Category Archives: Federal Reserve

Are the Feds Manipulating the Stock Market?

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 […]

"Grim Outlook" for JP Morgan

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 […]

Bear: Did the Fed and Treasury Push Too Hard?

Andrew Ross Sorkin in the New York Times provides some important background on how the Bear deal wound up being retraded today. But he does his readers and the greater public a huge disservice by telling the story so as to flatter Wall Street. According to Sorkin, the $2 price for Bear was the Fed’s […]

Setser: Foreign Buys of US Assets Increasing Dislocation

Brad Setser, a source for thorough, thoughtful coverage on currencies and related topics, provides his monthly parsing of the Treasury International Capital report (this one from January, plus its survey of foreign holdings of US securities as of the end of June 2007) and does not like what he sees. Since the August TIC report, […]

Does Bear Have JP Morgan Over a Barrel?

This is the nuttiest situation I can recall in some time in deal land, assuming the rumor in the New York Times is true. The Grey Lady reports that JPM is working to increase its offer for Bear from $2 (well, roughly $2 since it is a stock-for-stock deal) to $10. Yes, Bear’s stock price […]

Did the Fed Prevent a Financial Chernobyl?

There are two useful but frustrating articles addressing different aspects of the extraordinary measures implemented by the Federal Reserve in the last ten days, in particular the bailout of Bear Stearns. A New York Times article, “What Created This Monster,” is very much worth reading despite its shortcomings. It attempts to say how we got […]

Desperate Central Bankers to Bail Out MBS Market? (Not Yet, Perhaps….)

I quoted Lucy Kellaway, who once said (apropos management fads), “No idea is too ridiculous to be put into practice,” and warned that the credit crisis would soon get that sort of treatment. A story in the Financial Times indicated we are getting closer to that stage: Central banks on both sides of the Atlantic […]

Extreme Measures V and VI; Drop Mark-to-Market; Beg Oil Producers to Rescue Banks

A sign of the times: we haven’t sighted an Extreme Measure since October, and here we have two in one day (note that day was Thursday; we started on this last night but there were so many news-driven items that we are getting to this only now). By way of background, an Extreme Measure is […]

Deflation Watch: US Short Term Rates Fall Below Japan’s

Investors are so nervous that they are willing to take almost nothing in nominal terms, which is tantamount to a meaningful negative real return, to sit in the safety of three-month T-bills, which are now a mere 0.56%. One explanation is the large number of fails in the repo market, which as Alea reports, is […]

Primary Dealers Get Flattering Marks on Collateral for Fed Loans

A professional investor alerted me to a not-widely-noted element of the Fed’s new discount window clone for primary dealers, the so-called Primary Dealers’ Credit Facility (I am going to lose track of the acronyms given the speed with which the Fed is coming up with new ways to socialize losses). This overview is from the […]

Quelle Surprise! Wall Street Reluctant to Borrow at New Discount Window

The Wall Street Journal reports that primary dealers have been loath to use their new-found access to the discount window (technically, it’s a “temporary clone of the discount window”), despite the favorable rates on offer. Why? For commercial banks, the assumption is that only the distressed would go to the Fed for dough (the discount […]

"US losing confidence vote as investors flee"

The title of this article (provided by the page editors of the Telegraph) is a tad more sensationalistic than it need to be, but the basic observation holds: the Fed has gone so far in debasing the dollar that it is starting to see serious pushback from foreign investors. This is a serious matter. The […]

How the Prisoner’s Dilemma and Unintended Consequences are Accelerating the Credit Crisis

Two readers wrote to me concerning phenomena we’ve mentioned upon occasion in the expanding credit crunch, and it seemed a good opportunity to discuss them longer form. There are two separate, but related threads: we are now seeing a lot of “every man for himself” behavior (liquidity hoarding is one of many examples) that seem […]

Greenspan Now Blames the Risk Models

This is priceless. Being an objectivist means never having to take responsibility for your actions. Greenspan has now decided to pin the financial market crisis on models. Gee, it was your Fed, Mr. Greenspan, that endorsed letting regulated entities decide how to mark and manage their derivative and structured product risks without anyone at the […]

Fed Opens Discount Window to Broker Dealers

The Fed opened the window to broker dealers. This is a shocker, a sign of the Fed’s desperation. Recall that one of the reasons the Fed was able to assure us it wasn’t taking too much risk in its Term Auction Facility was that it said the institutions involved were sound. It doesn’t supervise broker-dealer […]