Category Archives: Credit markets

UK Overnight Rates Spike Up on Northern Rock Worries

Yet another indicator of the seriousness of the Northern Rock crisis: UK overnight rates increased 60 basis points on liquidity concerns. As Bloomberg reports: The cost of overnight borrowing in pounds rose the most since June as the bailout of U.K. lender Northern Rock Plc stoked concern other home-loan providers will be forced to seek […]

The Journal Tells Us Now A Rate Cut Will Have Little Impact?

If one didn’t know better, it might be possible to think that a page one story today, “Too Much Hope May Be Pinned On Rate Cut.,” was a decent piece of journalism. But to reach that conclusion, you need to overlook a few things. First, the story is late. Those who were early to recognize […]

Northern Rock: Assessing the Damage to the Bank of England’s Credibility

In today’s Financial Times, Willem Buiter, professor of political economy at the London School of Economics, and and Anne Sibert, professor of economics at Birkbeck College, University of London, take stock of the impact of the Northern Rock bailout on the Bank of England’s reputation. The article points out various dimensions on which the Bank’s […]

Northern Rock: Endgame and Collateral Damage

More customers lined up today to withdraw cash from troubled UK building society Northern Rock after the Bank of England provided emergency funding. Bloomberg reported that there were expressions of interest in the bank, and given the continuing run, Northern Rock’s best course of action would be to make some kind of deal ASAP. The […]

Is Capital Adequacy A Problem?

Sorry to be brief, but a good article by Charles Goodhart, emeritus professor at the London School of Economics, acknowledges that lack of transparency and dubious ratings have played a major role in the current credit crisis. Unlike most other writers, however, he points to a looming third culprit: insufficient bank capital. Observers may find […]

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 […]