One can disagree with the particulars of this comment by George Soros, but his main point is sound. The financier argues that the Treasury Department’s $700 billion Troubled Asset Repurchase Facility should be used to recapitalize banks. This blog and most economists have argued that restoring depleted bank equity is the top priority for shoring […]
Read more...Note: variants of the word “protect” as regards the US Treasury’s stance towards the pending $9 billion Mitsubishi UFJ investment in Morgan Stanley, appeared in the headline and first paragraph of the New York Times discussing the state of the deal. But the text of the article suggests the Treasury may be engaging in a […]
Read more...Better late than never, I suppose. Finally the powers that be acknowledge the role of leverage in our financial crisis and vow to do better next time. From the Independent: The governments of the world’s largest economies have moved decisively to prevent any recurrence of the collapse of the global financial system. The Financial Stability […]
Read more...Oh, just when it might be looking safe to go into the pool again, by virtue of the EU putting up a substantial enough plan to possibly start calming overfrayed nerves, another source of worry appears to be deteriorating, namely Morgan Stanley. Sports fans may recall that a badly-needed cash injection into the embattled investment […]
Read more...One troubling aspect of the banking crisis was that European banks, like their US peers, are at risk of failure, and some of them are sufficiently large that they are beyond the capacity of any one country to save. While Fortis was bailed out by three countries, ad hoc arrangements are risky. As Keynes said, […]
Read more...Equity analyst and market commentator James Bianco of Arbor Research e-maileda a discussion of the breakdown of interbank lending to us along with a few others, His note illustrates a point made by FT Alphaville a couple of weeks ago that we have harped on since, namely, that central banks’ efforts to provide liquidity to […]
Read more...The Dow rallied over 900 points to as high as 283 and is now in positive territory. Reader M passed us this report: A well informed investor I speak to regularly relays that the 3:45 PM speech by Paulson, coming out of the IMF meetings, will include the roll out of a joint clearing mechanism […]
Read more...From Bloomberg: U.S. stock exchanges may seek to impose a temporary ban on short sales for individual stocks that plunge as regulators seek to rein in short-selling. The New York Stock Exchange and Nasdaq Stock Market may file their proposal with the Securities and Exchange Commission as soon as today, said three people who have […]
Read more...Economist Paul De Grauwe, who has been an astute and harsh critic of central bank’s models and priorities, makes a very simple point and draw a conclusion. Banks are not lending to each other out of mistrust. Various measures to increase liquidity and backstop banks have not made them look any more favorably upon their […]
Read more...Nearly two weeks ago, it was becomimg apparent that central bank liquidity operations were not merely ineffective, but had become counterproductive in getting banks to lend to each other. As FT Althaville noted: Liquidity is being thrown at the system, but it’s just making things worse. By pumping in more money central banks aren’t addressing […]
Read more...The US is considering more drastic measures to shore up the banking system, namely guaranteeing bank debt and removing the ceiling on deposit guarantees. The idea of insuring bank debt may seem odd, given that writers like John Hussman have urged that bank bondholders, who knew the risks of investing and enjoyed the higher yields, […]
Read more...Nouriel Roubini has been almost freakishly accurate in calling the progression of the credit crisis, with his only major failings being predicting its onset on the early side and his fondness for an apocalyptic writing style, which now seems fully justified. Even by the standards of his alarming missives, his latest is truly troubling. Roubini […]
Read more...One has to wonder whether the FDIC’s giving a wink and a nod to Wells Fargo’s attempt to snatch Wachovia away from Citi will prove to have been too clever by half. The apparent motivation was the lower explicit cost to the taxpayer of the Wells deal (note Wells was going to take large tax […]
Read more...The other shoe, as in real economy symptoms of the credit crunch, are starting to show up. One that was widely anticipated was rising default rates in private equity loans. This last cycle was particularly overheated, with not only the predictable peak-of-cycle high prices, which therefore implies high debt levels to make the private equity […]
Read more...It is bit perverse that the powers that be had to try all sorts of measures before considering the course of action that has been the most successful in handling financial crises, namely, letting asset prices fall and recapitalizing banks. In this case it would apparently involve taking equity stakes, say preferred stock and warrants, […]
Read more...