You simply cannot make this stuff up. The Pension Benefit Guaranty Board, which backstops defined benefit plans (yes, Virginia, they still exist) faced a rather sizable gap between its expected returns on its $64 billion in holdings and its expected liabilities. So in a stroke of sheer genius, it increased its allocation to risky assets […]
Read more...Wolfgang Munchau often has a dour outlook, but his Financial Times comment today, “A new plan needed as the cycle grows vicious” is gloomy even by his standards. Munchau argues that the heroic seeming measures to aid the banks are insufficient to compensate for the losses they are and will continue to suffer, and that […]
Read more...Since I haven’t put together a detailed timeline, I run the risk of having the sequence wrong and therefore being at risk of putting foot in mouth and chewing too. But from where I sit, the only person in the US who seems to be doing anything meaningful to try to contain the looting of […]
Read more...Not that they listen to him, sadly. Buiter famously told the Fed in a presentation at its Jackson Hole conference that it was guilty of cognitive regulatory capture. Buiter argues that the games the Fed and Treasury are playing, with the Fed providing loans and guarantees that properly should come from the Treasury, is bad […]
Read more...It certainly looks as if Citigroup and Bank of America are using TARP funds, not to lend, which was one of the primary goals of the program, but to scoop up secondary market dreck assets to game the public private investment partnership. And it fleeces the taxpayer a second way: the public has spent enough […]
Read more...We have what is arguably the best Fed chairman ever ready to roll up his sleeves during the worst financial crisis since the 1930s. Team Obama has asked him to work on…..the tax code. From Reuters: A panel led by former Federal Reserve Chairman Paul Volcker will study options for U.S. tax reform and report […]
Read more...When AIG first went to the government for rescue funding, the insurer had said it would pay the proceeds of the emergency loans from the sale of assets, meaning some of its subsidiary businesses. As we now know, that effort did not bear fruit. One unit that was a candidate for sale, AIG’s aircraft lease […]
Read more...There have been plenty of takedowns on the plan (Leo provides a good recap in an earlier post tonight). Nevertheless, I thought I’d add a few further thoughts Aside from being busy, I didn’t weigh in because I don’t see that much has changed (obviously, Mr. Stock Market disagrees vehemently, but bonds didn’t move much […]
Read more...The Washington Post reports that Treasury will seek the power to take over insurers, hedge funds, and investment firms. Given the Treasury’s reluctance to assume control over clearly insolvent banks (Citi assuredly, probably Bank of America), it seems curious indeed that it is asking to extend authority that it is patently reluctant to exercise. Moreover, […]
Read more...Submitted by Swedish Lex, who helped unwind Sweden’s imploded banks in the 1990s: The U.S. Secretary of the Treasury appears to be close to proposing a Faustian bargain that, seemingly, will involve considerable Government subsidies towards a limited number of economic operators. In return for the sacrifice – the creation of massive moral hazard – […]
Read more...Hoisted from comments: Say I am SAC Capital. I get to be one of the bidders on bank assets covered by the program Citi holds $100mm of face-value securities, carried at $80mm. The market bid on these securities is $30mm. Say with perfect foresight the value of all cash flows is $50mm. I bid Citi […]
Read more...The New York Times seems to have the inside skinny on the emerging private public partnership abortion program. And it appears to be consistent with (low) expectations: a lot of bells and whistles to finesse the fact that the government will wind up paying well above market for crappy paper. Key points: The three-pronged approach […]
Read more...This blog has been saying for a while that financial fraud is more pervasive than the officialdom wanted to acknowledge. We believe it is not uncommon at big firms (see last night’s discussion of Merrill, including comments), but no one wants to open that can of worms. However, small fry (even biggish ones, as long […]
Read more...When some deemed the Fed’s move today to expand its balance sheet by as much as a trillion dollars plus as “shock and awe”, I recalled that when that term was first used, at the beginning of the US invasion of Iraq. The notion was a display of superior force would lead to quick capitulation. […]
Read more...A good article in tonight’s Financial Times gives useful detail about the Swedish response to its early 1990s banking crisis. As readers may know, Sweden (along with the less touted Norway) is considered to have been particularly effective in mopping up a banking crisis. We and others have observed that the US is engaging in […]
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