings and dividends), this announcement will lead the […]
Read more...Another sign of market panic: even though Fannie Mae and Freddie Mac are now officially wards of the state and the Treasury has assured that they will not fall into a negative equity standing, the general credit market stress and flight to quality means that their mortgage backed bonds are trading at elevated spreads. However, […]
Read more...The Dow rallied over 900 points to as high as 283 and is now in positive territory. Reader M passed us this report: A well informed investor I speak to regularly relays that the 3:45 PM speech by Paulson, coming out of the IMF meetings, will include the roll out of a joint clearing mechanism […]
Read more...England, which has been more candid in talking about the financial crisis than other countries (the governor of the Bank of England has said, for instance, that living standards will fall) issued a blunt assessment earlier today. The scary update is that even overnight lending is starting to break down. From the Financial Times: UK […]
Read more...All I can say is “ouch”. The theory is that for every loser there is a winner, but in this market with financial players at risk of failure due to hits to weak equity bases and/or runs, we have a serious asymmetry. A significant loss to an important intermediary, either directly, via CDS payouts, or […]
Read more...Those who wrote $400 billion plus of protection on Lehman’s credit default swaps had been expected to make a substantial payout in the 80% to 85% of face value range, but the preliminary auction showed even worse results. How the SEC and Treasury had so little clue that Lehman was in such bad shape is […]
Read more...Economist Paul De Grauwe, who has been an astute and harsh critic of central bank’s models and priorities, makes a very simple point and draw a conclusion. Banks are not lending to each other out of mistrust. Various measures to increase liquidity and backstop banks have not made them look any more favorably upon their […]
Read more...Nearly two weeks ago, it was becomimg apparent that central bank liquidity operations were not merely ineffective, but had become counterproductive in getting banks to lend to each other. As FT Althaville noted: Liquidity is being thrown at the system, but it’s just making things worse. By pumping in more money central banks aren’t addressing […]
Read more...The US is considering more drastic measures to shore up the banking system, namely guaranteeing bank debt and removing the ceiling on deposit guarantees. The idea of insuring bank debt may seem odd, given that writers like John Hussman have urged that bank bondholders, who knew the risks of investing and enjoyed the higher yields, […]
Read more...Nouriel Roubini has been almost freakishly accurate in calling the progression of the credit crisis, with his only major failings being predicting its onset on the early side and his fondness for an apocalyptic writing style, which now seems fully justified. Even by the standards of his alarming missives, his latest is truly troubling. Roubini […]
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