Willem Buiter reads two reports issued on the Northern Rock meltdown, and in his Olympian style, finds them wanting. While Northern Rock was a British crisis, its character was similar to those faced by a host of US and European institutions. The Rock held long-dated assets that it funded in short-term markets, a routine banking […]
Read more...According to the Financial Times, number two bond insurer Ambac has decided not to split its operations into a muni insurance business and a structured finance business. Note that we said on February 19 that we didn’t see how Ambac could possibly raise the $3 billion it sought ($2.5 billion in equity and $500 million […]
Read more...MBIA is revealing itself to be even more of a garbage barge than many cynics thought. On February 25, in a statement which went largely unnoticed, new MBIA CEO Jay Brown had “questions” about the 2007 preliminary financial results announced by the previous regime, and hadn’t signed off on the financial statements. That’s a big […]
Read more...In “States and Cities Start Rebelling on Bond Ratings,” the New York Times attempts to make the case that municipalities can lead a revolt against Wall Street: Does Wall Street underrate Main Street? A growing number of states and cities say yes. If they are right, billions of taxpayers’ dollars — money that could be […]
Read more...Paul Davies, in “True impact of mark-to-market accounting in the credit crisis,” discusses a paper by Tobias Adrian of the New York Fed and Hyun Song Shin of Princeton University that claim that mark-to-market accounting play a direct, perhaps central role in the credit bubble, and that it works just as dramatically in reverse. Once […]
Read more...A dirty little secret of the bond insurer mess is that the rating agencies not only aided and abetted their ill-fated entry into the structured finance business but apparently prodded them in that direction. Although I had been given this tidbit before, I hadn’t gotten independent verification, but it now comes via a report in […]
Read more...This comment in the Financial Times by Harald Benink and George Kaufman, discusses a major shortcoming in Basel II, the new bank capital standards promulgated by the Bank of International Settlements, namely, that banks can use their own risk models to set minimum capital levels. That procedure allows them to tell the regulators how much […]
Read more...Treasury Secretary Hank Paulson has thrown a bucket of cold water on a number of proposals being floated in Washington to rescue troubled borrowers via the explicit use of public funds, such as the idea of reviving the 1933 Home Owner’s Loan Corporation to buy underwater mortgages and renegotiate them. In some respects, Paulson’s tough […]
Read more...DealBreaker does some serious reporting today, informing us that some traders have told them that the failed auction rate securities market was always dependent on stabilization by dealers. For anyone who has worked in the securities industry, the term “stabilization” pregnant with regulatory significance. Stabilization, as defined by the SEC, is …transactions for the purpose […]
Read more...Martin Wolf, in “Why Washington’s rescue cannot end crisis story,” tells us, push come to shove, the government can bail us out of our economic mess, but it would be unwise to stop there. Wolf argues that substantial steps need to be taken to rein in a financial sector that is beyond the understanding of […]
Read more...A group of hospitals which has issued auction rate securities and are now choking on the “failed auction” rates have petitioned the SEC to allow them to buy back the debt. The notion is that they’d either hold the debt off the market until conditions normalize, or would retire it completely, replacing it with longer […]
Read more...To paraphrase the late Senator Everett Dirksen, a handout here, a handout there, and pretty soon it adds up to real money. The latest supplicants looking for alms from the Federal purse are state governors on behalf of local governments hit by the auction rate securities debacle. So far, they have not developed a proposal. […]
Read more...The headline above comes from the UK’s Independent. I could have picked number of variants (BBC, “Anti-depressants ‘of little use‘,” Financial Times, “Antidepressants ‘have no impact‘”), but what is interesting is that as of this hour, this study, published by the University of Hull, is getting MSM coverage solely in the UK and Commonwealth countries. […]
Read more...Jeffrey Sachs, in an article for Project Syndicate (hat tip Mark Thoma), argues that private sector efforts alone won’t yield sufficient progress in achieving needed progress on the environmental and anti-poverty fronts. Part of this, of course, is the classic problem of externalities: carbon emissions are free to the perps, but impose costs on everyone. […]
Read more...A comment in today’s Financial Times, “The fall of a financial model,” by Jean-Louis Beffa, chairman of Saint Gobain and Xavier Ragot of the Paris School of Economics argues that the approach to financial capitalism in operation for the last decade is coming to an end. They define the model as giving a primary to […]
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