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 […]
Read more...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 […]
Read more...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 […]
Read more...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 […]
Read more...Although the housing contraction started later in England than in the US, the credit and real economy contraction has progressed at a quicker clip. The latest sightings are not pretty. The Independent reports that new home construction has plummeted to a 50 year low: New private house-building is at a 50-year low, according to an […]
Read more...We wrote a couple of days ago that one of the reasons for rescuing AIG was that its failure would have had a devastating impact on EU banks. The insurer had entered into credit default swaps that enabled European banks to evade minimum capital requirements. Thus, an AIG failure would have put a considerable number […]
Read more...Even though the deeply flawed bailout bill appears to be moving relentlessly towards passage by the House, it hasn’t deterred pundits and experts from coming up with better alternatives. Since the smart money expects this so-called “Mother of All Bailouts” to be another chapter in a series, it’s worth keeping tabs on these ideas, since […]
Read more...Most observers have taken as a given that the increased disinclination of banks to lend to each other is counterparty risk, that is, the fear the money they lend out won’t come back, or at least on the initially promised timetable (bankruptcy proceedings take time and usually lead to losses by unsecured creditors). Some wags […]
Read more...Oh boy, this is badly timed. The run on money market funds appears to have abated, thanks to the insurance plan implemented by Treasury, but the commercial paper market, important for day-to-day business funding is still under big-time stress because the amount of money committed to short-term, non-government holdings has contracted. The new bit of […]
Read more...In the last few days, virtually all mainstream financial media outlets have taken up the banner for the passage of the deeply flawed bailout bill. A bit late in the game, BreakingViews, which is insightful but hardly extreme in any of its positions, argues that the Paulson plan directs capital to where it will not […]
Read more...One of the most troubling aspects of the credit crunch is that even large companies are now seeing its effects. By way of background, the commercial paper is a significant source of short-term funding for big companies and financial firms. Commercial paper is unsecured IOUs (there is another type of commercial paper, “asset backed commercial […]
Read more...Columbia professor and Nobel prize winner Edmund Phelps writes in a Wall Street Journal op-ed, “We Need to Recapitalize the Banks,” an article appears not to have garnered the attention it warrants in the blogosphere. Phelps comments approvingly on Sweden’s approach to handling its financial crisis, which had as its cornerstone reducing the size of […]
Read more...Reader FairEconomist left a short comment on an earlier post which we hoisted along with some other material, on why the bailout bill could make the illiquidity in money markets worse. He left a longer comment j that sets forth the issues, as he sees them, in more detail. I hope readers do not mind […]
Read more...Imitation is the sincerest form of flattery. The bailout bill discussions in the US have apparently emboldened politicians on the other side of the pond to suggest massive rescue efforts. As we have said, one of our colleagues who has high level regulatory contacts in the US and Europe has been telling us for quite […]
Read more...Boy, I wish I had thought of this, and why no one else save some smart readers have focused on the mechanics of the Paulson plan operations is beyond me. This bill is moving ahead like the Titanic…..with high odds of similar outcomes. Hoisted from comments, we turn the mike over to reader Don: The […]
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