The SV rescue plan touted by the Treasury Deparment and sponsored by Citigroup, JP Morgan, and Bank of America, has finally, officially, had a stake put through its heart today. It dies unmourned and unloved. It wasn’t hard to see that this concept was unlikely to get off the drawing board. But with the Treasury’s […]
Read more...As we have mentioned before, one of the dirty secrets of the bond insurance business was that the original product, municipal bond insurance, was as close as you could get to free money. States and municipalities never defaulted on principal, so the most an insurer would pay would be a few interest payments. That turned […]
Read more...A solid, well argued case against further central bank accommodation by Charles Wyplosz, professor of economics at the Graduate Institute of International Studies in Geneva, in the Financial Times. The centerpiece of his argument is that by providing ample liquidity and low interest rates, monetary authorities are delaying the very steps necessary for banks to […]
Read more...UBS is getting heat on multiple front on the planned investment of $11.5 billion, the bulk of which comes from the Singapore Investment Corporation, and the remainder from a secretive Middle Eastern investor. Initially, this development seemed like a coup, for the Swiss bank announced further writeoffs seen as deep enough to take it through […]
Read more...The Wall Street Journal has broken this story: “Merrill May Get Capital Infusion.” Hhhm. $5 billion seems to be the magic number, since it happens to be the size of the planned investment in Morgan Stanley by a Chinese investment fund. It may be another coincidence, but is also seems brokerage firms are keen to […]
Read more...MarketWatch, Bloomberg, and Reuters, among others, reported on the disclosure by the largest bond guarantor, MBIA, of its exposure to $30.6 billion in “complex mortgage securities.” What was particularly worrisome was that in the total is $8.1 billion of collateralized debt obligations of the particularly risky “CDO squareds” variety, or CDOs of CDOs. Bear in […]
Read more...I usually rely on public information, but I’ve had two not-so-public (well, one is public but second-hand) data points converge, and they are consistent with the MSM information on the matter at hand, namely, how Morgan Stanley came to post a $9.4 billion loss on the actions of one trading desk, which in turn led […]
Read more...There was some hope that bond insurers might be able to shore up their balance sheets via reinsurance and/or capital infusions, to avert a downgrade. The pending $1 billion investment by Warburg Pincus in MBIA, the largest monoline insurer, seemed a promising sign for the sector. The rating agencies are keeping the heat on. Standard […]
Read more...Yet another cash infusion for an investment bank suffering losses by the Chinese (the first was Bear Stearns). China state-controlled China Investment Corp, is buying securities that offer a current yield of 9% and convert into as much as 9.9% of the firm. However, the investment fund will receive no board seat or management role. […]
Read more...The ECB’s offer to lend to all takers who could post collateral for two weeks at 4.21% or higher led to an unprecedented $500 billion worth of advances. The New York Times and the Financial Times offer some insights as to what this portends. First, from the New York Times, which focused on the comments […]
Read more...A Bloomberg story reveals that municipal bonds have lagged other fixed income investments, mainly because important investors, namely hedge funds and banks, are directing capital to other uses (as in saving their hides). Due to their tax-deductible status, munis trade at a lower yield than Treasuries, but that differential has narrowed markedly. Are munis a […]
Read more...Despite the widely-held view that the SIV bailout plan engineered by the Treasury Department and sponsored by Citigroup, JP Morgan, and Banks of America will be largely irrelevant, the program keeps moving forward. We have the latest press release, um, update, courtesy Bloomberg: The “SuperSIV” fund, set up to provide cash to structured investment vehicles […]
Read more...On Monday, the European Central Bank announced an even more aggressive version of a liquidity facility it had used last August in its efforts to lower interbank lending rates that are stubbornly higher than policy rates. This move is an admission that the coordinated efforts of five central banks last week, including the Fed and […]
Read more...The Financial Times’ Paul Davies, citing Dresdner Kleinwort research, tells us that many structured investment vehicles face acute financial demands beginning in January when their medium term notes, the subordinated layer of their funding, come due. Note that this demand is a new source of stress. SIVs were already on the ropes due to their […]
Read more...John Dizard of the Financial Times has learned that Goldman is trying to find a counterparty for a bearish position on banking industry risk. Is this a house bet, a hedge, an attractive product, or is the firm merely trying to find a taker for a punt a client wants to make? Regardless, the actions […]
Read more...