Thomas Palley posts only occasionally, but just about everything he writes is first rate, and today’s offering is no exception. Palley argues one of our favorite views, that the Federal Reserve interest rate cuts have had more to do with trying to prop up asset values than with stimulating growth. He points out that this […]
Read more...Willem Buiter’s immediate reaction to the Fed’s emergency rate cut earlier this week was sharply negative, and upon reflection, his view has become even more critical. Buiter sees the reason for the cut as a “knee jerk” response to the prospect of a sharp fall in equity prices. He looks at the proximate causes of […]
Read more...Despite New York insurance superintendent Eric Dinallo’s desire to move a rescue of bond insurers along with all possible speed, and the very real pressure of an imminent downgrade (note that Security Capital Insurance was downgraded five levels by Fitch yesterday from AAA to A), there was perilous little in the way of progress. Indeed, […]
Read more...Bill Ackman of hedge fund Pershing Square has gotten a considerable amount of flack for his outspoken, negative views of the bond insurers, particularly MBIA and Ambac, which his firm has shorted. Ackman has been circulating a detailed analysis that estimates that the additional equity needed to maintain an AAA rating at the two biggest […]
Read more...I hate to be a nay-sayer, and I want to make it clear that it really would be for the best if New York State insurance superintendent Eric Dinallo could pull off a rescue of the troubled bond insurers. But as we pointed out, this is an uphill battle under the best of circumstances, and […]
Read more...George Magnus, the UBS economist who popularized the concept of a Minsky Moment and has been prescient in his bearish calls on the credit markets, veered today and, in a Financial Times comment, “More is needed to unblock credit arteries,” gave unqualified support for aggressive monetary easing. Put it another way, when mere New York […]
Read more...Eric Dinallo, the New York Superintendent of Insurance, is trying to orchestrate a rescue of on-the-ropes bond insurers and according to the Financial Times, has approached various unnamed banks for an immediate $5 billion and an ultimate sum which could be as large as $15 billion. Note that the Pershing Square estimate of capital needed […]
Read more...A reader provided a link to a post by Institutional Risk Analytics, which in turn cites a merger filing by Bank of America with respect to its plan to acquire Countrywide. The document details what can only be called a scheme by which Bank of America intends to acquire Countrywide (specifically, the FDIC insured entity) […]
Read more...Although a good deal can happen between now and January 31, the date of the next Fed Open Markets Committee meeting, a 50 basis point rate cut looks more consistent with present economic conditions than do deeper cuts. Most important (and widely ignored) is that the seize-up the money markets is largely a thing of […]
Read more...Despite a sharply negative opening, the Nikkei is up as of this hour, so there is some hope that the frazzled nerves of Thursday might calm in the US too. The Financial Times and the Wall Street Journal both address one of the major causes of the mini-panic: a new focus on counterparty risk. The […]
Read more...Mohamed El-Erian, in “A route back to potency for central banks,” in today’s Financial Times, gives a short but persuasive analysis of what ails central banks today and what they need to do to strengthen their role. El-Erian is insightful and his opinions often carry some weight, by virtue of being both a Serious Economist […]
Read more...Martin Wolf’s current comment is great fun. He makes a recommendation which is logical and well argued but so contrary to the prevailing orthodoxy that it is sure to elicit a lot of ire. And I guarantee it will be misconstrued as well. Wolf notes that banks (and we can include investment banks) have succeeded […]
Read more...There has been an enormous amount of fulminating about rating agencies, yet they solider on, their status still secure even if their reputations are considerably tarnished. John Dizard in today’s Financial Times adds some grist that is likely new to many readers. He discusses how the rating agencies operated before the SEC created the “Nationally […]
Read more...Ooh, I am ill. The Financial Times seems to have scooped this story (I don’t see it on Bloomberg). In keeping with Greenspan’s tutelage at the knee of Ayn Rand, he has exercised his right not to be constrained by propriety or other rules that govern little men and has gone and sold himself to […]
Read more...Bloomberg has come across some correspondence with the SEC that sheds light on Goldman’s much commented upon “net short” subprime position. Note, despite the fulminations of certain members of the media, it is not at all clear that being short creates any liability whatsoever, regardless of whether customers may feel “had” or not. On secondary […]
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