Category Archives: Credit markets

Central Bank Efforts to Stabilize Money Markets May Not Be Working

An update from Bloomberg tells us that commercial paper outstandings fell 4.2% in a week, which suggests the efforts of central bankers to restore confidence in that market, and particularly in asset backed commercial paper, may not be adequate. 4.2% may not sound like much of a drop until you do some quick and dirty […]

Update From the Man Who Popularized "Minsky Moment"

George Magnus, senior economics adviser at UBS and the person responsible for bringing economist Hyman Minsky to the public’s attention, invokes him again in a good piece in the Financial Times. In keeping with his affinity for the world view of the dour economist, Magnus depicts our current credit crunch as a Minsky moment and […]

Martin Wolf Defends the Fed

Normally, I have the highest regard for Martin Wolf, the Financial Times’ lead economics writer. He is forthright, data-driven, articulate, sober, and insightful. However, I take issue with his current article, “The Federal Reserve must prolong the party,” and see its failings as symptomatic of the state of economics. In brief, Wolf argues that the […]

Bush’s FHA Band-Aid

The Bush Administration, which resisted proposals to have Fannie Mae and Freddie Mac buy more mortgages to alleviate stress in the housing markets, is instead looking to the Federal Home Administration, which traditionally has provided insurance to low and middle income mortgages, to help troubled borrowers. But if you believe the data in the Wall […]

Dizard on the Fed

Upon occasion, we’ve quoted John Dizard of the Financial Times, who seems terribly plugged in and is unfailingly interesting. His latest piece included a succinct summation of the Fed’s situation and his take on what it will do: The real issue has been the excess liquidity created by the central banks through a decade of […]

Has Smoke and Mirrors Worked?

In an inspired bit of stagecraft, Senate Banking Committee Chairman Christopher Dodd reported today on a meeting with Fed chairman Ben Bernanke and Treasury secretary Henry Paulson that the Fed stood ready to use “all of the tools at his disposal” to address the current money market liquidity meltdown and general credit market distress. This […]

Chaos Continues in the Money Markets

The Fed’s move on Friday to lower discount rates and its policy shift towards addressing risks to growth has not brought relief to the sector that was in the most distress, the money markets. Panicked action continued Monday, begging the question of what, if anything, the authorities can do. Institutional are fleeing from counterparty risk […]

On What the Fed Hath Wrought (So Far)

A gut-wrenching two weeks in the credit markets have been capped by unprecedented moves by central bankers. The ECB’s offer of an unlimited infusion to member banks the week before last was followed last Friday’ by the Fed’s discount rate cut, which included stern warnings that those who needed it better use it and a […]

Nouriel Roubini and Marc Faber Are Not Impressed

Nouriel Roubini and Marc Faber are well known bears, but that fact has not prevented them from being largely right of late. And since the events of the last few weeks have been particularly nerve-wracking, the US media has taken to focusing on the more soothing aspects of news developments, to the extent they can […]

Is the Criticism of Bernanke Warranted?

A Bloomberg story, in what may be becoming conventional wisdom, charges Federal Reserve Chairman Ben Bernanke with making a novice’s error: By lowering the discount rate and issuing a statement conceding threats to the economy, Federal Open Market Committee members effectively ripped up the economic-outlook statement from their Aug. 7 meeting. Some economists describe the […]

Monoline Insurers Under Scrutiny for Suprime Exposure

Gillian Tett, in “Credit compass fails to work,” in the Financial Times, uses the woes suffered by monoline insurers such as MBIA and Ambac to illustrate that in our current subprime/housing credit crisis, nobody is sure where the dead bodies lie, which makes everyone suspect. Monoline insurers provide credit guarantees for securities. They have come […]

Asset Backed CP Yields Move Higher

Even though the Fed cut the discount rate to 5.75%, and more important, said it was concerned about risks to growth, asset backed commercial paper, which is the epicenter of the credit shock, is being placed at newly high yields: 5.99%, which is now above the discount rate. And remember, not only has the Fed […]

Rate Cut Links

I was planning to go on long form about what the Fed should do, and now they have gone ahead and done it. That means I now have to write something very substantive. More on that later, but here is a roundup of some good posts: Cassandra depicts the credit crunch as a horror movie, […]

The Fed Acts, and the Stock Market Yawns

Given how extraordinary the Fed’s half point (not mere quarter point) discount rate cut of this morning was, and how the markets had been clamoring for it, you’d think we’d see more of a bounce in the Dow than the mere 160 ish points it is up as of this writing (that has come to […]

Paul Krugman Punts

Paul Krugman, in this morning’s New York Times, tells us (subscription required) that mortgage borrowers in the US are feeling a world of hurt. The pain is moving up the food chain beyond stressed subprime borrowers into the Alt-A pool (which truth be told, never was much better than subprime, so this development was widely […]