Category Archives: Regulations and regulators

Bloomberg: Treasury Forces Nine Banks to Sell Perpetual Preferred to TARP

Lordie, do we have any rule of law in this country? Presumably, the twisted logic of forcing money on to bank in return for taking perpetual preferred was that making the banks ask for it would create a taint. But even with the Treasury’s sweeping new powers under the $700 billion rescue package, one wonders […]

WSJ Provides Sneak Preview of Treasury Bank Salvage Operations

The Treasury Department is expected to announce its bank rescue program, which entails making use of its authority under the $700 billion Trouble Assets Repurchase Program to buy pretty much anything it wants to. The Wall Street Journal provides the latest reading on what the plan might entail:The initiatives will likely supersede many of the […]

Rush to Put OTC Commodity Derivatives on Exchanges

In yet another sign reluctance to suffer counterparty risk, banks that only recently were aggressive in booking lucrative over the counter derivative trades are now tripping head over heels to shift them on to exchanges (note that the exchange, rather than the bank, would then monitor counterparty performance and be responsible for making margin calls […]

Soros: "How to capitalise the banks and save finance"

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 […]

US to Protect Mitsubishi Investment in Morgan Stanley

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 […]

Officialdom to Close the Leverage Gate Now That the Horse is in the Next County

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 […]

Mitsubishi and Morgan Stanley Renegotiating Mitsubishi Equity Purchase

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 […]

Germany Relents, Drafting Plan for Bank Rescue Facility

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, […]

"Are Central Banks Making Libor WORSE?"

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 […]

Monster Stock Reversal on Reports of Treasury Moves to Tame Libor

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 […]

US Seeks New Short Sale Restrictions

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 […]

"Temporary full state ownership is only solution:

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 […]

Three Month Dollar Libor Increases

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 […]

US Considering Backing Bank Debt

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, […]

Roubini Warns of Possible Systemic Meltdown, "Severe Global Depression"

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 […]