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 […]
Read more...We were glad to be back again on BloggingHeads this week, this time with Daniel Gross. This one was more oriented toward the a generalist audience than our chat last week with Megan McArdle. Below is a clip: You can find the entire conversation here.
Read more...On the one hand, I was mystified that the stock market was up in the morning session given that the money market seize up was not at all improved and several key measures had worsened overnight. I was wiling to accept the view that we might have an oversold bounce and saw several bloggers indicate […]
Read more...BBC reports that the IMF is reactivating some of the emergency mechanisms used during the 1997 Asian crisis to help support countries suffering from capital flight. The story is a bit thin on particulars; we’ll provide an update should they surface later today. From the BBC (hat tip reader Saboor): The International Monetary Fund (IMF) […]
Read more...Banks stuck with unsold inventory of LBO loans have maintained a fair degree of market discipline, attempting to offload the paper at favorable prices and engaging in financing the sales rather than taking bigger haircuts so as to avoid further writedowns of still-unsold paper. The sale of LBO paper held by Iceland’s failed banks and […]
Read more...First it was banks and securities firms, and now the focus of worry has widened to include insurance companies. Reader John referred us to a Reuters article that MetLife credit default swaps are now trading on an upfront basis, which means buyers of protection against the default of MetLife bonds must make an upfront payment […]
Read more...Over the last two weeks, we have said that central bank liquidity measures had become counterproductive. Throwing more liqiudity at banks made it more viable for them to depend on monetary authorities and not rely on private sources for funding, and in turn extend credit to them. One contributing factor not mentioned in many of […]
Read more...It is bit perverse that the powers that be had to try all sorts of measures before considering the course of action that has been the most successful in handling financial crises, namely, letting asset prices fall and recapitalizing banks. In this case it would apparently involve taking equity stakes, say preferred stock and warrants, […]
Read more...There is a new press release up at the Fed on its latest loan to troubled insurer AIG (hat tip Dealbreaker): The Federal Reserve Board has authorized the Federal Reserve Bank of New York to borrow securities from certain regulated U.S. insurance subsidiaries of the American International Group (AIG), under section 13(3) of the Federal […]
Read more...It is way to early to take cheer, but some of the stress in the money markets is backing off a bit. The TED spread is below 4, and ten year credit swap spreads were down to 45 basis points, which is a serious improvement and a genuine positive sign. From Bloomberg:The spread between the […]
Read more...Wolfgang Munchau in EuroIntelligence argues against conventional wisdom, which is that modern policy tools and institutional arrangements will keep the credit crisis from morphing into a depression. He contends that the policy errors, the result of political considerations, have been substantial. He also says that Treasury Secretary Henry Paulson devised the badly-flawed Troubled Assets Repurchase […]
Read more...The coordinated central ban effort today to restore some level of activity to stressed funding markets, in which five central banks cut their policy rates by a half a point and China cut rates by 0.27%, is a resounding failure. From Bloomberg: Overnight corporate borrowing costs jumped, Treasury bill yields fell and the bond market […]
Read more...Russia’s stock market took a beating as foreigners started getting cold feet over the British Petroleum row, when a consortium of oligarchs engaged in a power and money grab over a Moscow-based development joint venture, TNK. But falling oil prices are also a bad harbinger for a resource-dependent economy. From Bloomberg: Russia’s stock market collapse […]
Read more...