Paulson has tweaked the language of the bailout bill, with the Freudian-slip acronym TARP (“Troubled Asset Relief Program”) to make some additions that in theory make it more sweeping but in practice, with no review or oversight, the Treasury can do what it bloody pleases; the rest of the language of the bill, besides the […]
Read more...Repeat after me: bye bye the US’s AAA rating and the dollar. Although the Paulson’s plan is only sketchy, on the surface, it is utterly ridiculous. The authorities propose to save the economy by buying mortgage paper at market prices. Why do we need the government to create a massive and costly effort to buy […]
Read more...Just when the worries about AIG have receded from the fore, the longer-standing insurance bugaboos, MBIA and Ambac, may return to center stage. From the Financial Times: Moody’s Investors Service has increased its projections for losses on residential mortgage-backed securities, a move that could result in “multi-notch” credit rating downgrades for bond insurers such as […]
Read more...Reader eh pointed out in comments today that we could see “a monster snapback rally” should the tone of news improve, and one may be in progress. Bloomberg reports that Senator Charles Schumer proposed creating a new agency to provide equity to distressed financial firms. The stock market, and financials in particular, applauded. But in […]
Read more...Large central bank interventions continued today, and while the moves alleviated stress in the money markets, three month rates remain elevated, a sign of continued lack of confidence. From Bloomberg: The Federal Reserve almost quadrupled the amount of dollars central banks can auction around the world to $247 billion in a coordinated bid to ease […]
Read more...The credit markets had a seizure on Wednesday. To recap the mind-numbing events: Three month T-bills finished at a two basis point yield, and may even have traded at negative yields. Signs of ZIRP. Gold rose $68 and is still going up in Asia. The dollar fell against the yen, a sign of continued carry […]
Read more...Man, it’s ugly out there. While the bailout of AIG prevented what was sure to be a meltdown, conditions in the credit markets show considerable distress: Money market rates spiked up due to major money market fund Reserve breaking the buck and and the TED spread soared due to generalized worries about which firm might […]
Read more...the Treasury is applying some elbow grease too. From Bloomberg: The U.S. Treasury said it will sell bills to allow the Federal Reserve to expand its balance sheet, a day after the government agreed to take over American International Group Inc. “The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at […]
Read more...Readers probably know that money market funds seek to maintain a net asset value of $1 a share. The choice of words is precise. There is no guarantee to maintain the $1 value, but industry participants consider it to be so important to the reputation of money market funds that parent companies have upon occasion […]
Read more...The outlines of a deal to prevent the world’s biggest insurer from filing for bankruptcy may be emerging. In concept, the outline of provisions is about as good as the government could likely extract, absent taking control, which runs the risk of loss of talent (and having considerably lost by various “helpers” as Warren Buffet […]
Read more...I guess someone at the Fed figured that letting the financial system blow up on its watch was not such a hot idea. But as far as the Fed’s purview is concerned, lending to AIG is just about as far afield as lending to General Motors. What is surprising (at least based on this report) […]
Read more...Twp readers, Steve and Julian e-mailed us about the Bloomberg story below, that the Fed repaid JP Morgan for an advance made to Lehman after its bankruptcy filing: Lehman Brothers Holdings Inc., the securities firm that filed the biggest bankruptcy in history yesterday, was advanced $138 billion this week by JPMorgan Chase & Co. to […]
Read more...Money market rates doubled overnight, forcing interventions by central banks overseas. and the Fed joined suit this morning. From Bloomberg: The Federal Reserve added $50 billion in temporary reserves to the banking system when it arranged overnight repurchase agreements, or repos. The rate for overnight loans between banks had opened at 3.75 percent, above the […]
Read more...The latest sightings: Money market rates doubled overnight: despite considerable central bank intervention: The cost of borrowing in dollars overnight more than doubled as banks hoarded cash amid speculation more financial institutions will fail. The overnight dollar rate soared 333 basis points to 6.44 percent today, its biggest jump, according to the British Bankers’ Association. […]
Read more...I’ve revised the post since first putting it up, since the point of the two excerpts (assuming the reporting is correct) is that whle the AIG ratings downgrades did trigger the need to post additional collateral, it did not do so for swaps-related exposures. A senior debt downgrade would lead to the need to put […]
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