Category Archives: Credit markets

News Flash: Ben Stein Says Something Intelligent

Before I raise your expectations unduly, I am not saying that Ben Stein’s entire “Everybody’s Business” column today is intelligent. However, this week’s piece, “It’s Time to Act Like Grown-Ups,” had some sensible moments, and I want to give Stein his due on those infrequent occasions when it is merited. I am not parsing the […]

Mirabile Dictu: SIV Rescue Sponsors Have Finalized Terms

Eric Dash of the New York Times reports that the sponsors of the oft-criticized SIV rescue plan, the Master Liquidity Enhancement Conduit, have passed an important hurdle; they have agreed on a deal structure. As we have commented before. one of the things that has been perplexing from the outset was that the organizers, Citigroup, […]

CDOs: The Ticking Time Bomb

The equity markets seem to have finally realized that conditions are ugly in the credit markets, due to get uglier, and the mess will pull down the real economy. And the bad news continues. The dollar index fell to a new low. Wachovia said the value of its subprime securities, largely “super senior” tranches of […]

The Markets Raise Bet Bernanke Will Cut

Perhaps saying that the markets still “expect” the Fed to cut rates isn’t putting the right coloration on Fed futures prices, which imply another reduction in December. Comments in the press prior to the last FOMC meeting indicated that a big factor in the Fed’s thinking was that it didn’t want to upset markets. if […]

The Deteriorating Monoline Insurers and the Rating Agencies’ Dilemma

For mostly good reasons, the rating agencies have become a favorite whipping boy. One complaint it that they are typically slow to downgrade because they don’t want to tarnish an issuer by being early. The latest credits that appear to be looking weaker than their ratings are the monoline insurers, whose business depends on them […]

OFHEO’s James Lockhart Takes Cuomo to the Woodshed

Normally, I have a pretty good feeling for the dynamics behind turf wars, but on this one, I freely admit to sticking my neck out, and welcome any reader insight. As you probably know, the New York Attorney General Andrew Cuomo filed a suit against title insurer and appraiser eAppraiseIT, a unit of First American. […]

Commercial Paper Shows Biggest Weekly Drop in Two Months

The commercial paper market contracted $40 billion for the week ended yesterday. Not only did the asset backed commercial paper market continue to shrink, but other commercial paper outstandings fell as well. As we have noted before, the continued shrinkage of the CP market calls into question the strategy of using interest rate cuts to […]

SIV Rescue Plan Appears to be Too Late

One of the many problems we had mentioned from the outset with the proposed SIV rescue plan, the Master Liquidity Enhancement Conduit, was timing. Given that it was a new program that hadn’t even been structured, the proposed 90 day timetable to launch looked unrealistic and even then also appeared to run the risk of […]

New York Times: House as ATM Coming to an End

A story in the New York Times, “Homeowners Feeling the Pinch of Lost Equity,” reports that consumers are having to rein in spending now that they can no longer use their home as a piggy bank. Why is this story noteworthy? Yours truly, along with others whose feet are in the real world, like Joseph […]

Trying to Talk Their Way Out of the Doghouse (Merrill, Morgan Stanley Edition)

As conditions degrade from bad to worse at many Wall Street firms, the public is occasionally treated to explanations of Why Things Went Amiss. But firms usually provide detail only when they believe they can get persuade their chump shareholders that the problem is behind them. According to Morgan Stanley, the problem was stupid traders: […]

Investment Banks May Face $100 Billion in Writedowns

Royal Bank of Scotland estimated that investment banks will be forced to take $100 billion in writedowns as a result of the implementation of new accounting rules that restrict their latitude in valuing financial instruments that cannot be priced readily. Citigroup alone has $135 billion in so-called Level 3 assets, and that number rose by […]

More SIV Debt Ratings Cut

Today Moody’s lowered ratings on 16 SIVs representing about 10% of SIV debt outstanding. Ouch. From Marketwatch: Moody’s Investors Service downgraded more ratings on structured investment vehicles on Wednesday and warned that the funds are in a more precarious position than they were in early September, previously considered the height of this year’s credit crisis. […]

SIV Rescue Plan Delayed, May Be in Trouble

The Financial Times appears to have broken a story (nothing similar yet on Bloomberg, the Wall Street Journal, or the New York Times), “Risk of securities fire sale mounts,” reporting that the structured investment vehicle rescue plan, the so-called Master Liquidity Enhancement Conduit (MLEC) is suffering from delays and failure to expand its support beyond […]

A Particularly Choice Citigroup Disclosure

Various analysts and reporters took keen interest in Citigroup SEC filing Tuesday that revealed that the bank had deployed $7.6 billion of a total $10 billion liquidity facility to assist its floundering structured investment vehciles (SIVs), but stated it does not believe it has to consolidate the SIVs. CreditSights estimated that Citi’s losses on asset […]

Warning: Tough Accounting and More Writedowns Coming

The recent excesses of the financial services industry seem to be coming home to roost at the same time. Just when the arcane paper that sold like hotcakes a mere few months ago is now languishing in dealer inventories, so to is coming accounting treatment that gives the firms far less latitude in how they […]