John Dizard in “Disquiet on the western front of the credit world,” discusses the politics of the credit crisis, depicting two opposed absolutist camps: those who’d have everyone take their lumps now, no matter how bad they turn out to be, versus those who think preventing a nasty recession is all-important, even if it means […]
Read more...The deleveraging continues. MarketWatch reports that investment banks are reducing loans to customers, in particular their heretofore lucrative prime brokerage business, which is lending against hedge fund positions. Now Wall Street itself is less able than before to extend credit. With their equity bases under stress and exposed to further hits, securities firms are reducing […]
Read more...Why does the media treat entirely predictable events as news? Fitch has been saying since last April that commercial real estate was exhibiting the same sort of frothiness as subprime. CMBS spreads started widening sharply last August. Investors started pulling back from purchases in September, expecting prices to fall considerably. In November, Nouriel Roubini added […]
Read more...As this Financial Times article explains, taking the liquidation of the funds out of Bear’s chosen agent’s hands opens up the possibility of a suit against Bear to recover damages. From the Financial Times: Rebel investors have seized two failed Bear Stearns hedge funds in a move their lawyers hope will give them a platform […]
Read more...Jim Hamilton, in his latest post at Econbrowser, uses as a point of departure the oft-invoked image that Bernanke is walking a tightrope between inflation and recession. Because Hamilton is a Serious Economist, he has to be measured and fact based, which sometimes means he can’t be as pointed as I suspect he might like […]
Read more...DealBreaker does some serious reporting today, informing us that some traders have told them that the failed auction rate securities market was always dependent on stabilization by dealers. For anyone who has worked in the securities industry, the term “stabilization” pregnant with regulatory significance. Stabilization, as defined by the SEC, is …transactions for the purpose […]
Read more...Martin Wolf, in “Why Washington’s rescue cannot end crisis story,” tells us, push come to shove, the government can bail us out of our economic mess, but it would be unwise to stop there. Wolf argues that substantial steps need to be taken to rein in a financial sector that is beyond the understanding of […]
Read more...This post comes in significant degree from jck at Alea, who has access to the report, “Counterparty risk in credit markets,” from Barclays Capital and was kind enough to post the summary of key points. Despite the link, I seem unable to download it, but the summary is sufficiently detailed that I don’t think I […]
Read more...Ah, another quarter, another set of writedowns by financial firms, or so it goes these days. There have been various sightings of new source of acute pain: leveraged loans, commercial real estate, auction rate securities. So far, analysts have been mainly talking about each problem separately, but as earnings season approaches, they are now considering […]
Read more...Be careful what you wish for. New York insurance superintendent Eric Dinallo seems to be getting what he wants. FGIC, the number four bond insurer, was downgraded six grades by Moody’s on Thursday, from Aaa to A3, which meant it has lost its AAA rating from all agencies, and Moody’s warned it could be downgraded […]
Read more...Alistair Darling, the UK’s Chancellor, criticized bonus payouts as too often not warranted by performance and called on boards to exercise more restraint. The attack came as a surprise, but the proximate cause seems to lavish pay for those in the City while their companies and the country as a whole is not doing all […]
Read more...In a sign of how dramatic the reversals of fortune have been on Wall Street, hedge funds, until recently considered the riskiest players in the financial services industry, are now questioning how safe it is to leave cash and securities with their prime brokers, the securities firms that provide credit, brokerage, clearing, and sometimes fund […]
Read more...Ohh, the plot thickens. Investment banks are choking on unsold inventory of LBO loans that appears destined to continue to fall in value. These deals are already underwater and expected to hear further south. The interest payments float off short-term interest rates. so the widely anticipated Fed rate cuts will make them even less attractive. […]
Read more...One of the big news items yesterday was the turmoil in the auction-rate securities market, a $330 billion corner of the muni market, which is a direct casualty of the distress with the bond insurers. The specter of Bristol Myers taking a $275 million charge on an $811 million, announced at the end of January, […]
Read more...UBS announced fourth quarter results of a loss of 12.5 billion Sfr, which was in line with its January 30 preliminary estimate. The most interesting item was the breakdown of its $13.7 billion writedown. From Bloomberg: UBS’s writedowns included $10.8 billion on subprime residential mortgages, $2 billion on so-called Alt-A mortgages, which fall between subprime […]
Read more...