John Dizard, in “Fed plan is spoilt by its backing of hypocrites,” returns to a notion he has brought up in some recent Financial Times articles, namely, that the amount of funds that banks need to rebuild their balance sheets is so large that it cannot be obtained without some form of government sponsorship. Note […]
Read more...Ah, what cheery news this morning. Oil at a new high, producer price increases running twice as high as expectations, real estate repossessions running double the rate of last year. Yet the Dow is up a tad on the report that New York manufacturing increased. Pray tell what is New York manufacturing, besides the garment […]
Read more...As told in the Financial Times, LBO groups interested in buying leveraged loans on offer from Citi are able to select the assets they want, rather than buy pieces of the package, as Citi had planned. I rarely take issue with the FT, but in this case, particularly in its choice of headline, the pink […]
Read more...The US has had a free lunch for so long, thanks to the willingness of kindly savings rich foreigners to buy our Treasuries, that the realization that there are limits to what we can have, both individually and as a nation, is hard for many to accept. We managed to have guns and butter for […]
Read more...Ann Pettifor argues in The Guardian’s Comment is Free discusses some misperceptions about our current economic crisis and argues that the wrong lessons are being drawn from 1929. She writes from a UK vantage but much of the discussion is relevant to the US: In debates about the financial crisis – on the left and […]
Read more...Housing Wire provides this report: Maryland governor Martin O’Malley joined with local elected officials and consumer advocates last week to sign emergency legislation that targets troubled borrowers in the state. Perhaps the most immediate industry impact will be felt by just one of the three bills passed last week — the obscenely-long-named Real Property–Recordation of […]
Read more...The Financial Times reports a rare bit of encouraging news on the credit crisis front, namely, that investment banks have been making less use of the Fed’s liquidity facilities of late: Direct borrowing from its new primary dealer credit facility fell $8bn from $34bn (£17bn) to $26bn in the week to April 9, the Fed […]
Read more...Floyd Norris of the New York Times, in an otherwise fine piece, “It’s a Crisis, And Ideas Are Scarce” has a paragraph that set my teeth on edge. But let’s deal with the parts that have merit first, and hold the rant in abeyance. Norris uses the Paul Volcker’s speech at the Economic Club of […]
Read more...Just when market participants were patting themselves on the back, focusing on indicators that suggested the credit crunch was easing, even making forecasts that it would be behind us before year end, troubles creep back on little cat feet. The proximate cause for Fed intervention wasn’t the subprime crisis or rise in agency spreads, but […]
Read more...Reader William Kidder, who has been in the interest rates business since 1966 and managed a recognized government bond dealer in the 1970’s (some regard him as the father of the matched book) offered a proposal on how to clean up some of the problematic practices that have led to our credit crunch. Kidder admits […]
Read more...Whenever Greg Ip, the Wall Street Journal reporter whose beat includes the Fed, writes a piece about the central bank, one has to wonder whether the story was a plant. This isn’t to denigrate Ip’s coverage; it’s the reality of the quid pro quo of access journalism. His page one story today, “Fed Weighs Options […]
Read more...Former Fed chairman Paul Volcker, speaking at the Economic Club of New York, took issue with the central bank’s controversial loan to JP Morgan to help it effect an acquisition of Bear Sterns. For Volcker, who has steered clear of saying much about current Fed policies, these comments are a coded rebuke. Things have gotten […]
Read more...The IMF issued a stark forecast in its Global Financial Stability report of the damage resulting from the credit crisis, an eye-popping $945 billion. Note that unlike John Hatzius of Goldman’s $2 trillion estimate, this total does not include knock-on economic effects of reduced lending. In addition, the IMF also cited permissive regulation as one […]
Read more...Institutional Risk Analytics featured an interview with Joshua Rosner (hat tip reader bill) which focused on the outlook for the credit markets. We have a great deal of respect for Rosner; among other things, he co-authored a terrific paper, “Where Did the Risk Go? How Misapplied Bond Ratings Cause Mortgage Backed Securities and Collateralized Debt […]
Read more...The problem with offering deals that involve optionality is that the option will inevitably be exercised only when it is favorable for the user, which as things often work out, can wind up being at a time which is not so hot for the option provider. And in the case of bank standby lines of […]
Read more...