One of the most pervasive findings in social science, although it is seldom codified this way, is how suggestible people are. Numerous studies in behavioral economics have found that the same underlying bet elicits very different take-up rates when framed as a wager versus as insurance. Even worse, humans are susceptible to obviously exogenous influence. […]
Read more...The stock market is staging a very peppy rally on the hopes for the Obama infrastructure plan and the auto bailout, but key bits of news point to the stubbornness of some of the underlying economic stresses. We have long advocated mortgage modifications as a remedy that banks used fairly freely in the stone ages […]
Read more...In the geeky but important category, the California legislature attempted but failed to pass a budget that included a provision that effectively repudiated the recent Treasury directive to eliminate the limitation on acquiring banks’ ability to use the net operating losses of acquired banks. That rule change was widely described as instrumental in the catfight […]
Read more...You have to hand it to Paulson. The man is brazen. Now, admittedly, he has not asked Congress for the second half of the $700 bailout funds; the Wall Street Journal says merely that he is considering making a request. Now let us consider; 1. Paulson got the bill passed (remember the timing: it was […]
Read more...One of the arguments made by bottom-fishers is that not only are stocks “oversold” (a technical notion that reflects recent trading activity, such as trading volumes, price in relationship to various moving day averages) but are also cheap based on fundamental notions of value. We have been somewhat leery of any long-term valuation notions given […]
Read more...I hate it when I get contradictory information from supposedly reliable sources, which happens upon occasion when the topic is CDS. The latest Institutional Risk Analytics newsletter is again after one of its favorite objects of ire, credit default swaps. One of its beefs is that the collateral posting rules are a joke. Key excerpts: […]
Read more...To call Paulson response to the credit crisis improvised does a disservice to artists. Improvisation still requires a sense of direction and purpose, the thrust of a musical piece or the likely frictions between two characters. By contrast, the Treasury/Fed program looks completely reactive, an attempt to stabilize a system when they lack a good […]
Read more...Readers no doubt recall that the Fed announced the creation of the Term Asset-Backed Securities Loan Facility, which will lend as much as $200 billion against new or recent vintage asset backed securities collateralized by “student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration.” One wonders if the order […]
Read more...This ought to be a celebratory event, the scrutiny of a powerful player in the financial system who heretofore seemed immune to criticism. And what is interesting about the spotlight on Citigroup consigliere and board member Robert Rubin is that, unlike Greenspan, the reassessment is starting while he would still appear to have his hands […]
Read more...How can you give cash compensation to an executive, yet claim it is not a salary or bonus? You call it a “retention bonus,” No, I am not making this up. Note that AIG chose to make this disclosure the day before Thanksgiving, clearly choosing a time when it would attract the least notice. Not […]
Read more...The New York Times reports that the General Accounting Office is readying to issue a report that will criticize how Treasury has handled its spending under the $700 billion TARP program. The main shortcomings are failure to track how the money is actually being used and inadequate controls to prevent conflicts of interest. Gee, I […]
Read more...Willem Buiter is never one to mince words, and today his message is that the financial system is not operating: In a decentralised market economy, financial intermediation between economic agents with financial surpluses and those with financial deficits (or, more accurately, between economic agents who would like to run financial surpluses and those who would […]
Read more...Gee,if you took it at face value, the FDIC’s report, which says that problem banks increased by 46%, reaching a level not seen since the mid-1990s, says things are not as bad as in the savings and loan crisis. But of course, we are seeing this deterioration despite the Fed and Treasury throwing money at […]
Read more...Let’s see, Bloomberg said yesterday that the Federal government had committed $7.4 trillion to lending facilities and guarantees. The total is now $8.2 trillion thanks to new programs announced today to aid borrowing by consumers, small businesses, and homeowners. Stocks have rallied, and the 30 year bond is also up three points, due to a […]
Read more...We have been less than enthusiastic about the choice of Timothy Geithner to be the next Treasury Secretary. Granted, the idea that we will have someone who is intelligent, knows a thing or two about the markets, and is not from Goldman Sachs makes him a big improvement over the Bush incumbents. However, competence should […]
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