Goldman, in a research note discussed at CNBC, says the total tab for the US bank rescue operation could run as high as $4 trillion: The cost of restoring confidence in U.S. financial firms may reach $4 trillion if President Barack Obama moves ahead with a “bad bank” that buys up souring assets. The figure […]
Read more...Team Obama has started to preview some of its financial reform proposals. And if the New York Times has represented it accurately, it falls far short of what is called for. Consider the opening sentence of the article: The Obama administration plans to move quickly to tighten the nation’s financial regulatory system. If all the […]
Read more...The Wall Street Journal reports in a story frustratingly sketchy on key details that AIG has sprung another leak, or more accurately, had an ongoing leak that has just now come to light. The amount at issue, $10 billion, seems small compared to the $150 billion the insurer has already managed to extortsecure from the […]
Read more...As credit default swaps have come in and out of focus over the last year, I have been struck by the assumption that this product would of course continue to exist. I have trouble seeing their legitimate uses. In theory, they could allow banks to diversify and hedge credit risks better, but once risks rise […]
Read more...I hate it when I get contradictory information from supposedly reliable sources, which happens upon occasion when the topic is CDS. The latest Institutional Risk Analytics newsletter is again after one of its favorite objects of ire, credit default swaps. One of its beefs is that the collateral posting rules are a joke. Key excerpts: […]
Read more...The New York Times has a solid bit of reporting tonight by Eric Dash and Julie Creshwell, “Citigroup Pays for a Rush to Risk,” that seeks to explain why the giant bank got itself in so much trouble. The piece points to the usual culprit, too much risk taking, but the particular Citi flavor was […]
Read more...As the prospects for the economy deteriorate, the cost of default protection on corporate bonds hit a new high. From Bloomberg: The cost of protecting corporate bonds from default surged to records around the world as the prospect of U.S. automakers filing for bankruptcy protection fueled concern of more bank losses and a deeper recession. […]
Read more...What is intriguing about this article describing the likelihood of more synthetic CDO woes is that no one has a grip on how big a problem this might be and who might be exposed. From the Financial Times: Synthetic CDOs, the risky and complex debt products that are based on pools of corporate credit derivatives, […]
Read more...Note that the headline above was on a Wall Street Journal story about the new taxpayer-raping improved version of the AIG bailout. The current headline is anodyne: “New AIG Rescue Is Bank Blessing.” Just as one wonders why the government backed down on a deal that was appropriately punitive to AIG (at worst, it was […]
Read more...The Wall Street Journal reports, as was rumored on Friday, that AIG appears on the verge of approving a considerably enlarged and sweetened rescue package from the government. We were less than happy with the idea when it first surfaced (see our rant “The Black Hole Gets Bigger: AIG Back for Yet Another Bailout“). Let […]
Read more...The Financial Times reports that AIG is up to its old tricks, back again to the trough for more money. Christmas The Iceland credit default swaps settlement is coming soon, you know. The worst is that AIG is pretending to act as if this is a negotiation as opposed to extortion. Get a load of […]
Read more...Bloomberg has a good report today explaining why the DTCC report saying the credit default swaps market is only $34 trillion in notional outstanding isn’t all that it is cracked up to be. We muttered darkly at the time that some might read more into the DTCC report, released yesterday, than it deserved. Useful is […]
Read more...Even though the (supposed) supervising grownups in the credit default swaps market keep making reassuring noises about the credit default swaps market, I am not entirely convinced, mainly because the picture is still somewhat murky. Witness the Bloomberg story today, which tells us that the CDS market is smaller than we thought, roughly $34 trillion […]
Read more...When it rains, it pours. Amazingly, the list of possible casualties from positions on forward freight agreements includes not only ship owners, traders, and charterers, but also hedge funds. From the Financial Times: Fears are growing in the shipping industry over the potentially big losses that could emerge this week on derivatives triggered by the […]
Read more...The agonies of Jefferson County, Alabama, which got itself into a too-clever-by-half funding arrangement that put the county on the verge of bankruptcy, have faded from the public eye. However, the type of transaction that caused so much woe, a swaption to supposedly lower financing costs, has been the subject of SEC and Justice Department […]
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