Ah, the odd working of the markets. It’s often difficult to decouple the factors at work. For example, in the wake of the Fed’s unexpected 50 basis point Fed funds rate cut in September, long-dated Treasuries fell due to heightened inflation concerns. But last week, despite another rate cut and near $100 a barrel oil, […]
Read more...If this factoid about barter being used to effect distressed subprime trades (and she admits it is, at least so far, an isolated example) had come from anyone other than Gillian Tett, the captial markets editor for the Financial Times, I’d be inclined to discount it. But the fact that it is happening at all […]
Read more...If you want a vivid illustration of why subprimes have turned out to be the mess they are, the graphic below, courtesy Russ Winter who also supplied this explanation: The term used here, “DTI proforma” , measures what debt payments to income on 2005 and 2006 vintage subprime teaser loans would have required if the […]
Read more...I had wondered why, given the swift and brutal contraction of the commercial paper market in August and September, that there weren’t more apparent signs of distress. Outstandings fell an eyepopping $368 billion. Commercial paper is short-term borrowings, maximum 270 days, but typically much shorter. If a borrower can’t roll his commercial paper but still […]
Read more...Despite the widely-held view that the Fed will lower the Federal funds rate another 25 basis points this Halloween, some continue to argue against further reductions. We’ve taken that position here before, and will recap some of the reasons. The 50 basis point cut in September was a pre-emptive strike, based not on evidence of […]
Read more...As most readers probably know, subprime mortgage broker/lender Countrywide Financial’s CEO Angelo Mozilo, which posted a massive loss for its third quarter, predicted a return to profit this quarter. Not only did the stock rise 32% that day, but CFC’s announcement was perceived to be such good news that it gave the stock market a […]
Read more...Nouriel Roubini is a bit self-congratulatory in his latest post, and one can’t begrudge him. He took a lot of heat for his early prediction that the housing market would deteriorate badly and pull down the broader economy. So far, since growth has slowed only somewhat, some economists still hold out hope that the impact […]
Read more...At this juncture, the question of “Whither Merrill?” is largely rhetorical. We won’t know for certain until the fourth quarter results come in, and for all firms, those are likely to be telling. However, consider the following: Some securities analysts already estimate that based on further deterioration in the mortgage markets since September 30, Merrill […]
Read more...The inner and even not-so-inner workings of the Beltway frequently escape me. Nevertheless, a complaint made by Charles Schumer, chairman of the Joint Economic Committee, in an interview with the Financial Times, seems truly bizarre. Schumer moans that Paulson isn’t doing enough to help with the subprime crisis because his hands have been tied by […]
Read more...The New York Times, in “Reports Suggest Broader Losses from Mortgages,” does a workmanlike job of providing an update on the losses likely to result from the housing slump. Nevertheless, the piece feels woefully incomplete. It’s not the authors’ fault, but the bad news is coming in faster the experts can update their estimates. Today, […]
Read more...I assume that a high proportion of readers of this blog also follow Calculated Risk. I nevertheless wanted to comment on a particularly good post by Tanta on a favorite topic of mine, the efforts of the financial services industry to maintain that Suprimes Are Good For The Poor. Extensive news coverage of on-the-ropes borrowers […]
Read more...This invaluable consumer information comes to us courtesy Katie Porter Credit Slips. I think I know what most readers would rather buy…. From Credit Slips: Question: What do phone sex and mortgage servicing have in common? Answer: They both cost $9.99 a minute. This isn’t a joke. It’s a real-life example of the difficulties that […]
Read more...We noted yesterday that we had reservations about Countrywide’s announcement that it was launching a program to modify terms on up to $16 billion of mortgages, However, the stock market appears to believe the initiative will have some impact, since its stock fell 4% today. CNBC (hat tip gaius marius), the Wall Street Journal, and […]
Read more...Hank Paulson must be very unhappy with the Wall Street Journal. While the newspaper briefly fell into line and issued one story that reported that the his pet project, the structured investment vehicle rescue plan, was getting traction, pretty much all its news coverage coverage has been skeptical, and its editorial comments have been downright […]
Read more...Countrywide, a leading player in subprime lending, has announced that it may modify terms on as much at $16 billion worth of loans before the end of 2008. I am enough of a skeptic about Countrywide to wonder what this move really signifies. However, the stock market seems to be taking the program at face […]
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