Category Archives: Credit markets

AIG Bailout Saved Goldman From Major Loss

Gretchen Morgenson in the New York Times reports that Goldman and no other Wall Street firm was involved in the AIG rescue talks and an AIG failure would have created a hole as big as $20 billion in Goldman’s balance sheet. This is special dealing, pure and simple. Even if AIG needed to be salvaged […]

Bailout Scare-Mongering: "Another Bank Teetering on the Edge"

The quote above comes from Robert Bennett (Senate, R-Utah) and while no doubt narrowly true (presumably it’s Wachovia), implying that the bank will go under due to the failure to implement the Paulson plan is just plain dishonest. The bank has been wobbly for a very long time and t isn’t at all clear that […]

New IMF Study of Banking Crises Contradicts Bailout Bill Premise and Details

The IMF just released a study that analyzed 124 banking crises, and I wish everyone in Congress (well, at least their staffers), the Treasury, and the Fed read the paper. It provides insight into what worked and didn’t work in past banking crises, and gives an idea of what we might expect from various policy […]

"Even Hank Paulson’s bail-out plan cannot detox global banking"

Some readers would have a go at me whenever I’d post articles by the Telegraph’s Ambrose Evans-Pritchard. Although he has a tendency to hyperventilate and sometimes oversimplifies, he regularly points to data and research that I haven’t seen covered elsewhere. More important, his major calls this year have been correct. He predicted the oil price […]

Even Top Corporates Having Trouble Raising Short-Term Funding

The Times Online tells us that even blue chip companies are having trouble raising money in the commercial paper market. By way of background, commercial paper is an unsecured short term debt (there is another version, asset backed commercial paper, but that’s not the one under discussion right now) that companies and financial firms use […]

Credit Markets Predictably Not Happy Right Now

As we reported earlier, central banks have been providing emergency liquidity, but it has not coaxed nervous investors off the sidelines. From the Wall Street Journal’s MarketBeat: “There is extreme lack of liquidity in the short-term markets,” Kevin Giddis of Morgan Keegan told Dow Jones Newswires, noting he has seen no commercial paper trade so […]

Europe Opens Ugly

Hope you like the smell of napalm in the morning. Otherwise, this will not be your sort of day. I have to turn in, but the early morning sightings, as expected, are not at all pretty. What is particularly troubling is that central bank interventions may have become unproductive. Banks have quit lending to each […]

Tim Duy: Economy Downshifting, Bailout or No

Tim Duy at Economist’s View tells us that the economy is slowing down markedly, and that that will lead to a lot of false causality. Whether the bailout plan gets done in some reasonable form or not, the slowdown will be blamed on its failure, or the fact that the rush to get it done […]

Asian Central Banks Throw Money at Seized-Up Credit Markets

Oh, we are in for a wild ride today. Oddly, the reaction in Pacific rim stock markets seems comparatively subdued (the Nikkei is down only 134 points, but the Hang Seng has fallen over 2%), but the credit markets are stumbling badly. Central banks are rushing to the rescue, but their efforts aren’t having much […]

Dallas Fed’s Richard Fisher Worries About Cost and Effectiveness of Bailout Bill

Mirabile dictu, one of the Fed governors is expressing reservations about the stalled bailout proposal. Richard Fisher’s concern is that it would push Federal debt precariously high. From Bloomberg: Dallas Federal Reserve Bank President Richard Fisher said the proposed $700 billion rescue of financial institutions backed by Fed Chairman Ben S. Bernanke would plunge the […]

Is the Plan Still in Play? (Updated Further, Yes There May Be No Deal As of Now)

Readers Dean and Dwight wrote to tell me that CNBC is reporting that Senator Shelby (R-Alabama, and the ranking member of the Senate Banking Committed) came out of the White House waving the University of Chicago organized letter from economists objecting to the plan and said there was no agreement. Given the apparent momentum to […]

"A Bailout We Don’t Need"

As James Galbraith points out in today’s Washington Post (hat tip reader Marshall), the Paulson bailout plan wasn’t necessary, and any rescue could have been handled by expanding existing programs: Now that all five big investment banks — Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley — have disappeared or morphed into […]

More Clarification of Bailout Details (Updated)

From the Washington Post: House Financial Services Committee Chairman Barney Frank (D-Mass.) said the bailout deal reached by key lawmakers calls for dividing the $700 billion pricetag into three parts: Paulson would receive $250 billion immediately and another $100 billion upon White House certification of its necessity. The final $350 billion could be dispersed without […]

Goal of Paulson Plan: Restore Mark-to-Myth Accounting

While we have focused on the fact that the Treasury bailout plan, which with some tweaks, is moving towards approval. is a covert and inefficient recapitalization of the banking system, other observers see another goal for the plan. The contend that its main purpose is to circumvent mark-to-market accounting. The belief is that mark to […]

Paulson Plan Officially On

While there have been various reports during the day that a version 2.0 of the Treasury bailout bill was moving towards passage, the agreement in principle now appears to be official. From the Wall Street Journal: A bipartisan group of House and Senate lawmakers left a two-hour-plus meeting in the U.S. Capitol on Thursday saying […]