An article by John Berry at Bloomberg, “Fed Actions Defuse Subprime ARM Rate Reset Bomb,” is extraordinarily misleading, claiming that a Fed paper based on a single pool of MBS issued by New Century in 2006 shows that subprimes will work out much better than conventional wisdom says. Let’ s start with Berry: Many analysts […]
Read more...Before I put my buzz saw to work, let me make a few things clear. First, I have a good deal of respect for Robert Shiller’s work. Anyone who was willing to tell Greenspan in 1996 that he ought to be worried about asset bubbles has a good deal of foresight. Second, I am a […]
Read more...This forecast, that Wall Street credit-crunch-related losses could eventually total $460 billion, is mind-numbing. Consider that less than two weeks ago, the markets staged a rally on the comparatively cheery S&P forecast that a subprime bottom was in sight, that the total damage would be a mere $285 billion, and most of the rest of […]
Read more...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 […]
Read more...People never learn, as John Dizard reminds us via “Forget the past and you make the same mistakes again” in the Financial Times. Quite a few policy makers have talked up plans to use Fannie Mae and Freddie Mac as central agents in salvaging the US housing market, typically by refinancing stressed borrowers. The markets […]
Read more...Mohamed El-Erian, former head of Harvard Management Company, now co-head of the biggest bond investment firm, Pimco, has been a reliable source of insight into the operations of financial markets and the implications of policy measures. Well, at least until today. In a comment in the Financial Times that shows him to be wearing an […]
Read more...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 […]
Read more...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 […]
Read more...That statement comes from Carmen Reinhart, who co-authored a paper with fellow Serious Economist Kenneth Rogoff which I had told readers earlier that they must read immediately: “Is the 2007 US Sub-Prime Financial Crisis so Different? An International Historical Comparison.” The Reinhart/Rogoff paper is elegant; it identifies 18 postwar banking crises in advanced economies and […]
Read more...The normally sober and measured Martin Wolf of the Financial Times is getting worn down by reading too many bearish forecasts, particularly those of Nouriel Roubini. And although Wolf would like to dismiss Roubini’s estimates as extreme, his track record in calling this downturn makes him loath to do so. From the Financial Times: What […]
Read more...Paul Krugman usually has enough important topics to occupy himself, like the sorry state of health care, income inequality, tax policy, Bush Administration offenses du jour, that he rarely gets around to matters financial. But stress in the markets has again come to the fore, so Krugman is taking a serious look. Not surprisingly, he […]
Read more...Even as recently as, say, last December, worrying about the the safety of Fannie Mae and Freddie Mac’s guarantees was seen as a sign of a being overly preoccupied with remote risks (in fairness, Nouriel Roubini did consider this possibility in the summer of 2006 and Michael Panzner did in his book Financial Armageddon, but […]
Read more...The retreat from the mortgage market continues. Not surprisingly, no one wants to lend to high-risk borrowers that are now having trouble paying. Notice also that Citi plans to sell a high proportion of its new mortgages to Fannie and Freddie. From the Financial Times: Citigroup is to shrink its $200bn-plus mortgage portfolio by a […]
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...We have said that Countrywide is an institution that has deliberately operated on the edge of the law. Apparently we’ve been far too charitable in our views. The federal bankruptcy trustees in Florida, Georgia, and Ohio have decided to take on Countrywide for a persistent practice of attempting to lard up the amount owed by […]
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