We had noted earlier that one of the motivations for launching the SIV rescue plan sponsored by Citigroup, JP Morgan, and Bank of America wasn’t only to help save the banks who sponsored SIVs from having to tie up their balance sheets by extending funding to them, but also to save money market funds from […]
Read more...Readers likely know that new accounting standards are forcing investment banks and other financial firms to specify how the value the assets on their balance sheet. Level 1 assets are ones whose prices can be readily obtained (i.e., they trade actively); Leve 2 assets may not trade often, but they are very similar to assets […]
Read more...By coincidence of timing, two economists, Nouriel Roubini and Willem Buiter, who have sharply contrasting temperaments, writing styles, and analytical approaches, came out with posts that both argued that US growth prospects look weaker than mainstream forecasts suggest. Readers who follow economics blogs doubtless know full well that NYU economics professor Roubini is a very […]
Read more...Sometimes I feel like I am beating a dead horse, or in this case, an about-to-be-stillborn one. The leak over the weekend revealed that the sponsors of SIV salvage operation, the so-called Master Liquidity Enhancement Conduit, had come up with a deal structure. That’s an important hurdle, but it still puts the concept a long […]
Read more...Nothing like a sobering forecast to focus the mind on a Monday morning. As readers may recall, I was deeply concerned early this year about excessive leverage, asset bubbles in many different markets, and complacency about risk. But it is one thing to know that things are likely to turn out badly, quite another to […]
Read more...Oh, we are in for a wild ride. The long-anticipated and much delayed unwind of the carry trade appears to be underway, due to credit market fears. For those new to the concept, the carry trade involves borrowing where interest rates are low (typically in a cheap currency, like the yen, where interest rates are […]
Read more...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 […]
Read more...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, […]
Read more...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 […]
Read more...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 […]
Read more...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 […]
Read more...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. […]
Read more...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 […]
Read more...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 […]
Read more...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 […]
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