This story on Citi’s further SIV woes has appeared on Bloomberg; we’ll update it when the Wall Street Journal and other financial news sources weigh in. Citi had roughly $80 billion of SIVs outstanding, but a MarketWatch story that looked to be a a PR plant, put the emphasis not on the rating agency actions, […]
Read more...The debacle in Florida, namely a $27 billion short-tern investment fund being frozen after the revelation it held $700 million of defaulted debt (today reported as $900 million) led to $12 billion in withdrawals, is producing a cash crisis at the government entities that hadn’t gotten their money back. Aside from the troubles this impairment […]
Read more...Bloomberg reports that despite the latest balm to the credit markets, that of offers of emergency funds that would tide banks over the typical end-of-year reduction in liquidity, Libor has nevertheless increased to the highest level since 2001. The problem, of course, is the the reason funding is tight is that banks are worried about […]
Read more...I am sticking my neck out a bit on this post, since the credit default swaps market doesn’t garner much coverage, so any readers who are involved in this busines are encouraged to comment. Yes, there are frequent references to what changes in CDS prices mean about the credit-worthiness of particularly names, but there is […]
Read more...Do we see a pattern here? The much-covered, little-loved SIV rescue program (formally known as the Master Liquidity Enhancement Conduit and informally called the Entity or Super SIV) was announced prematurely, didn’t clearly solve the problem it was meant to address, involved a lot of failing around to try to resolve irreconcilable interests (those of […]
Read more...Who was it who said money is too important to be taken seriously? I came across this video courtesy Dave Iverson at Economic Dreams – Economic Nightmares. Enjoy!
Read more...Yesterday, Bloomberg reported that a state-run investment fund in Florida witnessed $8 billion of redemptions out of a total fund size of $27 billion because its investors learned the fund held $700 million of defaulted paper. The fund froze the remaining fund assets today. Apparently withdrawals continued yesterday after the Bloomberg story was released, since […]
Read more...In the interest of (occasionally) balanced reporting, I thought to include this post from Willem Buiter, currently a Professor of European Political Economy at the London School of Economics, blogging at the Financial Times, on whether the credit crunch will damage the real economy. This piece makes for an interesting contrast to the New York […]
Read more...Ah, someone, namely jck at Alea, finally nailed the economics of the Abu Dhabi investment in Citigroup. I have to confess that when I read Andrew Clavell’s analysis, I was sufficiently chastened so as not to think about it further. But jck points out the obvious flaw: Clavell decomposed the deal in to put and […]
Read more...Public funds often make for great stuffees, as this story from Bloomberg (hat tip Ann Beaulieu) recounts. In brief: the Florida State Board of Administration runs roughly $42 billion of short-term investments on behalf of various government entities, including a “short term investment pool” of roughly $27 billion, as well as the state’s $137 billion […]
Read more...The rating agency Fitch for some time has warned of lax lending practices in the commercial real estate market. Bloomberg reports today that prices of derivatives protecting investors against default of the highest-rated commercial real estate securities have appreciated sharply in the last month, signaling the expectation of defaults ” rising to the highest level […]
Read more...Martin Wolf, the well respected lead economics editor of the Financial Times, turns to a favorite topic: why banks regularly get themselves in trouble. His answer: it’s “a risk-loving industry guaranteed as a public utility.” Privatizing gains and socializing losses, particularly if the employees share in that arrangement, is a formula for reckless behavior. Wolf […]
Read more...While the Financial Times has a wealth of journalistic talent, one of its standouts is capital markets editor Gillian Tett. She reported on the signs of trouble in the credit markets when the world at large thought everything was hunky-dory. One of her many prescient pieces was an article in January that used the fact […]
Read more...Bloomberg reports that JP Morgan analysts forecast that large bank exposure to CDO-related losses could reach as high as $77 billion. Note that they have written off more than half that amount already. They also estimated aggregate losses at $260 billion. We have come up with larger back-of-the-envelope loss estimates, but that was based on […]
Read more...From time to time, Mark Thoma features the views of his University of Oregon colleague and Fedwatcher Tim Duy. Duy got his last call wrong. He genuinely believed the Fed would not cut, basically because not cutting was the right thing to do, and misread the FOMC’s sensitivity to market reactions, or to be less […]
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