John Dizard, in “Fed plan is spoilt by its backing of hypocrites,” returns to a notion he has brought up in some recent Financial Times articles, namely, that the amount of funds that banks need to rebuild their balance sheets is so large that it cannot be obtained without some form of government sponsorship. Note […]
Read more...Henry Kaufman, former chief economist of Salomon Brothers in its heydey and a Wall Street eminence grise, joins the chorus of critics who said that the Fed’s failure to regulate got us into our economic mess. Note that Kaufman is not new to this theme, just more blunt, as a post from June of last […]
Read more...Floyd Norris of the New York Times, in an otherwise fine piece, “It’s a Crisis, And Ideas Are Scarce” has a paragraph that set my teeth on edge. But let’s deal with the parts that have merit first, and hold the rant in abeyance. Norris uses the Paul Volcker’s speech at the Economic Club of […]
Read more...Just when you think you’ve heard everything about how low the Fed has stooped to rescue an industry that really ought to be left to twist in the wind a bit, another squirmy critter crawls out from under a rock. Investor Scott directed us to a Bloomberg story that cites a Morgan Stanley report which […]
Read more...Just when market participants were patting themselves on the back, focusing on indicators that suggested the credit crunch was easing, even making forecasts that it would be behind us before year end, troubles creep back on little cat feet. The proximate cause for Fed intervention wasn’t the subprime crisis or rise in agency spreads, but […]
Read more...Whenever Greg Ip, the Wall Street Journal reporter whose beat includes the Fed, writes a piece about the central bank, one has to wonder whether the story was a plant. This isn’t to denigrate Ip’s coverage; it’s the reality of the quid pro quo of access journalism. His page one story today, “Fed Weighs Options […]
Read more...Former Fed chairman Paul Volcker, speaking at the Economic Club of New York, took issue with the central bank’s controversial loan to JP Morgan to help it effect an acquisition of Bear Sterns. For Volcker, who has steered clear of saying much about current Fed policies, these comments are a coded rebuke. Things have gotten […]
Read more...Institutional Risk Analytics featured an interview with Joshua Rosner (hat tip reader bill) which focused on the outlook for the credit markets. We have a great deal of respect for Rosner; among other things, he co-authored a terrific paper, “Where Did the Risk Go? How Misapplied Bond Ratings Cause Mortgage Backed Securities and Collateralized Debt […]
Read more...Greenspan decided to launch a frontal attack on critics of his tenure at the Fed, via a Financial Times comment, “The Fed is blameless on the property bubble.” Needless to say, his defense does not stand up to scrutiny. Greenspan was happy to take credit for the commonly-held view that central bankers were responsible for […]
Read more...Oooh, because I have to be on a plane at an ungodly early hour tomorrow, I do not have time to do Robert Shiller’s New York Times piece, “The Fed Gets a New Job Description.” justice. In short, I don’t agree with this mission creep by the Fed becoming official. First, as Shiller implies, the […]
Read more...While there have been dark mutterings about how Bear shareholders were cheated in the sale of the firm to JP Morgan, I don’t have much sympathy for that view. Plenty of businesses fail every day; equity investors usually lose their entire stake and employees are fired. While it is sad on a human level to […]
Read more...A reader sent me the link to this week’s Institutional Risk Analystics, and I am posting despite the fact that at points it undermines its own credibility. Most of the article, “Novated Bears & the Education of Ben Bernanke,” is a combination of trader gossip about the fall of Bear Stearns, some of it quite […]
Read more...Reader Scott passed along this article from the Telegraph. Note that earlier this year, a colleague with high-level connections at the Treasury and Fed said that they were looking at a partial nationalization of US banks. The reasoning was that even if they were technically solvent, they would be sufficiently impaired, between writedowns and carrying […]
Read more...Bill Gross argues that tougher regulation of investment banks, particularly regarding leverage, will lower their profits. While his forecast is intuitively correct, it will also increase the propensity of professionals in non-capital-using businesses, like M&A amd fund management, to form boutiques or operate in pure-play firms subject to less oversight. From Bloomberg: Goldman Sachs Group […]
Read more...Two articles in the Financial Times, one a discussion of the implications of Japan’s crash for US policy, the other the latest in a series of comments on the credit crisis by Larry Summers, take different views of the best remedies for our economic woes. Unfortunately, the Japanese prescription seems likely to be necessary, yet […]
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