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 […]
Read more...On the one hand, I should be flattered that Brad DeLong took the time and trouble to take two posts (here and here) to respond to my comments on an earlier post of his, in which I objected to his and Summers’ notion of having the government fund either directly or indirectly, the purchase of […]
Read more...Martin Wolf takes a discursive route to make a fairly straightforward observation: no matter how the US deals with its debt hangover, the consequences are likely to be contractionary. But a rapid move to a sustainable savings rate (6%? 10%?) would produce tremendous dislocations. Hence, the public sector will throw sand in the gears, which […]
Read more...According to the New York Times, Congress is suddenly keen to get a homeowner bailout program in place, and made a rare bipartisan show of a joint news conference, with the hope of tabling the bill as soon as noon Wednesday. Key elements: At a minimum, the bipartisan package was expected to include up to […]
Read more...A Financial Times story reports that the Financial Stability Forum, which is tasked with finding remedies to our credit crisis, is circulating a paper which suggests some radical possible solutions. The fact that these measures are under consideration says that the authorities do not expect a resolution any time soon. One paragraph caught my eye: […]
Read more...The word was out earlier today that UBS was going to take a stunning first quarter writedown of $18 billion (the total turned out to be $19 billion), far and away the largest credit crunch writedown to date. But for my money, the attention-getting number is the quarter’s net loss in relation to equity: $12 […]
Read more...Two articles in the Financial Times, one a discussion of the implications of Japan’s crash for US policy, the other the latest in a series of comments on the credit crisis by Larry Summers, take different views of the best remedies for our economic woes. Unfortunately, the Japanese prescription seems likely to be necessary, yet […]
Read more...Anyone who has paid even a wee bit of attention to the business press no doubt has gotten the message that there is a world of hurt in the debt markets. But both optimists and skeptics might wonder: is there an element of reporting fallacy? Are there sectors that are OK but have gone unnoticed […]
Read more...An article by John Berry at Bloomberg, “Fed Actions Defuse Subprime ARM Rate Reset Bomb,” is extraordinarily misleading, claiming that a Fed paper based on a single pool of MBS issued by New Century in 2006 shows that subprimes will work out much better than conventional wisdom says. Let’ s start with Berry: Many analysts […]
Read more...Before I put my buzz saw to work, let me make a few things clear. First, I have a good deal of respect for Robert Shiller’s work. Anyone who was willing to tell Greenspan in 1996 that he ought to be worried about asset bubbles has a good deal of foresight. Second, I am a […]
Read more...Two loosely related and thoughtful posts today point up some of the ways that the fundamental frameworks of how participants think about and relate to financial markets are breaking down. Note that this development is separate from the fact that financial institutions look pretty wobbly. Instead, these two writers, Roger Ehrenberg and Cassandra, highlight two […]
Read more...CR at Calculated Risk yesterday pointed to an important sign of improving conditions in the credit markets. The fever chart of the so-called third wave of the liquidity crunch, the TED spread, showed signs of improvement. The TED is difference between the interest on three month Treasuries and Libor; the earlier acute episodes were August-September […]
Read more...This forecast, that Wall Street credit-crunch-related losses could eventually total $460 billion, is mind-numbing. Consider that less than two weeks ago, the markets staged a rally on the comparatively cheery S&P forecast that a subprime bottom was in sight, that the total damage would be a mere $285 billion, and most of the rest of […]
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