The New York Times’ Floyd Norris, in “In This Mess, Finger Pointing Is in Style,” discussed who might be responsible for the subprime woes and included this tidbit: Who’s to blame for the subprime mortgage mess? It’s the lenders, says William Poole, the president of the Federal Reserve Bank of St. Louis. As he sees […]
Read more...Today’s Financial Times has a good piece on the turmoil in the markets yesterday, which has continued into Asian markets today (although Europe appears to be staging a recovery). There were two noteworthy elements in this article, namely the divergence between the equity and credit market perspectives, the second on Bernanke’s posture. On the first […]
Read more...I’m sure you know the old saw about the drunk looking for his keys. A cop comes across a drunk crawling on all fours under a street lamp. The cop asks what he is doing. The drunk says he is looking for his keys. The cop looks about and can’t find any keys, and asks […]
Read more...A good old-fashioned showdown is set for this week between the Congress and the Fed. Congressmen are hoppin’ mad at the Fed’s failure not only to act to stem overheated and sometimes predatory subprime lending, but also its patent lack of enthusiasm in doing anything to keep this and other predatory practices from recurring. And […]
Read more...As Russ Winter describes the recent runup in margin debt in “Leveraged to the Hilt.” Needless to say, heavy use of margin is considered a sign of speculative excess. I believe much of the market move can be attributed to synthetic leverage (futures). But now we get more evidence that a parabolic move in the […]
Read more...A Fed and Treasury official both said they don’t see the downgrade of some subprime related debt leading to a broader meltdown, but instead see the repricing of credit working itself through in an orderly fashion. The fact that they felt the need to issue the reassurance in and of itself isn’t a good sign, […]
Read more...Today’s Wall Street Journal describes how the Office of Thrift Supervision is weighing new rules that would bar the banks it supervises from engaging in “unfair and deceptive” practices, a response to widespread claims of “predatory lending” in the subprime mortgage market. This effort, if it comes to fruition, is less and more than it […]
Read more...We’ve been skeptical of inflation targeting, no doubt as a result of seeing Paul Volcker use monetary targets very effectively. Witness the proof of the pudding, namely, asset bubbles, deteriorating credit quality, and increasing inflation (at least in overall CPI, although core CPI is better behaved). But serious economists have only started looking into this […]
Read more...Felix Salmon commented on an intriguing and colorful post by Steve Waldman that argues that it’s in China’s best interest to buy a few CDOs and save the Street and the hedge fund industry from a meltdown and possible jail time. Here is the meat of Waldman’s argument: Here’s where the dragon comes in. Several […]
Read more...OK, the headline may be exaggerating, but not by much. A Bloomberg article titled, “Bernanke, Trichet Turn to BIS as Markets Ignore Risk,” discusses how central bankers are finding the Bank of International Settlements an increasingly important forum for exchanging ideas and intelligence. What is distressing yet not surprising is the central bankers’ acknowledgement of […]
Read more...Marc Faber, who likes a colorful turn of phrase, has a sobering piece in the Financial Times, “Market insight: Beware the driving forces behind surging asset prices.” He looks at the symptom of pervasive asset bubbles (at least until US housing started unravelling) and traces it back to rapid money supply growth, which produced the […]
Read more...I know we are in the midst of a classic pattern, but it is still mystifying to watch it operate. At the end of a cycle, bonds start to decline in price before the equity market starts to fall. One would think that this sequence was sufficiently well established that the time lag between the […]
Read more...I am clearly showing my age. I am mystified watching both the Fed’s and the banking industry’s reluctance to tighten up on lending practices in subprime home loans. One would think this situation would, handled correctly, represent an opportunity for bankers. They have lost share to mortgage brokers, who were more lightly regulated and appear, […]
Read more...Bill Gross, storied bond investor and head of PIMCO, a fund manager with nearly $700 billion under management, made an important observation in a Financial Times comment, namely, that interest rate policy is having a very different impact on businesses and consumers. While the two groups were (most of the time) similarly affected, now interest […]
Read more...This Bloomberg story cites Federal Reserve research efforts that found that blacks and Hispanics were more likely to wind up with costly mortgages than whites. Even though this work is three years old and strong enough that FDIC chairman Shiela Blair says she is troubled by the data, no regulator has yet to take action. […]
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