Henry Paulson is becoming the spokesperson for half-baked proposals, first the SIV rescue plan, and now his idea for what sounds like standard-form loan modifications for stressed mortgage borrowers. Paulson’s fondness for Big Schemes That (Purport To) Fix The Problem With A Master Stroke may be a sign of grandiosity. Doesn’t he understand that the […]
Read more...It looks like I am in the process of being proven wrong, but even if I am wrong, it is because I underestimated the stupidity of policymakers and the short-sightedness of the mortgage industry. In September, Shiela Bair, chairman of the FDIC, had called on mortgage servicers to freeze teaser loans at their introductory rates. […]
Read more...Federated Investors has joined Bank of America in investing its own funds in a short-term fund to prevent investors from suffering losses. While BofA’s salvage operation is estimated to have cost as much as $600 million, the damage to Federated has not yet been disclosed. Note that the fund in question is an enhanced cash […]
Read more...Having made a few back-of-the-envelope calculations in this blog, and then having had readers jump on me, I know what fraught exercises they are. But at the same time, a lot of information is bandied about, and you can learn a lot by connecting the dots (although sometimes what you learn is that you didn’t […]
Read more...One of our ongoing beefs is that with all the ink that has been spilled on our snowballing credit crisis, there are almost no decent proposals as how to keep it from happening again. Too few commentators and policymakers have gone beyond either fixating on the size and complextion of the mess, and when they […]
Read more...These days, a mere $1 billion writedown is such an penny-ante event as to not merit much interest. Indeed, what made the fact that Swiss Reinsurance Co., the world’s biggest reinsurer, lost that much on mortgage related derivatives noteworthy was the fact that it was engaged in that activity at all. It turns out the […]
Read more...Perhaps I am attributing too much importance to a single speech, but the Minneapolis Fed President Gary Stern’s “Credit Market Developments: Lessons for Central Banking,” reveals a lot of what is wrong about the way policymakers are thinking about our credit crisis. And if Stern’s position is widely held within the Fed, we are in […]
Read more...University of Oregon professor Tim Duy is featured on Mark Thoma’s Economist’s View with his latest prognostication: “Fed Watch: Headed For Another Game of Chicken?“ Readers may recall that Duy provided a great analysis prior to the Fed’s last FOMC meeting, and concluded the Fed shouldn’t cut, which he took to mead the Fed wouldn’t […]
Read more...The story, “Support for SIV superfund grows,” in today’s Financial Times, is curious. Let’s give you the key bits and then go over why it’s odd: The plan for a $75bn superfund to buy assets from cash-strapped structured investment vehicles appears to be gaining support among sceptical institutions, amid concern that SIVs might start dumping […]
Read more...Nouriel Roubini, in his latest post, “With the Recession Becoming Inevitable the Consensus Shifts Towards the Hard Landing View. And the Rising Risk of a Systemic Financial Meltdown,” takes his somber views one step further and discusses the possibility of a crisis in some detail. Even by Roubini standards this is grim reading. I have […]
Read more...Two contrasting stories on Bloomberg: Federal Reserve Governor Randall Kroszner made the most explicit statement by a Fed official to date, saying that further rate cuts aren’t needed to get the economy through its “rough patch.” Although Fed futures declined, the implied expectation of a rate reduction is 84%. Yesterday, Goldman’s chief economist Jan Hatzius […]
Read more...A colleague was so kind as to send me the text of a speech given at the Graham & Dodd breakfast a few weeks ago by David Einhorn, CEO of hedge fund Greenlight Capital. The speech has gotten play only in some personal-investment-oriented blogs like Seeking Alpha and Naked Shorts. Even though they are fine […]
Read more...Bloomberg reports that the net asset value of SIVs rated by Fitch continue to fall. It is important to understand that a fall in net asset value is NOT the same as a fall in value of the fund’s total assets (according to Fitch, they stand at 97.7% of the face amount). As an earlier […]
Read more...Bloomberg reports today that a downgrade of the monoline bond insurers MBIA and Ambac, which had been the subject of concern for some time (see here and here), may cost investors as much as $200 billion. If they lose their AAA rating, then any securitized deals that relied on them for credit enhancement will be […]
Read more...Did you think the Bear Stearns hedge fund drama of the summer was over? We may see a low-budget sequel. The Financial Times reports that aggrieved shareholders of one of the failed Bear funds, High-Grade Structured Credit Strategies Enhanced Leverage (Overseas), have assumed control. US based investors get to vote on Friday (no guess as […]
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