News reports appear to be converging on the hoped-for end game for Lehman. Whether that will come to pass is another thing entirely. First, the Washington Post, New York Times, and Wall Street Journal all report that the Fed and Treasury are brokering a deal, but are trying to avoid the use of public funds. […]
Read more...We noted a few weeks ago that between large amounts of short term financial firm debt maturing in the third and fourth quarters, banks still leery of lending to each other, and liquidity always lower at year end (banks pull back from the market to square off their books), this November-Decemeber looks to be even […]
Read more...We had said a couple of days ago that while the conservatorship of Fannie and Freddie looked to be a credit event for credit default swaps, meaning they would trigger payment, we did not see this being a financial event (presumably there would be no loss, with the Treasury assurance to prevent a negative net […]
Read more...Bloomberg points out what some observers have already mentioned: putting Freddie and Fannie into conservatorship is a credit event as defined in credit default swaps (note defintions are sui generis, but this one was evidently close to universal in these agreements). Due to the Federal assurance that positive net worth will be maintained, this ought […]
Read more...It will be interesting to see if this dose of cold water from former Fed governor William Poole will take any sizzle out of the forceful equity rally (the Nikkei is up 425 points as of this writing, and US stock futures say the US markets will also show an impressive move up). From Bloomberg: […]
Read more...Sorry to be a bit heavy on Fannie and Freddie, but this is a historic event. These statements came in a five paragraph section in a New York Times article: Mr. Paulson added a mantra of his own: he privately said he didn’t want to “kick the can down the road” and leave the problems […]
Read more...Not only is the commentary in the blogosphere on the Freddie and Fannie bailout program pretty skeptical, but even some normally staid MSM commentators have an eyebrow cocked. There is a comprehensive list of links on Freddie and Fannie from Barry Ritholtz. This post serves a different purpose and serves up some choice bits: Mohamed […]
Read more...Even though the stock markets are over the moon as of this hour (the Nikkei up nearly 440 points, other Asian markets up over 3%, bank stocks up even more), the all-important question is the reaction in the credit markets. It is far less enthusiastic. One might charitably call it underwhelmed. From John Jansen: I […]
Read more...The deed is done. Freddie and Fannie are now officially in conservatorship. Uncharacteristically, I listened to the presentation by Paulson and Jim Lockhart, which was thin on details (particularly size of new facilities and investments). The bombshell was the aside that not only is there to be a new secured lending facility for the GSE […]
Read more...The New York Times, in “Loan Giant Overstated Its Capital Base,” sets forth an interesting bill of particulars as to where Freddie deviated from what one might consider a full and fair statement of its financial condition. Indeed, the article says that the widely-expected Sunday intervention was triggered by the GSE’s regulator determining that the […]
Read more...Guess the powers that be were unwilling to risk playing chicken with the markets and losing. So much for the theory espoused by some that the government couldn’t put the GSEs into custodianship absent a breaching of statutory minimums (technically, by being insolvent under the “fair asset” valuation method, Freddie is already on plenty thin […]
Read more...The ECB, like the Federal Reserve, implemented bank liquidity facilities which (in oversimplified terms) allow them to pledge collateral in exchange for cash. The ECB has been more liberal in the types of collateral that it accepts, which has led to some pretty blatant gaming of the system (and God only knows how much slippery […]
Read more...Although there have been rumors of various Lehman Hail Mary passes (the number of companies allegedly interested in investing in the troubled bank seems to grow on a daily basis), the one involving it spinning off less than choice debt into a liquidation vehicle appears to have some substance. A Bloomberg story today gives details […]
Read more...Bill Gross of Pimco’s monthly newsletter, “There’s a Bull Market Somewhere?” is out and making the rounds. The title refers to a Jim Cramer dictum. The bond chief uses it to argue that asset prices are declining on all fronts, which he then contends that the US government must reverse (boldface his): because in a […]
Read more...Brad Setser is thoughtful and data driven, but he also isn’t shy about saying what numbers portend, even if he runs the risk of sounding a tad alarmist. We’ve had so much complacency, followed by concerted efforts to keep asset values and confidence aloft that an unvarnished presentation can come off as a dousing of […]
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