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 […]
Read more...It isn’t surprising to see spreads on credit card debt on the increase. In fact, it might seem odd that it has taken this long. However, one perverse effect of the 2005 bankruptcy bill is that it is easier for consumers who are not eligible for a Chapter 7 bankruptcy to walk from their mortgages, […]
Read more...It’s hard to discern what took place in a closed-door session at a remove, but some of the tidbits coming from last weekend’s Federal Reserve conference at Jackson Hole were worrisome. Note I didn’t have this sense about last year’s meetings, based on a reading of Jim Hamilton’s commentary (which may simply mean Hamilton was […]
Read more...We wrote yesterday about Japanese retail and institutional investors exiting Freddie and Fannie holdings, and didn’t consider it as worrisome as it might seem on the surface, since at this juncture, the funding of our current account deficit is coming almost from central banks and to a lesser degree, sovereign wealth funds. Tonight, the Financial […]
Read more...Although one robin does not make a spring, the increased reluctance of Japanese retail and institutional investors to hold GSE debt is worrisome. Bloomberg reports that Japanese retail and institutional investors are unloading foreign debt due to currency volatility and are particularly leery of Fannie and Freddie securities. Admittedly, as Brad Setser has pointed out […]
Read more...Bloomberg reports that today’s sale of $3 billion of GSE debt went well, which investors took as a sign that a GSE crisis is not imminent. However, even this striving-to-be-upbeat article had some threads that bode ill for the longer term. And DealBreaker pointed out earlier this week that there is a profitable arbitrage on […]
Read more...Yes, it’s the end of the summer, but the Fed boys worked over the weekend, so what’s the excuse of Hank Paulson & Co.? The saber rattling for the Fannie and Freddie rescue program to be unveiled is getting louder and louder. We had an unmistakable demand from the Chinese over the weekend, if you […]
Read more...While the Fannie/Freddie crisis has come to the fore, the money markets continue to signal heightened worry about risk. Indeed, expert opinion and forward trading suggest that the year end crunch will be worse this year than last. Normally, liquidity starts to fall in December as banks start to square their books; last year, it […]
Read more...Forgive me tonight for relying more heavily on other people’s material than usual, but 1) it’s good stuff, 2) it’s an end of summer weekend, and I’m suffering from diminished productivity (the Olympics haven’t helped), 3) I foolishly wasted a lot of time and energy corresponding with a reader who was mightily unhappy with my […]
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