The New York Time reports that the Federal government is leaning towards conservatorship as the approach for handling Freddie and Fannie’s shaky finances. Under this scenario. shareholders are wiped out and taxpayers fund any losses. What I find disturbing about the mainstream media coverage is the refusal to connect the dots between the increasing demands […]
Read more...Just a few weeks ago, experts were saying the credit crisis was on the mend and we could all get back in the pool. But as we discussed in an earlier post, worries about Fannie and Freddie are on the rise, and the increase in agency spreads back in January was probably the biggest trigger […]
Read more...The Wall Street Journal (hat tip Saboor) sends mixed signals in a page one story for tomorrow, “U.S. Mulls Future of Fannie, Freddie.” The Journal reports that contingency planning in case the two GSEs get into trouble has stepped up, yet go to some lengths to take a reassuring tone: The Bush administration has held […]
Read more...We recently wrote about a long overdue shot across the bow from the Senate Banking Committee about initiatives by the Treasury and now the Fed that amount to a regulatory land grab. Why do we think Congress should have done more, sooner? Because the proposed action put the Fed in the position, as with the […]
Read more...Only the Financial Times’ John Dizard would say straight out that monetary authorities (and diesel) constitute a bigger threat to our collective security than America’s pet nemesis, Iran. I would not be surprised to find some readers in agreement. Dizard dispatches Iran first. He starts with some colorful quotes, from Talleyrand (in French) and Lord […]
Read more...Wolfgang Munchau, in his latest Financial Times comment, “Recession is not the worst possible outcome” takes up a theme near and dear to our and many readers hearts: that policies to avoid recessions do more damage in the long run than letting slumps run their course. Munchau is hard on economists, but not the purely […]
Read more...Readers no doubt recall that the Federal Reserve loaned $30 billion to JP Morgan against certain Bear Stearns assets to, ahem, induce the bank to go forward with the deal. The arrangement got reworked on the fly, and in the end, the Fed loan was reduced to roughly $29 billion as JP Morgan agreed to […]
Read more...Readers have taken to throwing brickbats when I post material that suggests that raising interest rates (at least in advanced economies) might not be a good move right now. We’ve said before that the reason the Fed kept rates too low too long was it looked at inflation as strictly a domestic phenomenon and ignored […]
Read more...Free Exchange, in Guts or PhD?, contends that that having a PhD in economics is crucial for modern central bankers: When Paul Volcker, Stan Fischer, Jacob Frenkel and Jean-Pierre Roth discussed what central bankers and academics learn from each other at a conference last month, the line that stayed with me was Mr Fischer’s comment […]
Read more...The newly-released annual report of the Bank of International Settlements sounds as if it is unusually lively reading. Most official documents strive for an anodyne tone, while this one appears to be unusually blunt. However, while some reporters have their hands on it, the report is not yet up on the BIS website, so those […]
Read more...Larry Summer’s latest comment at the Financial Times, “What we can do in this dangerous moment.” is troubling both for its analysis of our economic mess and its remedies. Start with his first paragraph: It is quite possible that we are now at the most dangerous moment since the American financial crisis began last August. […]
Read more...Perhaps it’s merely the result of drafting in a bit more haste than usual, but the latest offering by Nouriel Roubini, “The delusional complacency that the “worst is behind us” is rapidly melting away…and the risk of another run against systemically important broker dealers,” is unusually heated in tone, to the point where it distracts […]
Read more...Why has taken it taken so long for Congress to try to rein in a Treasury, Fed, and now SEC that has roughshod over their prerogatives? And even odder, why do they send a shot across their bow now that the Fed and SEC are starting to work together on securities reform ideas (or more […]
Read more...Alert readers pointed us to new sightings of heightened credit market worries from Barclays via the Telegraph and Bill Fleckenstein via Calculated Risk. What distinguishes them from normal patter about the debt markets is the urgency of their alarms (hat tip Dwight and doc) The irony here is that the Fed, as Tim Duy points […]
Read more...Der Spiegel, in “The Shrinking Influence of the US Federal Reserve,” (hat tip reader Saboor) discusses how the US is submitting to a detailed, comprehensive investigation of it financial system under the Financial Sector Assessment Program. While Der Spiegel claims that this program is a humiliation to the US, the real significance may be that […]
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