Category Archives: Credit markets

Goldman’s Proportion of Level 3 Assets Exceeds Merrill’s, Citi’s

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 […]

Nouriel Roubini and Willem Buiter Both See Downside Economic Risk

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 […]

Yet More Doubts About the SIV Rescue Plan

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 […]

Wolfgang Munchau: Less Than 10% Through the Credit Crisis

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 […]

Yen Rises Above 110 as Carry Trades Unwind

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 […]

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: […]