Category Archives: Regulations and regulators

How to Waste $350 Billion

As readers may recall, we have been skeptical of the TARP from the get-go. As the program ricocheted from one high concept to another, one had to wonder: were Paulson and the Treasury truly that incompetent, or was the seeming cluelessness, as some have suggested, a cover for a program to transfer funds to the […]

WSJ: Bank of America to Receive $20 Billion Injection, Support for $118 Billion of Loans

The market’s case of nerves this week seems a tad more justified, given that the details of the Bank of America rescue plan are apparently out, Previous press reports suggested the Charlotte bank might need $8 to $10 billion of additional equity to compensate for losses related to the Merrill acquistion. Yes, as Senator Everett […]

US Negotiating to Backstop BofA Purchase of Merrill

Now we know why John Thain was so eager to sell Merrill. That comment isn’t entirely fair (the deterioration in the securities firm took place in the fourth quarter, while the sale was negotiated in September). But directionally, the former Merrill chief saw the downside risks and did what was best for the firm. The […]

TARP Arm-Twisting Begins Again

The effort to get the second half of the TARP approved (or more accurately, not force Obushma to nix a Congressional turndown) is all feeling a bit Groundhog Day-ish, without the backdrop of a Lehman collapse and AIG implosion to add a sense of urgency and high drama. The officialdom is again using its access […]

FT: Citi to Split Investment and Commercial Bank

The irony is rich, and a bit sad. I had Citi as a client in the 1980s, and served them in a small way in their efforts to make inroads into investment banking. It looked like a quixotic effort with commercial banks seeming likely to remain relegated to the margins: smaller clients, simpler deals. JP […]

Is Bush Tanking Stocks to Grab the Remaining $350 Billion TARP?

Remember the much decried end-of-Clinton- era pardons, the most controversial of which involved tax cheat and storied trader Marc Rich? Well, if I am reading the tea leaves right, those shenanigans pales compared to the nonsense Bush is trying to pull in his last week in office. Bush is making it sound as if it […]

China to Relax Bad Debt Rules to Encourage Lending

In another sign that China’s slump is serious enough to evoke crisis responses from the officialdom, banking officials there announced that they were relaxing rules on bank bad debt ratios. The objective is to encourage banks to continue to extend credit to borrowers experiencing short-term difficulties who have viable businesses. The concern, of course, is […]

Chase Behaving Badly: Unintended Consequences of the Fed’s New Credit Card Rules

In late December, banking regulators agreed to new rules to limit actions by credit card issuers that consumer advocates deemed to be abusive. While the new rules do not take effect until July 2010, regulators claim they will press banks to comply earlier (see here for a summary of the main provisions). Experts argued that […]

Citi on Its Way to Breakup?

The Wall Street Journal tonight says, “Citigroup Takes First Step Toward Breakup.” But what does that mean, exactly? Or had the Journal gone a bit far with the notion that the bank is doing some way, way overdue housecleaning? The eye-popping bit is that the asset dispositions are reportedly at the instigation of the Federal […]

"The myth of the riskometer"

Jon Danielsson has provided a great post at VoxEU (hat tip Independent Accountant) that calls into question the very premise of modern risk management, namely, that risk can be accurately quantified. This notion goes far further than the discussion of Value at Risk last the weekend keying off an article in the New York Times […]

Willem Buiter Calls for Less US Stimulus, Expects Collapse in Price of Dollar Assets

I am a big fan of Willem Buiter, even on those rare occasions when he is wrong. He is unusually blunt for a Serious Economist, and is willing to take on orthodox views and institutions frontally. He has, for instance, been quite critical of the Fed. He created a firestorm at its last conference in […]

Woefully Misleading Piece on Value at Risk in New York Times

The New York Times Sunday Magazine has a long piece by Joe Nocera on value at risk models, which tries to assess how much they can be held accountable for risk management failures on Wall Street. The piece so badly misses the basics about VaR that it is hard to take it seriously, although many […]

So Paulson Say US Lacked Tools to Battle Financial Crisis?

Wellie, the incumbents are not yet out of office, yet the Bush Administration blame shifting spin doctoring is already in high gear. Henry Paulson gave an interview to the Financial Times that appears either to have been remarkably brief (even the 10 minute Bloomberg videos typically yield more quotable material) or Paulson has gotten very […]

GMAC: A Mini-AIG in the Making?

Dwight Cass at BreakingViews makes some astute and troubling observations about the GMAC rescue, which spurred a market rally in the face of truly awful economic releases (one might take the cynical view that, given how thin trading is this week and the tape-painted appearance of the end-of-day recovery in stocks yesterday, that a rally […]