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 […]
Read more...Why is it that the media feels compelled to take pronouncements from government officials more or less at face value? By now, they ought to know that if someone from the Bush Administration is moving his lips, odds are it’s a lie. Today’s object lesson is the so-called financial services regulatory reform plan announced by […]
Read more...CR at Calculated Risk yesterday pointed to an important sign of improving conditions in the credit markets. The fever chart of the so-called third wave of the liquidity crunch, the TED spread, showed signs of improvement. The TED is difference between the interest on three month Treasuries and Libor; the earlier acute episodes were August-September […]
Read more...As Senator Everett Dirksen once said, “A billion here, a billion there, and pretty soon you’re talking real money.” Although the powers that be have relied mainly on guarantees and loans rather than explicit payment to try to prop up financial institutions and the housing market, the same principle applies. Even though these commitments are […]
Read more...This message came from an investor who has provided me with some very useful research from time to time: Mike Belkin, who writes a weekly technically-based look at lots of markets—the only technical service to which I subscribe—notes today that last week equity fund flows netted to a $22.9 billion inflow, broken down as $3.3 […]
Read more...A hedge fund correspondent pointed us to an article at Institutional Risk Analytics on the Bear-JP Morgan deal. While we don’t subscribe to its view that Bear was “raped” (please, the firm was going to file for bankruptcy a week ago Monday), it contains an intriguing analysis of JP Morgan. Differing with popular opinion, IRA […]
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