Category Archives: Credit markets

Japan, Australia Inject $11 Billion to Combat Rising Money Market Rates

Even with Japan’s banks largely on the sidelines in the international housing bubble (US subprime exposure is a mere $8 billion), its money markets are suffering the effects of the flight from risk. Both Japan and Australia pumped more funds into their markets to combat banks’ unwillingness to lend to each other. From Bloomberg: Japan […]

Roubini: Fed Fiddles While Rome Burns

We noted earlier today that neither the signing of the much-touted bailout bill, nor the dramatic increase in size of the already bulked-up Term Auction Facility (it has been enlarged six-fold in a mere two weeks) has had any impact on conditions the money markets, which are barely functioning. We noted earlier and reiterated that […]

Term Auction Facility Increased to $900 Billion, With No Apparent Success

The increase in the size of the Term Auction Facility, from $150 billion a month ($75 billion per two 28 day auction) as of its last auction to $900 billion today (with an interim plan to go to $450 billion that was blown past in this announcement) is an admission that the banking system is […]

Wolfgang Munchau: Europe Needs a Bank Rescue Plan

Wolfgang Munchau, who writes for the Financial Times and the blog EuroIntelligence, argues that the fact that EU member nations managed to survive their first series of bank failures does not mean it can afford to take the risk of defaulting to continued improvisation. Munchau comes out squarely in favor of a coordinated, funded rescue […]

Money Market Stress Worsens in London, Europe Despite Bailout Bill

The specter of six major financial institutions failing in a mere two weeks has confirmed the wisdom of banks’ tendency to hang onto their money and not lend it out to their bretheren. The bailout bill passed last week appears to have made nary a dent in the tightfistedness; it’s an open question as to […]

Fed Considering More Extreme Measures, Further Expansion of Its Role

As the Fed’s interventions have failed to halt the progress of the credit crisis, the central bank has taken even bigger measures, only to see them provide at best temporary relief. As we have indicated, the Fed’s moves appear to have hit the point of being counterproductive. Why should banks deal with each other when […]

Hypo Bank Gets $68 Billion Rescue

The latest crisis averted…..From Bloomberg: The German government and the country’s banks and insurers agreed on a 50 billion euro ($68 billion) rescue package for commercial property lender Hypo Real Estate Holding AG after an earlier bailout faltered. Germany’s financial industry agreed to double a credit line for Hypo Real Estate to 30 billion euros, […]

European Leaders Promise to Save Major Banks, But Fail to Adopt EU Plan

So far, the statement released this afternoon US time out of a Euro summit amounts to an attempt at reassuring hand-waving but in fact was merely a restatement of the status quo. The group of European leaders did agree on a set of principles, but it remains an open question whether they will be able […]

Germany to Guarantee Bank Deposits; Efforts to Salvage Hypo Bank Continue

In response to the crisis at Hypo Bank, Germany said it will guarantee bank deposits. Note that no action was announced regarding Hypo, whose collapse is expected in the next few days if a rescue is not in place. Hypo is not a depositary institution, but it is sufficiently large (almost as big as Lehman) […]

Soros: "He Foresaw the End of an Era"

John Cassidy, in the New York Review of Books, discusses George Soros’ latest book, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means, emphasizing how the storied investor’s views differ from those of the efficient markets/rational expectations school of economics. It also weaves in a wide-ranging discussion of the […]

The Paulson Plan = MLEC Version 2.0

I can be painfully slow to see things sometime….. Long-standing readers and finance junkies may remember the Treasury’s structured investment vehicle fiasco of last fall. By way of background, banks had created off balance sheet entities called structured investment vehicles (SIVs) which contained subprime (and sometimes other) assets, funded by commercial paper and short-term debt. […]

More on the Charge That JP Morgan Withheld $17 Billion From Lehman, Triggering Collapse

Reader Saboor passed along the day’s updates on the case filed by Lehman creditors last week, alleging that JP Morgan, Lehman’s clearing bank, refused to give Lehman access to $17 billion of excess funds held at the bank, precipitating the firm’s failure. I did not see an link to the case yet in a quick […]

Hypo Bank Rescue Fails, Threatening Lehman Scale Bankruptcy, Future of Euro

Hypo Real Estate, Germany’s second largest real estate lender, teeters on the verge of collapse. The bank has a €400 billion balance sheet, which would make for a failure of a similar scale to Lehman’s (Hypo’s footings are roughly $550 billion, while Lehman’s were $660 billion as of its last balance sheet date). Even though […]

Bailout Bill Passed by House

From the Wall Street Journal: U.S. House of Representatives lawmakers wary of growing signs of the nation’s economic distress voted in favor of a $700 billion Wall Street rescue package on Friday, sending the biggest government intervention in the financial markets since the Great Depression to President George W. Bush for his signature. The vote […]

States, Cities Hit Hard by Credit Crisis, Falling Revenues

Even though the markets are looking for a boost from the expected passage of the bailout bill, which means they have faith in the US government’s ability to pay, that trust does not appear to extend to states and municipalities, who like companies, are having trouble raising money in the credit markets. Some government bodies […]