Even though the Fannie and Freddie near crisis, which produced a few days of panic in the credit markets, now seems to have abated, money market investors are still on edge. The Financial Times warns that various risk measures remain at elevated levels: Libor, the measure of inter-bank interest rates that is a key barometer […]
Read more...From the New York Times today: The covered bond markets in some European countries have suffered to some extent from house price declines, but the markets have not closed down as the private-label securitization market has in this country. From the Financial Times last November: Volatility is virtually unknown in the near 240-year-old market for […]
Read more...Wow, Merrill is raising cash like there is no tomorrow. Which of course makes one wonder what they know that the rest of us don’t yet know. From Bloomberg: Merrill Lynch & Co. said it will record $5.7 billion of pretax writedowns in the third quarter because of additional losses on the sale of collateralized […]
Read more...It no doubt seems absurd to question the idea that deleveraging in underway. We’ve had three heroic central bank interventions, starting in August 2007, to reverse seize-ups in the money markets. The asset backed commercial paper market has been almost in run-off mode. Leveraged buyout loans have been scarce to non-existent. Banks have cut home […]
Read more...Former regional Fed president William Poole argues forcefully in a New York Times op-ed today that Fannie Mae and Freddie Mac are not only unnecessary but also distort the financial markets and should be wound down. This program would also be consistent with a strategy of minimizing risk and cost to taxpayers. Probably due to […]
Read more...Tonight brings some useful commentary on the prospects and possible remedies for the banking industry. Roger Ehrenberg offers a good overview, highlighting an area that hasn’t gotten the attention it deserves, namely, proposals to change the Bank Holding Company Act to attract more investors. Reader Steve sent an e-mail that relates to some of the […]
Read more...Bond maven Bill Gross has raised his estimate of losses from the credit crunch to $1 trillion. One has to note that his firm is a large holder of Freddie and Fannie debt and he issued this pronouncement the day after the GSE rescue bill passed the House and looks certain to become law. Note […]
Read more...I must be missing something here. Not too long ago, Goldman was wiling to act as a principal in LBO financings for deals the firm did and would then syndicate the deal. Now admittedly that was the sign of a bull market peak, that an investment bank would take that sort of risk, but bear […]
Read more...As he is often wont to do, Ambrose Evans-Pritchard worries, in dire terms, about the poor prospects for growth and stability, It would be easy to dismiss him as histrionic were it not for the fact that some commentators who have been right so far about the progress of the credit crunch, are also hyperventilating. […]
Read more...The Bloomberg report on Minneapolis Fed president Gary Stern’s hawkish views noted that he has a more sanguine view of the health of the financial system than other FOMC members do. From Bloomberg: The Federal Reserve shouldn’t wait until financial and housing markets stabilize to raise interest rates, central bank policy maker Gary Stern said. […]
Read more...The results of the auction of the Cheyne SIV portfolio do not portend well for other SIV restructurings. From the Financial Times: A benchmark auction of distressed debt assets has given investors a gloomy guide to the prospects of recovering cash from the troubled structured investment vehicles that have been at the heart of the […]
Read more...Ambrose Evans-Pritchard appears to be trying to corner the market in apocalyptic financial news. But his sources aren’t evangelicals, survivalists, or even goldbugs. The experts he cites are with respected financial firms, meaning they don’t sound alarms casually. Even more significant, the terms they are using to describe what might be coming are uncharacteristically dire. […]
Read more...The link is here. Main elements: Common and preferred equity wiped out Subordinated debt swapped for equity warrants Current senior unsecured debtholders get per each dollar of face 90 cents face amount of new debt and 10 cents face amount of new equity Equity holders can put common to Feds at face value for first […]
Read more...As we indicated, a deterioration in Treasuries was the likely outcome of affirming the implied Federal backing of Fannie and Freddie debt. And as we said, we might have been able to persuade our friendly creditors, meaning foreign central banks who also own a lot of Treasuries, that they’d likely be no worse off from […]
Read more...So much for the notion that the not-quite-a-rescue-plan for Fannie and Freddie would calm troubled markets. Equities gave a raspberry yesterday and overnight, the TED spread widened 11 basis points to 133 basis points (a sign interbank funding trouble may be nigh) and today the currency markets, which initially seemed to take the news in […]
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