Category Archives: Credit markets

Brady Bonds Redux as Credit Crisis Remedy?

At VoxEU, Luigi Spaventa makes a forceful case that the remedies to the credit crisis are provisional at best and more work needs to be done: The global financial system may be caught in a downward spiral as market and funding illiquidity reinforce each other… Prolonged financial distress, which has now lasted for almost a […]

So Why Did MBIA Raise $1.1 Billion? To Pay Executives, Apparently

MBIA has brazenly advanced its own interests at the expense of investors and policyholders. A partial list: Issuing a disappointing earnings release in the middle of the night in the hopes that it would garner less attention that way Asserting it needed no more capital while the Dinallo-led “save the monolines” effort was still underway. […]

Is "The Credit Crunch is Over" Talk Premature?

Even though there has been a lot of whistling-in-the-dark talk that the credit crisis is past, the evidence is far from conclusive. On the one hand, BlackRock bought $15 billion of subprime debt at a mere 25% discount to face. In March, UBS was rumored to have sold $24 billion of Alt-A for 70 cents […]

Is the Credit Crisis Really Over? Minsky Would Say No

The “end of the credit crisis” apostates looks to be a small and shrinking group (and we don’t mean just the downbeat but nevertheless accurate Nouriel Roubini or Michael Panzner). I’m amazed our number is as small as it is, given the overwhelming counterevidence in the form of the increase in the Term Auction Facility […]

Why Such Timid Financial Reform Proposals? (Alan Blinder Edition)

Here we are, in the midst of the worst financial crisis since the Great Depression, and what do we see? Central banks madly pumping water out of leaky, listing vessels, some discussion of how to patch the most visible holes, but perilous little consideration of how to correct the defects of construction, poor choice of […]

More on What Bank of America Might Do With Countrywide Debt

The BofA/Countrywide follies continue. Earlier in the week, the Charlotte bank, in an SEC filing on the pending Countrywide acquisition, remained silent on the question of the fate of Countrywide bonds. As we had mentioned some time ago, BofA plans to use a deal structure that would leave the debt in a subsidiary so that […]

"The inappropriateness of financial regulation"

Because I have yet to throw my stuff back in my bags to be on a morning plane back to NY, I must be brief. I have not had the chance to think about Avinash Persaud regulatory proposals at VoxEU deeply, but at a first glance, they sound appealing. However, the devil will lie in […]

Bank of America May Not Guarantee Countrywide Debt

Some months ago, we had mentioned that Bank of America was keen to avoid taking on Countrywide’s liabilities (who wouldn’t be?). The possibility that the giant bank might not provide a guarantee for Countrywide’s debt came to the fore again. Without BofA backing, the Countrywide paper is a pretty dodgy proposition. From Bloomberg: Bank of […]

"Four mega-dangers international financial markets face"

“Mega” is not the sort of word one usually associates with economic analysis. It’s the domain of popular books and obesity-inducing sizes of junk food. The normally sober blog VoxEU may be drifting into pop economics usage, although the focus of its article is straightforward. Dennis J Snower argues that the credit crisis, and more […]

Will Credit-Default-Swaps-Induced Distortions Continue?

A short piece in the Financial Times suggests that imbalances in the credit default swaps market are likely to continue, and those problems redound to the cash bond markets, distorting the prices at which companies can raise funds. Admittedly, due to reduced anxiety in the funding markets, credit default swaps prices have generally improved. However, […]

Unrepentant, Intransigent Lenders: Overplaying Their Hand?

Still out of town, still behind the eight ball, so forgive the terseness with today’s offerings. Two items provide further evidence that lenders not only have little sense of responsibility for the problem they helped create, but worse, their unwillingness to reform in the face of considerable public pressure. As we noted, with regulators capitulating […]

Barclays: Negative Equity Subprime, Alt-A to Soar

Barclays estimates that half the 2006 and 2007 subprime loans are in or close to negative equity status, which means this roughly $800 billion of mortgages is at greater risk of default. Note that their analysis used OFHEO data; Case-Shiller estimates of the fall in housing prices exceed those of OFHEO, which means this forecast […]

Quelle Surprise! Real Estate Lenders Fight Tough Rules

The New York Times, in “Loan Industry Fighting Rules on Mortgages,” tells us that the real estate creditors are fighting tooth and nail to gut new rules that the Fed intends to impose. The Times, apparently reflecting the sentiment of sources in the Fed, Capitol Hill, and consumer advocates, seems surprised at the vehemence of […]

Signs of Improvement in the Credit Markets

Various indicators suggest that the tone of the credit market (save the interbank market) is improving: jck at Alea deems the latest TSLF auction to be a success. Bloomberg tells us that government bond prices are falling, not just in the US but other major economies, signaling a return of confidence: Government bonds worldwide are […]