We’ve often observed that the reason to keep the banking industry (and Wall Street, now that some firms are too big to fail) on a short leash is that it plays with the public’s money: gains go to employees and shareholders but losses are socialized. We now see a bald-faced example of that problem in […]
Read more...One of the big news items yesterday was the turmoil in the auction-rate securities market, a $330 billion corner of the muni market, which is a direct casualty of the distress with the bond insurers. The specter of Bristol Myers taking a $275 million charge on an $811 million, announced at the end of January, […]
Read more...The Financial Times has an interesting piece today by Chris Giles and Gillian Tett, “Lessons of the credit crunch.” The world’s top central bankers have learned that their traditional policy tools haven’t worked as well as they would have liked. So how to judge the job they have done? The FT story fails to address […]
Read more...We didn’t think much of the New Hope Alliance, the program brokered by the Treasury Department to rescue subprime borrowers facing resets. The program’s criteria targeted those who were already paying fairly high initial interest rates with very little to no equity in their house at the time of closing. In other words, this group […]
Read more...We had commented before on the fact that Spanish banks have been going to the ECB for funding because their domestic mortgage securitization market is virtually shut. In December, Spanish banks borrowed €44 billion, more than double the average of the previous 15 months. The Financial Times story notes two troubling elements: first, that the […]
Read more...The Wall Street Journal and Bloomberg report that the SEC is mulling regulations for rating agencies. Note that rating agencies have benefited from being a protected class, since the SEC determines who can be a Nationally Recognized Statistical Ratings Organization, yet heretofore has imposed no obligations on them. In the 1970s, the SEC set regulatory […]
Read more...Deutsche Bank’s CEO Josef Ackermann issued a stark warning today: bond insurer downgrades would have catastrophic consequences, on par with the subprime crisis. Note tha this view is in contrast with teh comparatively sanguine readings that have been coming from some US analysts and the US media, which now appears to regard teh increasing possibility […]
Read more...The Wall Street Journal today says that even if the efforts to raise new funding for the troubled bond insurers are successful, they are unlikely to stave off a ratings downgrade. This story, based in part on reports coming from the rescue discussions led by New York state insurance superintendent Eric Dinallo, indicates that the […]
Read more...Although it’s merely talk at this point, international regulators are considering how to reform rating agencies’ role in structured finance, which in hindsight contributed to many parties buying paper that was considerably riskier than they realized, One notion is to limit their their role in advising issuers on the design of structured finance products, which […]
Read more...Readers may note we have a fair number of posts from the Financial Times today. The pink paper is having a good day, and conversely, in the US, Super Tuesday has taken pride of place in the news. Martin Wolf in today’s Financial Times argues that more aggressive reform of the financial sector is needed, […]
Read more...This story is so heinous that I couldn’t let it go by. Court filings indicate Wachovia not only permitted telemarketers to steal from individuals, but they were aware of the practice and turned a blind eye because it was profitable to them. And the targets of the fraud were typically elderly. The suit was filed […]
Read more...In today’s post, “The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster,” the bearish and prescient professor Nouriel Roubini sets forth how a systemic financial crisis could play out. The most troubling thing about this piece is that it is quite plausible. Of Roubini’s twelve steps, the first eight are […]
Read more...Standard & Poor’s issued a research report today that stresses that bond insurer downgrades would hurt banks and in some cases could lead to reductions of their debt ratings. This report is in contrast to the comparatively cheery view of Morgan Stanley yesterday, that bond guarantor downgrades (presumably to AA; note further downgrades are possible) […]
Read more...Perhaps my memory is failing me, but the insistence by three major Wall Street firms, that utilities prove that their new coal-fired plants are economically viable, is at a minimum highly unusual (I’d say unprecedented). Normal Wall Street practice is simply “disclose and sell.” Under securities laws, if the issuer presents its financial situation and […]
Read more...Long term, the dollar is not a good bet unless the US increases its savings rate and reduces its current account deficit considerably. Monetary easing and fiscal stimulus only exacerbate the problem. But never forget the Wall Street saying, “Don’t fight the tape.” From Bloomberg: Ben S. Bernanke’s decision to lower interest rates 1.25 percentage […]
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