Category Archives: Credit markets

Bank of England’s Tough Position Absent From the Wall Street Journal

One of our forms of recreation is keeping an eye on how coverage of certain news stories in the Wall Street Journal is curiously different than elsewhere. We’ve noted before that the WSJ tends to put a happy face on economic and market news (its company reporting is considerably more evenhanded). The latest reporting disparity […]

John Kay on Central Bank Independence

Faithful readers, I have looked around quite a bit tonight, but I am not coming up with much grist for blogging. Yes, there is a Wall Street Journal front page story that tells us that homebuilders are putting up smaller houses. And there is some chat everywhere about OPEC’s small production increase, one that the […]

The Ways of Wall Street (Distressed Debt Edition)

The Financial Times’ John Gapper had an interesting piece today, “Patience on debt can ease distress.” I’ll give you the section that caught my eye to see if you react to it the same way I did: Last week, I went to a dinner in Manhattan that ostensibly had nothing to do with the credit […]

Foreign Investors Abandoning US Treasuries

The rally in Treasuries, due primarily to a flight to quality by US investors, has masked a troubling trend: a retreat from Treasuries by foreign investors. Today’s Bloomberg story quotes investors openly discussing their disenchantment with the dollar. This is more significant than it might appear. First, this selling of Treasuries is almost certain to […]

Wall Street Firms Face High Borrowing Costs

With the credit crunch in high gear, investors are shunning borrowers that look risky, might have subprime exposure, and are opaque (meaning it’s hard to tell what they own). Wall Street firms have all of those qualities and are thus particularly hard hit. A Bloomberg story reports that securities firms are facing high interest rates […]

Nouriel Roubini: "The Coming U.S. Hard Landing"

Some may have already seen Nouriel Roubini’s latest piece, “The Coming U.S. Hard Landing.” He goes through an exhaustive and exhausting litany of what ails the US economy (short answer: pretty much everything, although he did spare weak-kneed readers the role of global imbalances). His article is worth reading, and the extracts that relate to […]

The Asset Shuffling Game

Financial Times writer John Authers passed along an interesting observation from UBS’s George Magnus (the man who popularized “Minsky moment”) about the credit crisis: Issuance of commercial paper – short-term borrowing central to many financial institutions – is drying up, while Libor, reflecting the interest rates at which banks lend to each other, is spiking […]

Task Force to Encourage More Mortgage Modifications

I’m late to this item, “Task Force Will Seek More Loan Revisions,” which appeared in the Saturday Wall Street Journal. It seemed to merit comment and I haven’t seen much online. Here’s the premise: Attorneys general and banking regulators from 10 states have formed a task force hoping to persuade mortgage-servicing companies and investors in […]

Fed President Plosser: Don’t Count on the Fed Put

In a speech in Hawaii this morning, Philadelphia Fed President Charles Plosser the Fed’s views on stability and monetary policy, and his words were cold cheer to anyone expecting a rate cut. Calculated Risk noted that it was unusual for for a Fed president to speak so directly about monetary policy. Plosser noted that monthly […]

What a Difference a Job Makes (Steve Rattner Edition)

The Wall Street Journal’s Deal Journal quoted veteran deal hand Steve Rattner, now DLJ’s head of merchant banking, taking a comparatively upbeat view of the difficult conditions in the LBO market: Yes, “the oversupply is the worst we’ve ever seen,” said Rattner, whose private-equity fund closed last year with $2.1 billion of capital. “The market […]

A Call for Central Bankers to Hang Tough

With today’s weak non-farm payrolls report, financial markets participants have turned up the volume on their calls to the Fed to lower interest rates. Even Barney Frank, chairman of the House Financial Services Committee, has weighed in, urging a “meaningful” cut. So the Financial Times comment today by Raghuram Rajan, professor of finance at the […]

James Hamilton: The Bank Run on Non-Banks

James Hamilton provides a nice, succinct explanation of why the crisis in the credit markets is not a bank run (the afflicted organizations are not banks) yet has the characteristics of a bank run. It’s a useful piece for explaining, as he did at Jackson Hole, why the problem isn’t remedied by interest rate cuts. […]

Extreme Measures III: Cambiz Alikhani at the Financial Times

As concern about tightening conditions in the credit markets and the continued erosion of the US supbrime and broader housing market has grown, so too have calls for Extreme Measures to combat these snowballing problems. The first was from Bill Gross at Pimco, who suggested that the US government “rescue” the 2 millionish homeowners who […]

Another Blow to Rating Agency Credibility

A Bloomberg story today tells us that CreditSights found that AAA ratings for a new type of credit derivative may be as likely to default as junk. In a report titled “Distressed CPDOs: We’re Doomed!”, CreditSights raised doubts about the ratings of constant proportion debt obligations, which use credit default swaps as a means to […]

Martin Wolf on a "Sadly Predictable Debt Crisis"

The problem with being a night blogger is that one is either early or late on the day’s news. Apologies for being late to turn to the Financial Times’ Martin Wolf’s article on what he describes as “the first crisis of our brave new world of securitized financial markets.” The piece is in the form […]