Category Archives: Credit markets

"Debt Reckoning: U.S. Receives a Margin Call"

I rarely feature Wall Street Journal articles in long form because I figure most readers will find them on their own. But the Journal’s Saturday edition isn’t as widely read, and this is an exceptionally good piece, particularly given that the Journal is not the best source on credit market reporting. The ongoing crisis seems […]

Is That S&P Forecast of Subprime "Bottom" Good News?

The market rallied on the news that S&P reported that the end was in sight for subprime writedowns, with the firm placing the total damage at $285 billion, with $150 billion realized so far. The need to believe is stronger than I realized. “End is sight” is not the same as “end is nigh” but […]

The Administration’s Cosmetic Credit Market Reform

Never expect a group with members ideologically opposed to regulation to come up with a wide ranging reform program, no matter how badly one is needed. An individual can have a Nixon-goes-to-China moment, but not a committee. Later today, no doubt with great fanfare, Hank Paulson will announce the plans devised by the President’s Working […]

Dollar, Asian Stocks Tank on Carlyle Capital Collapse, Credit Market Worries

Asian markets opened lower, then took a nosedive after the release of a report that troubled mortgage bond hedge fund to Carlyle Capital failed to reach a standstill with creditors (hat tip reader cb). The Nikkei fell 3.5% to 12,400. The dollar dropped to 100 to the yen. I bought yen at around 111 in […]

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 […]