John Authers of the Financial Times, in “Market vultures await more blood,” tells us that bottom fishers have been taking a wait-and-see attitude towards the recent market turmoil. While they’ve been able to make handsome profits on certain trades based on the (until a couple of months ago) underpricing of risk, the distressed merchandise pros […]
Read more...Bloomberg and the BBC report that Barclays, the third largest bank in the UK, borrowed “as much as ” 1.6 billion pounds ($3.2 billion) from the Bank of England. The bank claimed it fell short of caah due to an error in its trade processing system, and it discovered the need for funding too late […]
Read more...The Wall Street Journal, in “Bush Moves to Aid Homeowners,” reports that today the President will set forth a program to help stressed borrowers at risk of losing their homes. Main elements: Allowing the FHA to guarantee loans to borrowers who are at least 90 days behind on their mortgages but still living in their […]
Read more...I hope you don’t think this blog is in danger of becoming the “all Fed, all the time” channel, but this is an otherwise slow news period and central bankers are very much in the spotlight. Willem Buiter has a long post on his blog which discusses the Fed’s limited independence compared to other central […]
Read more...The news from rating agency land goes from bad to worse. This Bloomberg article does much to explain why investors are avoiding subprime like the plague. AAA paper revealed to be CCC. Repeated incidents of financial institutions saying they have no/little subprime exposure, then shortly thereafter fessing up that they have a lot. And rating […]
Read more...Bloomberg tells us that the commercial paper market is shrinking rapidly.This is a more serious issue than might appear. Commercial paper is an important, if not the most important, source of short-term funding for sizable corporations, mainly because it’s cheap and flexible. They can reading adjust the amount outstanding to reflect changes in their need […]
Read more...Frankly, this is pathetic. If Bernanke and his minions can’t take the heat of some well-deserved criticism from the highly-regarded Martin Wolf of the Financial Times, they don’t belong in public service. To recap: yesterday, Wolf issued a stinging rebuke of Bernanke’s conduct on the Financial Times editorial page, in “Central banks should not rescue […]
Read more...Lucy Kellaway, a Financial Times columnist who writes about corporate fads, once said no new business technique is too ridiculous to be put into practice. The Springwise newsletter (“New business ideas for entrepreneurial minds”), demonstrates that the same can be said of new business concepts. This week’s edition breathlessly describes what can only be depicted […]
Read more...Oh, I do so enjoy it when the Financial Times’ chief economics editor, the normally measured and thoughtful Martin Wolf, works himself into a lather. Wolf blasts what he reads as the Fed’s vow of last week, uttered by Senate banking committee chairman Christopher Dodd, to keep the markets afloat (Dodd’s exact words were that […]
Read more...BreakingViews (free subscription required) reports that the degree of deleveraging of corporate balance sheets may be exaggerated. Yet another reason to look at stocks with a wary eye. Readers may know that the level of corporate borrowings relative to their equity and total assets has fallen since 2002. For example, Standard & Poors reports that […]
Read more...The Financial Times’ Lex column today takes issue with those who take comfort in the oft-quoted statistic that default rates are at a 25 year low. The article shows a long-term, unrelenting decline in average ratings and notes that bond defaults tend to peak two to four years after issuance. We’ve had an increase in […]
Read more...Has Roubini gone to the Dark Side? Nouriel Roubini, normally the voice of prudence, makes a marked shift in his latest post, “Fiscal versus Monetary Solutions to the Subprime Crisis. ” He sympathizes with those like Bill Gross of Pimco who call on the federal government to rescue mortgage borrowers at risk of losing their […]
Read more...Today, in a comment at the Financial Times, “This is where Freddie and Fannie step in” (subscription required), Harvard’s Larry Summers argued that the subprime crisis highlights three questions. Most commentators focused on the one question he not only posed but answered, namely, what role government should play in aiding the flow of credit to […]
Read more...Recently, we’ve noticed a new theme among economics writers: Extreme Measures. Commentators have looked toward the end of the road we are on and fear it leads to a precipice. Hence the calls for radical course correction. Paul Krugman and Bill Gross of Pimco, each of whom proposed large scale rescues of homeowners at risk […]
Read more...A reader pointed me to Willem Buiter’s blog, and it is a real find. For those who haven’t heard about him, he (along with Anne Siber) has proposed a rethinking of central bankers’ roles in times of crisis, arguing that they should serve as market makers of the last resort. One reason to read Buiter, […]
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