Category Archives: Credit markets

Rodrik on Financial Regulation

Now that the credit markets for the moment have been moved out of intensive care, some commentators have shifted their attention away from “what should the powers that be do to prevent a meltdown” to the broader question of “what can we do to prevent this sort of mess from happening again?” Dani Rodrik, in […]

The Economist’s Cheery View of Credit Default Swaps

It’s remarkable how attending an industry love-fest can distort one’s perception. The Economist seems to have fallen hook, line, and sinker for International Swaps and Derivatives Association view that counterparty risk in the credit default swaps market isn’t all that big an issue. Its article, “Clearing the fog.” while mentioning the little problem that led […]

Mortgage Rates on the Rise

With all the cheery talk about how our credit crisis is a thing of the past, mortgage rates, as reader Scott reminds us, are moving up again. From his message: You’ll recall that some time over the last month or so, bullish commentators noted that with mortgage rates falling, resets of ARMs were no longer […]

"Let Britain’s housing bubble burst"

I wish we had someone as well regarded as the Financial Times’ Martin Wolf giving the same message in the US. Wolf stresses that prosperity built on overpriced homes is illusory. He pans some ideas that are already being road tested in the US, and says attenuating an inevitable fall in prices is unsound. And […]

Why the Happy Talk About the Credit Crisis?

I am frequently mystified at what goes on in the markets. I am even more mystified when people who ought to know better make pronouncements that appear to be profoundly counter-factual. Even if they are talking their own book, the high odds of being revealed as bald-faced liars proven wrong ought to make them worry […]

Forecast: $2 Trillion in US Originated Credit Losses

As the credit crisis progresses, the estimates of the total damage march relentless upward. Reader Scott passed along a note by Frank Veneroso, Market Strategist for the Global Policy Committee of Allianz Dresdner Asset Management, which gives a top-down and bottoms-up estimate of credit losses. Note that this estimate is based strictly on US consumer […]

Merrill’s Reckless Mortgage Bond Binge

A page one story in the Wall Street Journal, “Merrill Upped Ante as Boom In Mortgage Bonds Fizzled,” tells the sorry tale of how the brokerage giant did so much damage to itself via a pathological disregard for risk at the very time when the mortgage markets were about to sour. The firm is still […]

Dizard: Fed Backs Hypocrisy of Bank Recapitalization

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 […]

Quelle Surprise! Corporate Bankruptcies Rising

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 […]

"Citi allows loan ‘cherry picking’"

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 […]

Bigger Role for Fannie and Freddie Could End US AAA Rating

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 […]

"1929 once 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 […]

Maryland Greatly Lengthens Foreclosure Process

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 […]

Investment Bank Demand for Fed Liquidity Falls

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 […]

Ban "No One Could Have Foreseen the Crisis"

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 […]