Category Archives: Credit markets

Monoline Death Watch: Moody’s to Grade Munis on Same Scale as Corporates

Boy, that was one of the fastest capitulations on record. Less than thirty-six hours after Barney Frank threatened to intervene and end the disparity between corporate and municipal bond ratings, Moody’s fell into line. That pretty much guarantees the other rating agencies will follow suit. As we noted earlier, the ratings disparity gave the monline […]

Barney Frank Threatens to Kill Muni Bond Insurance Business

No, Barney Frank, head of the House Financial Services Committee, did not say in so many words that he wanted to end the municipal bond insurance business. But that’s the implication of the ultimatum. He told the rating agencies and the insurers that they have a month to make the standards applied to the ratings […]

Hamilton: The Fed Cannot Solve the Credit Crisis

James Hamilton, in “Asking too much of monetary policy,” is trying to talk sense to a Fed that just doesn’t get it. Hamilton ought to have some cred; he proved to be remarkably prescient when he warned in his presentation at the Fed’s Jackson Hole conference of the danger of the markets playing chicken with […]

Martin Wolf Reads Too Much Roubini and Freaks Out

The normally sober and measured Martin Wolf of the Financial Times is getting worn down by reading too many bearish forecasts, particularly those of Nouriel Roubini. And although Wolf would like to dismiss Roubini’s estimates as extreme, his track record in calling this downturn makes him loath to do so. From the Financial Times: What […]

Fed to the Rescue of Fannie and Freddie

The Fed’s move today to lend up to $200 billion against mortgage backed securities comes as close as one can without an act of Congress to affirming the implicit Federal guarantee of Freddie Mac and Fannie Mae debt. Its new facility, the Term Securities Lending Facility, will lend to primary dealers through 28 day auctions, […]

Moody’s and S&P Avoid Cutting Ratings on AAA Subprime

A kind reader Tim e-mailed me this Bloomberg story, which apparently is only up on the professional version (yes, I am a member of the great unwashed who lacks a Bloomberg feed. Now you know what to get me for Christmas). I’ll add a proper link once it migrates over. The rating agencies have taken […]

Self-Inflicted Wounds and Mutual Assured Destruction

Oooh, the week has barely started and we’ve already had an overdose of adrenaline-generating news. Thornburg Mortgage and Carlyle Capital, both twisting in the wind, battered by margin calls, look unlikely to escape bankruptcy (Thornburg has already defaulted on financing agreements; Carlyle is seeking a standstill). Freddie and Fannie took a further beating thanks to […]

CDOs: Murky Deal Documents Compound Woes

An article in the Financial Times, “Credit crisis lurches from bad numbers to bad writing,” by Arturo Cifuentes, contains a stunning revelation: the deal documents governing CDOs are in many cases so badly written that, for instance, it isn’t clear how to handle a default. To give readers a sense of proportion, the contracts governing […]

Asian Bonds Hit by Credit Panic

The ratchet down of the credit market Monday due to worries about Bear Stearns’ solvency and Fannie Mae have produced widespread collateral damage (no pun intended). Bloomberg reports that credit default swap prices, which rose sharply for US and European issuers, reflecting heightened worries about credit risks, have also increased for a large range of […]

No Exit: Will "A Short Financial Crisis Become a Long One"?

By happenstance, three articles in the Financial Times provide useful, if disheartening, triangulation on the credit crisis. In sum, the markets are a mess, policymakers don’t agree on what to do, and there may be nothing they can do except make matters worse. Last week was by any standards a bad week, with the Fed’s […]

Ambac Updates: Spitzer Twisted Arms; More on Tape Painting

The Financial Times reports today that New York governor Eliot Spitzer, hardly a well-liked figure on Wall Street, did serious arm-twisting to get banks to support Ambac’s fundraising: Eliot Spitzer, governor of New York, played a critical behind-the-scenes role in the rescue of Ambac, frequently calling senior bankers to press for a deal to be […]

On Krugman’s Worries and the Breakdown of the Securitization Model

Paul Krugman usually has enough important topics to occupy himself, like the sorry state of health care, income inequality, tax policy, Bush Administration offenses du jour, that he rarely gets around to matters financial. But stress in the markets has again come to the fore, so Krugman is taking a serious look. Not surprisingly, he […]

Why Investors Are Down on Fannie Mae

Even as recently as, say, last December, worrying about the the safety of Fannie Mae and Freddie Mac’s guarantees was seen as a sign of a being overly preoccupied with remote risks (in fairness, Nouriel Roubini did consider this possibility in the summer of 2006 and Michael Panzner did in his book Financial Armageddon, but […]

Covert Nationalization of the Banking System

One of the upsides of blogging is sometimes other inquiring minds get to the bottom of matters that have been nagging at you. We had warned a couple of months ago that a colleague with serious connections into the Treasury and Fed told us they were working on plans for a quasi-nationalization of the banking […]

"Sense of crisis haunts trading floors"

An article in today’s Financial Times is useful, albeit sobering, for attempting to give more of a calibration of the negative sentiment sweeping credit markets. Pretty it isn’t. Note also that the FT isn’t big on stories with emotional content. From the Financial Times: A palpable sense of crisis pervades global trading floors. Not since […]