Category Archives: Regulations and regulators

A Former Regulator on the Fed Allowing Deposits to Fund Investment Banking Operations

Due to the lateness of the hour, I will be a bit more terse than I perhaps should be. We discussed yesterday that one of the emergency measures implemented by the Fed was the suspension of the rules prohibiting banks from using deposits to fund their investment banking subsidiaries. Reader dh helpfully pointed to background […]

WSJ: Fed Asks Goldman, JP Morgan to Lend $75 Billion to AIG (But FInancial Times Disagrees)

The numbers and the measures become more and more extreme. For AIG to get permission from regulators to move $20 billion in capital from its subs to the holding company and have significant asset disposals teed up wasn’t sufficient to shore up the embattled insurer., The Fed has reportedly convened yet another emergency session to […]

Treasury: "Honey, I Just Shot the Banks"

Readers may recall that we were gobsmacked that the conservatorship of Fannie and Freddie involved wiping out dividends on their existing preferred stock. That was stunningly shortsighted move, guaranteed to be commemorated as a a major mistake when histories of this period are written. Fannie and Freddie preferred were held by banks, so any losses […]

AIG Stay of Execution: Holding Company Can Access $20 Billion of Subsidiary Capital

AIG appears to have fended off the immediate threat of a downgrade with the granting of permission by New York State for the parent to gain access to subsidiary capital. While certainly quite a waiver, it is also possible that AIG has overcapitlaized subs and thus this move may be defensible as far as policyholders […]

WaMu Failure Could Trigger Extension of Deposit Guarantees

The alert have taken note that the failure of Washington Mutual, which looks increasingly likely, would consume the FDICs reserves and, as in the savings and loan crisis, force the agency to go hat in hand to Congress for more money. But this is comparatively early in our burgeoning banking crisis for the bulwark of […]

Lehman Bankruptcy Looms; Emergency Lehman Swaps Session Today (Slightly Revised and Updated)

Reader Steve A , Scott and Saboor also pointed to the Bloomberg story reporting that the International Swaps Dealers Association had announced an emergency Sunday session to net Lehman-related position in anticipation of a possible bankruptcy filing, From Bloomberg: Wall Street prepared for a potential Lehman Brothers Holdings Inc. bankruptcy after Barclays Plc said it […]

NY Times: Barclays, Most Likely Lehman Suitor, Walks from Deal

The noose is tightening, with the powers that be facing the unattractive choices of a politically unpopular bailout (and egg on their face) versus an unwind of Lehman with potentially disastrous consequences. Will Paulson blink? So far, the word is no. From the New York Times (Hat tip reader DaddyMac): Unable to find a savior, […]

WSJ: Private Sector Resolution Looking Less Likely; Pressure Continues for Bailout (Updated)

The Wall Street provided an update on the Lehman rescue efforts which were consistent with its earlier coverage, which discussed considerable impediments to a “good bank/bad bank” solution with Wall Street firms providing the capital to support the bad bank. Note this contradicts the more optimistic report from CNBC on this approach (which we viewed […]

CNBC: Lehman Bad Bank Deal Drafted; Firms Expected to Kick in $3 Billion Each

A few hours ago, we went over the most recent report on the Lehman talks sponsored by the Fed (the Wall Street Journal had a remarkably detailed account), and it seemed as if the obstacles to getting a deal done were considerable. Although there was discussion of forming a “good bank/bad ban” structure, it sounded […]

AIG Plans $20 Billion Asset Sale

The UK’s Times reports that AIG is looking to liquify some holdings to shore up its balance sheet and hopefully its stock price. While AIG, like Lehman, is making a “reassure investors” presentation ahead of its scheduled earnings announcement, the article gives the impression that AIG can provide a more concrete, readily executed salvage operation […]

Lehman Options Limited; Firm Hires Bankruptcy Attorneys

The New York Times and the Wall Street Journal provided Saturday afternoon updates on Lehman. The discussions increasingly acknowledge that a deal may not be in place by Sunday as initially hoped (understandable, given the authorities’ unwillingness to provide support and the near-impossibility of doing adequate due diligence in a few days) and have moved […]

Moody’s Cuts WaMu Senior Debt to Junk; Bank May Sell Branches, Deposits

Washington Mutual, which has long looked wobbly, is moving beyond the point where it can survive in its current form (cynics might say in any form). Moody’s lowered the bank’s rating on its deteriorating financial condition and the difficulty of raising sufficient capital on viable terms. From Reuters: Washington Mutual Inc. was downgraded to below […]

Lehman: Deal Sought Before Monday; BofA Most Likely Suitor (Updated Again)

News reports appear to be converging on the hoped-for end game for Lehman. Whether that will come to pass is another thing entirely. First, the Washington Post, New York Times, and Wall Street Journal all report that the Fed and Treasury are brokering a deal, but are trying to avoid the use of public funds. […]

Preferred Shared Whacked in the Wake of Freddie, Fannie Bailout

Readers may recall that the Treasury’s rescue plan for the GSEs called for preferred stock dividend to be eliminated and for new investment by the government to come in the form of preferred stock that would be senior to the outstanding preferred. Needless to say, those actions have had a rather deleterious effect on the […]

Lehman Death Watch: Will Paulson Let Lehman Fail?

The short answer is yes, but we need to define fail And BTW, it’s very frustrating to be stuck on a plane waiting for the weather on the eastern seaboard to clear while the markets were having such an exciting day. As readers no doubt know, Lehman broke down after word got out that talks […]