Just when the Fed thought it had gotten financial markets turbulence under control, conditions start to worsen. Lehman is looking wobbly and markers are signaling increased worries about interbank funding. Bloomberg tells us that a key indicator of bank willingness to lend, the spread between three month Libor and the forward overnight index swap, is […]
Read more...Lehman managed to escape the same fate as Bear Stearns around the Ides of March partly due to the heroic intervention of the Fed, in part to reporting first quarter profits. A member of the skeptically-minded short cohort described the earnings as a sham, and noted that they depended entirely on counting the increase of […]
Read more...It appears the US central bank got taken to the woodshed at a conference hosted by the New York Fed for overly aggressive rate cuts, but despite jeering from the peanut gallery, it looks likely that the Fed will hold pat until at least the fall. While I have no idea of how representative his […]
Read more...There’s been a lot of hand-wringing about the alphabet soup of new Federal Reserve facilities having hidden costs and generating unintended consequences. The biggest focus of concern is that the assets that the central bank has taken on may come a cropper, leaving the taxpayer holding the bag. Reader Lune has pointed out some examples […]
Read more...Gretchen Morgenson of the New York Times in “First Comes the Swap. Then It’s the Knives.” delves into a dispute between UBS an Paramax, a Connecticut-based hedge fund group over a credit default swap written by Paramax in 2007 on a subprime CDO (you can already guess how this movie ends). Morgenson-bashing is a popular […]
Read more...Satyajit Das has a very useful post, “The Credit Default Swap (“CDS”) Market – Will It Unravel?,” in which he describes some of the ways that CDS may fail to perform as expected in real world situations, ie, when companies start getting in trouble. While this work isn’t quite at the Tanta Uber-Nerd level of […]
Read more...Two UK columnists looked at the credit markets, and neither liked what he saw. And they wrote it up more colorfully than most of their American counterparts would have. The first, Nils Pratley of the Guardian, tells us that that the idea that the credit crisis is on the wane is more than a tad […]
Read more...There’s an odd little story on the home page of the Financial Times website, odd in three respects. First, it discusses a development, namely, the launch of a credit derivatives clearinghouse that is important enough that it ought to be reported more broadly, yet several searches on Google News came up empty-handed. Readers no doubt […]
Read more...Reader Abdul sent me a piece that ran in the New York Post on simmering disputes between investment banks trying to unwind CDOs and monolines that provided credit enhancement. Yes, I know the Post isn’t the usual place to see what amounts to breaking financial news, but it was the first out with some stories […]
Read more...Willem Buiter decided to provide some further thoughts on regulatory reform over the holiday weekend. Given the nature of posting, and the difficulty of devising banking reforms, most proposals are going to fall short on detail. But this one falls a bit shorter than I’d like. For instance, Buiter clearly assumes international cooperation; these ideas […]
Read more...For those who remember the “monolines on the ropes” days, one of the big bones of contention between critics like Bill Ackman of Pershing Square and industry executives was how to account for the fact that the risks of default on the guarantees the companies had made had increased. Ackman used a conservative mark to […]
Read more...Reader Baruch sent us this tidbit from Reuters: Bank Hapoalim, the second largest bank in Israel, sold its entire portfolio of MBS to Pimco for 75 cents on an already-written-dollar (or in this case, shekel). Note that the previous writedowns were at least $90 million on an portfolio valued before the sale at $3.42 billion. […]
Read more...Ken Funnell at Bank Lawyer’s Blog tells us that Ohio is about to put legislation into effect that will kill payday lending: The new Ohio law would limit borrowers to four short-term loans a year and cap annual interest rates at 28 percent. The bill also would limit loan amounts to $500 per loan, or […]
Read more...Let me make a wee confession: I tend not to follow money supply figures closely, in part because I am not a fund manager (there are only so many things you can watch on the side) and in part because we are missing some key underpinnings that might help make it a useful metric. In […]
Read more...Just when the world at large has become inured to the stories of the role of rating agency incompetence and complicity in our credit mess comes a bit of news that catches the attention of even the jaded. Moody’s had a bug in a program used to rate complex debt securities (constant proportional debt obligations, […]
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