Wow. I am going from memory, but I am pretty certain that this is the mother of all quarterly financial services losses. And remember, Wachovia is merely a pretty big US bank, not a global capital markets behemoth like UBS, Deutschebank, or Citi. From the Wall Street Journal: Wachovia Corp. swung to a large third-quarter […]
Read more...As we have noted often, in tightly coupled systems like our modern financial regime, efforts to contain risk typically make matters worse. As Richard Bookstaber explained in his Demon of Our Own Design, there are two reasons for this phenomenon. First is that processes move through a series of steps that cannot be interrupted, so […]
Read more...We have said for some time that the repricing of residential real estate has some way to go. While conditions will vary greatly by market, a number of measures all suggested that nationally, the decline peak to trough would be on the order of 35-40%. That would in turn suggest that we are only a […]
Read more...Another sign of market panic: even though Fannie Mae and Freddie Mac are now officially wards of the state and the Treasury has assured that they will not fall into a negative equity standing, the general credit market stress and flight to quality means that their mortgage backed bonds are trading at elevated spreads. However, […]
Read more...Now that the world is in the throes of the mother of all financial messes, economists are scrambling to develop expertise. Carmine Reinhart and Kenneth Rogoff recently had this beat largely to themselves. but in the last two weeks, the IMF came out with a stud of 124 modern banking crises. The latest addition to […]
Read more...The Financial Times reports that residential real estate prices fell in the third quarter in Manhattan, according to data from a real estate appraisal firm. Getting good data about Manhattan real estate activity can be a tricky affair, since a big chunk of the market is co-operatives (buyers acquire shares in the co-op corporation, which […]
Read more...Repeat after me: bye bye the US’s AAA rating and the dollar. Although the Paulson’s plan is only sketchy, on the surface, it is utterly ridiculous. The authorities propose to save the economy by buying mortgage paper at market prices. Why do we need the government to create a massive and costly effort to buy […]
Read more...Just when the worries about AIG have receded from the fore, the longer-standing insurance bugaboos, MBIA and Ambac, may return to center stage. From the Financial Times: Moody’s Investors Service has increased its projections for losses on residential mortgage-backed securities, a move that could result in “multi-notch” credit rating downgrades for bond insurers such as […]
Read more...It will be interesting to see if this dose of cold water from former Fed governor William Poole will take any sizzle out of the forceful equity rally (the Nikkei is up 425 points as of this writing, and US stock futures say the US markets will also show an impressive move up). From Bloomberg: […]
Read more...Not only is the commentary in the blogosphere on the Freddie and Fannie bailout program pretty skeptical, but even some normally staid MSM commentators have an eyebrow cocked. There is a comprehensive list of links on Freddie and Fannie from Barry Ritholtz. This post serves a different purpose and serves up some choice bits: Mohamed […]
Read more...Even though the stock markets are over the moon as of this hour (the Nikkei up nearly 440 points, other Asian markets up over 3%, bank stocks up even more), the all-important question is the reaction in the credit markets. It is far less enthusiastic. One might charitably call it underwhelmed. From John Jansen: I […]
Read more...The deed is done. Freddie and Fannie are now officially in conservatorship. Uncharacteristically, I listened to the presentation by Paulson and Jim Lockhart, which was thin on details (particularly size of new facilities and investments). The bombshell was the aside that not only is there to be a new secured lending facility for the GSE […]
Read more...The reporting on the main elements of the Freddie and Fannie rescue plan is converging as the content of official briefings leaks out. The stunner, which contradicts preliminary reports, is that the preferred shareholders in the GSEs will take losses. The Wall Street Journal reports that dividends on common will be eliminated and those on […]
Read more...The New York Times, in “Loan Giant Overstated Its Capital Base,” sets forth an interesting bill of particulars as to where Freddie deviated from what one might consider a full and fair statement of its financial condition. Indeed, the article says that the widely-expected Sunday intervention was triggered by the GSE’s regulator determining that the […]
Read more...Guess the powers that be were unwilling to risk playing chicken with the markets and losing. So much for the theory espoused by some that the government couldn’t put the GSEs into custodianship absent a breaching of statutory minimums (technically, by being insolvent under the “fair asset” valuation method, Freddie is already on plenty thin […]
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