Many commentators on the bailout of E*Trade by hedge fund Citadel focused on either the terms of the deal (costly to E*Trade) or the fact that Citadel, like some other risk-minded investors, are starting to pick and choose among distressed mortgage assets, a sign they believe that the bottom is nigh. But a Reuters story, […]
Read more...If you had any doubts that the credit contraction was having real-world consequences (beyond, say, the ease of getting a mortgage in the US), consider this DowJones Newswire story (hat tip Michael Panzner). Banks are not only not willing to lend to each other, but because liquidity is scarce, they are trying to dissuade UK […]
Read more...Yesterday, we posted some thoughts about the subprime rescue plan under development among the Treasury, some leading servicers, other regulators, and some investors (most notably Freddie and Fannie). A few additional items: We had commented that the plan would be limited to only borrowers who were current on payments. That appears to be incorrect, or […]
Read more...Below we have some charts that depict in various ways how fraught the debt markets and sentiment are. Some indicate that conditions are worse than in August, others are less grim. The graphics come courtesy Jim Hamilton at Econbrowser (“Risk Premia Creeping Higher“) and Michael Panzner at Financial Armageddon (“Off the Charts“). 30-Day Asset-Backed Commercial […]
Read more...The Wall Street Journal’s page one story, “Rate Plan Has Skeptics, Fans,” offers little new information about the substance of the program (not surprising) but gives mainly positive reviews. In case readers somehow haven’t figured it out, I believe this program to be a Bad Idea in any form, although some variants could be worse […]
Read more...Willem Buiter, the London School of Economics political economy professor who blogs at the Financial Times, asks the provocative question in the headline above, and after a very length discussion, that they probably shouldn’t yet, but they most assuredly should not cut rates. But what is more interesting about this post, and I’ve excerpted those […]
Read more...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 […]
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