Category Archives: Credit markets

UBS: $10 Billion in Writedowns, Selling Stake to Foreign Investors

When it announced its third quarter writedowns of nearly $4.7 billion, UBS had predicted a profit for the fourth quarter. The planned $10 billion writedoff of subprime-related debt announced today not only will lead to a fourth quarter loss, but may lead the Swiss bank to show losses for the full year. The bank plans […]

SIV Rescue Plan "Increasingly Irrelevant"

A story by Eric Dash in the New York Times, “Big Banks Scale Back Plan to Aid in Debt Crisis,” does a good job of explaining why the SIV salvage operation brokered by the Treasury Department and sponsored by Citigroup, Bank of America, and JP Morgan, may in the end not accomplish very much. The […]

UBS May Take Further Subprime-Related Writedowns

Both Bloomberg and MarketWatch feature stories on the possibility of further mortgage-debt triggered writeoffs at UBS. Readers may recall that the markets took cheer when UBS announced its third quarter chargeoffs, believing the bank and its peers were putting their troubles behind them. However, the bank now has lower MarketWatch cited a Swiss newspaper that […]

"The trouble with the Paulson plan"

An article by Clive Crook at the Financial Times which focuses on the inconsistencies (one might say hypocrisies) and failings in the subprime rescue plan announced last week. Because this program will provide only limited relief, he foresees that more rescue efforts, with costs to taxpayers, will follow. From the Financial Times: “This is a […]

Rising Inflation Expectations Conflict With Fed Rate Cut

A story on Bloomberg notes that the Fed has been sanguine so far about inflation because inflation expectations haven’t seemed to be rising. However, a measure the Fed relies upon, the five year forward inflation rate, has risen above the level that led the Fed to start its rate increases in 2004. In other words, […]

"Superfund pill fails to treat the SIV illness"

A concise comment by Francesco Guerrera in the Financial Times on why the SIV rescue plan is misguided and therefore will be ineffective. Although some of the issues have been discussed elsewhere, Guerrera gives a crisp treatment, and takes issue with a key assumption, that the bank sponsors can’t afford to take SIV assets on […]

Bank of America Affiliated Cash Fund Reported to Halt Redemptions

This pointer came from a reader: the largest enhanced cash fund, Columbia Funds Strategic Cash, has halted redemptions, which had taken the fund down from $40 billion to $33 billion over several weeks. However, this report has not been confirmed by the fund manager, Columbia Management, nor has it been picked up by any of […]

Wall Street Journal Versus the Financial Times on the SIV Rescue Plan

Once again, another example of the Wall Street Journal basically printing a press release and calling it a story, as contrasted with the Financial Times, which did some real reporting. The object lesson today is the latest news on the SIV rescue plan, which has retreated from the limelight as the Treasury’s other brainchild, the […]

Sheila Bair Launches Ad Hominem Attack on Subprime Plan’s Critics

The quality of debate in America has become so debased that for the most part we have become desensitized to the use of ad hominem attacks. In logic and rhetoric, an ad hominem argument, which attempts to discredit the person mounting the criticism, is considered invalid, since the substance of the charge has not been […]

Traders Cut Estimates of 50 Basis Point Rate Cut, But Asset Backed Commercial Paper Rates Rise

Two Bloomberg stories discussed the conflicting currents in the short term markets. First on the reduced expectations of a large Fed funds rate reductions: Futures contracts on the Chicago Board of Trade indicated a 24 percent chance that policy makers will lower the 4.5 percent target rate for overnight lending between banks by a half- […]

Subprime Rescue Plan: Investors Indeed Have Grounds for Lawsuits

Dear readers, I had wanted to go through the geeky American CoreLogic Mortgage Resets study, which gives mind-numbing detail on what type of mortgages reset when to come up with a more refined guesstimate of how many borrowers might be eligible for the formerly-Paulson, now Administration subprime program. The Administration claims its program could help […]

Home Equity Loans: Source of Systemic Risk?

Minyanville has a post on three potential sources of systemic risk that have been largely overlooked by the media and in the markets. Numbers two and three on the list – downgrades to monoline insurers damaging municipal credit and counterparty risk in derivatives markets – have been covered in this blog. But the first, the impact […]

"S&P Says Mortgage Freeze Plan May Cause Downgrades"

Duh. Note how, nevertheless, S&P bends over backwards to look supportive…. From Bloomberg: U.S. Treasury Secretary Henry Paulson’s plan to freeze some subprime mortgage rates in an effort to stop a wave of foreclosures may lead to ratings cuts on some mortgage bonds, Standard & Poor’s said. “Simply freezing interest rates on some U.S. first-lien […]

Subprime Relief Deal Spurred by Fear of Pending Democratic Legislation

As some cynics speculated, the subprime freeze proposal, scheduled to be unveiled early this afternoon, got a considerable push from worries about legislation sponsored by Barney Frank which would have allowed judges in bankruptcy some ability to change mortgage terms in bankruptcy. Note that these proposed rules merely put consumers on the same footing as […]

Saving Face (SIV Rescue Edition)

Events have overtaken the SIV rescue plan brokered by the Treasury Department and sponsored by Citigroup, Bank of America, and JP Morgan. The concept, first announced as a way to unfreeze the commercial paper market, is now being depicted as providing only modest benefits, namely, giving bank sponsors more time to sell the vehicles’ assets, […]