One of the reasons for Bank of America to walk from the Countrywide deal is the rising tide of legal costs and potential for sizeable damages. Admittedly, at this juncture the prevailing view is that the Charlotte bank would renegotiate the acquisition rather than abandon it (particularly since it should be able to limit liability […]
Read more...Former Fed Chair Paul Volcker reiterated some of his concerns about the Fed’s recent moves and the evolution of the financial system in prepared remarks before the Joint Economic Committee of Congress. From the WSJEconomicsBlog: “Whatever claims might be made about the uniqueness of current circumstances, it seems inevitable that the nature of the Fed’s […]
Read more...Reader AK sent me a bit of Christmas in May: three hot-off-the presses reports, one from Morgan Stanley on the credit standing of US and European broker dealers, a Moody’s report on RMBS, and a UBS report on the subprime crisis. The Morgan Stanley report, although the shortest, was in some ways the most informative, […]
Read more...The Financial Times has a long analysis, “Value to Unlock,” on how various financial players are starting to pick and choose among distressed mortgage assets. This may prove to be premature (recall how Wall Street firms eagerly bought subprime brokers through January 2007) and the housing market itself appears unlikely to hit its floor before […]
Read more...Bloomberg reports that the company that is the biggest property owner in downtown LA, with concentrated holdngs in the Little Tokyo section of Los Angeles is trading at a deep discount to book value minus borrowings. The reason? The company may not be able to refinance debt coming due. Now one may legitimately take book […]
Read more...A New York Times story discusses a new manifestation of housing stress, namely, that people who have euphemistically had to downsize their housing are inceasingly unable to keep up with the storage charges and are having their possessions auctioned off. It would be nice if we could all emulate Buddhists and take such reversals with […]
Read more...Martin Feldstein, who as a Chairman of the Council of Economic Advisers under Reagan and an advocate of Social Security reform, has been a surprisingly open critic of the Fed’s and Bush Administration’s responses to our current economic woes. Feldstein has been regularly writing op eds opposed to some of the viewpoints and actions of […]
Read more...An odd set of voices is beginning to question the wisdom of America’s extraordinarily generous subsidies to homeowners. Paul Krugman once remarked that American like to consume houses, while the French prefer to consume vacations, but we shouldn’t overlook the role of incentives in those choices. At the Milken Institute Global Conference, a true disciple […]
Read more...John Dizard gives a cautionary tale to the growing ranks of vulture wannabes, and in a clever two-for-one, also warns against bottom fishing in commercial mortgage backed securiites. Although the piece revolves around a single anecdote, it’s revealing. Dizard’s story reminded me of this Oscar-winning song from 2005 (skip to the one minute mark): From […]
Read more...It’s amazing how a problem isn’t a problem until it’s presented as one on television or a respected print outlet. Never mind the fact that the cognoscenti have been worried about the possibility that the two big mortgage guarantors, Fannie Mae and Freddie Mac, were too thinly capitalized relative to their massive balance sheets. Never […]
Read more...Here we are, in the midst of the worst financial crisis since the Great Depression, and what do we see? Central banks madly pumping water out of leaky, listing vessels, some discussion of how to patch the most visible holes, but perilous little consideration of how to correct the defects of construction, poor choice of […]
Read more...Still out of town, still behind the eight ball, so forgive the terseness with today’s offerings. Two items provide further evidence that lenders not only have little sense of responsibility for the problem they helped create, but worse, their unwillingness to reform in the face of considerable public pressure. As we noted, with regulators capitulating […]
Read more...Last year, we were less than impressed with Bush’s tightly bounded but widely touted plan to use the FHA, a traditional source of financing to low and middle income borrowers, to help salvage homeowners at risk of begin dispossessed. Note we have doubts about “rescue debtor” operations. Iin many cases, these borrowers had little to […]
Read more...Thanks for your patience. Still in LA at the Milken Conference (I feel like I have been parachuted into a Pasadena Republican/Chicago School of Economics parallel universe, although I have managed to find some fellow apostates. If I spent enough time here, I might be brainwashed (social assent is very powerful). Thus I hope you […]
Read more...Barclays estimates that half the 2006 and 2007 subprime loans are in or close to negative equity status, which means this roughly $800 billion of mortgages is at greater risk of default. Note that their analysis used OFHEO data; Case-Shiller estimates of the fall in housing prices exceed those of OFHEO, which means this forecast […]
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