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 […]
Read more...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. […]
Read more...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 […]
Read more...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 […]
Read more...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 […]
Read more...In case you were wondering why mortgage borrowers were having solvency problems…
Read more...Breaking news over a weekend is rare indeed, so the financial press is having great fun with the demise of now former Citigroup CEO Charles Prince, speculating over his likely replacement and possible futures for the financial giant. Some are calling for a break-up, and news stories suggest that interim chairman Robert Rubin has long […]
Read more...The question posed in the headline isn’t exactly the one Gillian Tett and Paul Davies address in a long and worthwhile analysis at the Financial Times, “What’s the damage? Why banks are only starting to uncover their subprime losses.” But that’s because, as the piece make clear, we are only at the end of the […]
Read more...Ah, the odd working of the markets. It’s often difficult to decouple the factors at work. For example, in the wake of the Fed’s unexpected 50 basis point Fed funds rate cut in September, long-dated Treasuries fell due to heightened inflation concerns. But last week, despite another rate cut and near $100 a barrel oil, […]
Read more...An excellent post at Vox EU, “Subprime crisis: the policy response and filling the information gap,” by Alberto Giovannini, Chief Executive Officer, Unifortune SGR SpA, and Luigi Spaventa, Professor of Economics at the University of Rome. The article gives a nice recap of the credit crisis and focuses on regulatory failure. It zeros in on […]
Read more...Maybe I am getting a bit burned out. I almost took a night off because I couldn’t get worked up as I normally do about the stories du jour. Yes, Chuck Prince is expected to resign on Sunday. I’m surprised he lasted this long. He was over when he made his now-infamous remark: When the […]
Read more...I will confess to being cynical about the reporting in the Wall Street Journal. As we have noted repeatedly in the past, it generally goes overboard to stress the positive its market-related reporting. That says the reporters too often lack the time or savvy to go beyond their sources’ spin. Now Thursday was undeniably a […]
Read more...Paul De Grauwe, professor of economics at the University of Leuven, makes a persuasive and succinct case as to why central banks need to combat asset bubbles. Reading his argument, one might even wonder why the topic is controversial. Yet it is. Beyond insuring the safety of the banking system, central bankers’ mandates extend only […]
Read more...If this factoid about barter being used to effect distressed subprime trades (and she admits it is, at least so far, an isolated example) had come from anyone other than Gillian Tett, the captial markets editor for the Financial Times, I’d be inclined to discount it. But the fact that it is happening at all […]
Read more...If you really want to worry about the credit markets, it might behoove you to turn your attention from subprimes to the vastly more arcane, opaque, and larger problem of collateralized debt obligations. A structured credit product, they are so heterogeneous in terms of structure and composition that it is difficult to make meaningful generalization […]
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