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...Reader eTrader alerted us to an important but under-reported development today, namely, that FAS 140 has been provisionally modified so as to kill SIVs. While this structure was effectively dead as of now, there remained the possibility of it being reconstituted in the future. As FT Alphaville reports, the problem with SIVs is that they […]
Read more...Greenspan decided to launch a frontal attack on critics of his tenure at the Fed, via a Financial Times comment, “The Fed is blameless on the property bubble.” Needless to say, his defense does not stand up to scrutiny. Greenspan was happy to take credit for the commonly-held view that central bankers were responsible for […]
Read more...As the credit crisis has worsened, regulators are increasingly abandoning their usual anodyne statements in favor of blunt assessments and plainspoken calls for action. But even in this new age of supervisory candor, the call by Dominique Strauss-Kahn, the IMF head, for global fiscal action to combat the decline in growth, reveals that the IMF […]
Read more...Private equity funds (except for specialists like Chris Flowers) seldom make investments in banks, and for good reason. They are regulated businesses with complex, integrated overhead structures that don’t lend themselves to the sort of cost cutting and breakups that are easy ways for LBO firms to unlock value. On the one hand, with sovereign […]
Read more...Readers may recall that MBIA tried the “just say no” strategy with rating agency Fitch, trying to shut out the number three firm, obviously due to its less than charitable view of the industry (Fitch downgraded Ambac to AA while Moody’s and Standard & Poor’s maintained the sham of a top grade). MBIA requested that […]
Read more...Gillian Tett of the Financial Times perhaps a bit wistfully, looks back on the days when market participants could tell themselves that everything could bubble along at a “just right” level. She now wonder whether despite the troubling prospects, we might somehow stumble through in a way that avoids the worst extremes (the equity markets […]
Read more...Because I was distracted today (houseguest, plus preparing for out of town trip), I haven’t spent as much time as I would have like on the Congressional hearings into the Bear bailout. Judging from the media reports, it seems that the assertive presentations by the perps, um participants in the deal were not met with […]
Read more...As the Financial Times points out today, we are witnessing a replay of the pattern seen during Japan’s credit bust, except in reverse. Western banks were leery of extending credit to the Japanese and charged a premium over normal interbank rates. Now that the Japanese credit markets are more liquid than many others, foreign bank […]
Read more...George Soros, in today’s Financial Times, joins a long list of critics of the Paulson financial services reform plan, although even to dignify its bureaucratic legerdemain with the label “reform” is singularly misleading. Soros departs from his peers in sketching out where he thinks regulators went wrong and offers two specific proposals, I am particularly […]
Read more...Several alert readers caught the Financial Times story, “Wall St banks seek to ring-fence bad assets,” and I held off from posting on the assumption it would merit coverage in the Wall Street Journal or the New York Times. Not so. The Financial Times article says that investment banks are seeking to put dodgy assets […]
Read more...In an amusing bit of irony, Standard & Poors chief, in an interview, acknowledged that the bond markets are anticipating that corporate defaults will run at twice the rate foreseen by the rating agencies. Recall that roughly half the big business debt outstanding is junk, and nearly all of that was issued in connection with […]
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