Category Archives: Regulations and regulators

Wolfgang Munchau: Policy Errors Risk Turning Credit Crunch Into Depression

Wolfgang Munchau in EuroIntelligence argues against conventional wisdom, which is that modern policy tools and institutional arrangements will keep the credit crisis from morphing into a depression. He contends that the policy errors, the result of political considerations, have been substantial. He also says that Treasury Secretary Henry Paulson devised the badly-flawed Troubled Assets Repurchase […]

Coordinated Central Bank Action Fails to Relieve Money Markets

The coordinated central ban effort today to restore some level of activity to stressed funding markets, in which five central banks cut their policy rates by a half a point and China cut rates by 0.27%, is a resounding failure. From Bloomberg: Overnight corporate borrowing costs jumped, Treasury bill yields fell and the bond market […]

Coordinated Central Bank Rate Cuts Stem Equity Rout

The Federal Reserve, ECB, Bank of England, Sweden’s Risbank, and Bank of Canada all made rate cuts, each of a half a percent; China cut its benchmark rate by 0.27%. The move pared substantial losses in foreign equity markets (the FTSE, which also benefited from a capital injection into stressed banks) is up slightly, and […]

£50 Billion Rescue for British Banks (Update: RBS Chief Thrown Out)

The Independent reports that a rescue package will be announced tomorrow. After the massive amounts of liquidity thrown around in the last couple of weeks, a mere £50 billion seems a bit puny. However, this is a far more sensible than anything done in the US to date (save the AIG bailout, which was concluded […]

SEC’s Cox Censors Report on Bear Collapse

The public got a bglimpse of an unedited report on Bear Stearns failure because Senator Charles Grassley put the full version on the Internet briefly. The official version had significant deletions. From Bloomberg (hat tip reader Alex): U.S. Securities and Exchange Commission Chairman Christopher Cox’s regulators stood by as shrinking capital ratios and growing subprime […]

Lloyds, RBS, Barclays Ask UK Treasury for£15 Billion Each; RBS Shares Plunge

Another day, another rescue? Well, at least another rescue petition. From Robert Peston at the BBC: Well last night a trio of the UK’s biggest banks – Royal Bank of Scotland, Barclays, and Lloyds TSB – signalled to Alistair Darling that they’d like to see the colour of taxpayers’ money rather quicker than he might […]

Willem Buiter: Banking System in North Atlantic Probably Insolvent

Willem Buiter has a penchant for ruffling feathers with his blunt pronouncements. He caused a firestorm at the Fed’s recent Jackson Hole conference by, in his presentation, telling the central bank that it was a victim of “cognitive regulatory capture” and was excessively sensitive to the needs and special pleading of the financial services industry. […]

Japan, Australia Inject $11 Billion to Combat Rising Money Market Rates

Even with Japan’s banks largely on the sidelines in the international housing bubble (US subprime exposure is a mere $8 billion), its money markets are suffering the effects of the flight from risk. Both Japan and Australia pumped more funds into their markets to combat banks’ unwillingness to lend to each other. From Bloomberg: Japan […]

Wolfgang Munchau: Europe Needs a Bank Rescue Plan

Wolfgang Munchau, who writes for the Financial Times and the blog EuroIntelligence, argues that the fact that EU member nations managed to survive their first series of bank failures does not mean it can afford to take the risk of defaulting to continued improvisation. Munchau comes out squarely in favor of a coordinated, funded rescue […]

Lehman Asked to Become a Bank, Rebuffed by Fed

In light of the Fed’s decision to grant Goldman Sachs and Morgan Stanley banking licenses, and the breathtaking damage of the Lehman bankruptcy, the central bank may have a bit of explaining to do as to why it turned down Lehman’s petition to become a bank in July. The other side of the coin is […]

European Leaders Promise to Save Major Banks, But Fail to Adopt EU Plan

So far, the statement released this afternoon US time out of a Euro summit amounts to an attempt at reassuring hand-waving but in fact was merely a restatement of the status quo. The group of European leaders did agree on a set of principles, but it remains an open question whether they will be able […]

Germany to Guarantee Bank Deposits; Efforts to Salvage Hypo Bank Continue

In response to the crisis at Hypo Bank, Germany said it will guarantee bank deposits. Note that no action was announced regarding Hypo, whose collapse is expected in the next few days if a rescue is not in place. Hypo is not a depositary institution, but it is sufficiently large (almost as big as Lehman) […]

Soros: "He Foresaw the End of an Era"

John Cassidy, in the New York Review of Books, discusses George Soros’ latest book, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means, emphasizing how the storied investor’s views differ from those of the efficient markets/rational expectations school of economics. It also weaves in a wide-ranging discussion of the […]

The Paulson Plan = MLEC Version 2.0

I can be painfully slow to see things sometime….. Long-standing readers and finance junkies may remember the Treasury’s structured investment vehicle fiasco of last fall. By way of background, banks had created off balance sheet entities called structured investment vehicles (SIVs) which contained subprime (and sometimes other) assets, funded by commercial paper and short-term debt. […]

Citi Gets Judge to Suspend Wachovia Deal

This interim success by Citigroup, of getting a judge to step into Wells Fargo’s effort to break up a deal that Citi had struck to acquire Wachovia, is surprising, to say the least. Most observers thought that the bank had slim grounds for recourse (the FDIC has broad authority regarding the disposition of failed and […]