A solid, well argued case against further central bank accommodation by Charles Wyplosz, professor of economics at the Graduate Institute of International Studies in Geneva, in the Financial Times. The centerpiece of his argument is that by providing ample liquidity and low interest rates, monetary authorities are delaying the very steps necessary for banks to […]
Read more...The ECB’s offer to lend to all takers who could post collateral for two weeks at 4.21% or higher led to an unprecedented $500 billion worth of advances. The New York Times and the Financial Times offer some insights as to what this portends. First, from the New York Times, which focused on the comments […]
Read more...The odd thing about former hedge fund manager Ralph’s Cioffi’s departure from Bear Stearns isn’t that it has happened, but that it is taking place now. The decision to keep him on as an advisor was inexplicable, unless there was some convoluted legal reasoning, for example, that keeping him in the Bear tent would lead […]
Read more...Despite the widely-held view that the SIV bailout plan engineered by the Treasury Department and sponsored by Citigroup, JP Morgan, and Banks of America will be largely irrelevant, the program keeps moving forward. We have the latest press release, um, update, courtesy Bloomberg: The “SuperSIV” fund, set up to provide cash to structured investment vehicles […]
Read more...On Monday, the European Central Bank announced an even more aggressive version of a liquidity facility it had used last August in its efforts to lower interbank lending rates that are stubbornly higher than policy rates. This move is an admission that the coordinated efforts of five central banks last week, including the Fed and […]
Read more...John Dizard of the Financial Times has learned that Goldman is trying to find a counterparty for a bearish position on banking industry risk. Is this a house bet, a hedge, an attractive product, or is the firm merely trying to find a taker for a punt a client wants to make? Regardless, the actions […]
Read more...If this story proves to be valid, Bear has a major mess on its hands. Business Week reports that the SEC and the US attorney’s office in Brooklyn are looking into whether Bear permitted insiders to withdraw their capital in February and March from the two Bear hedge funds that failed later in the year. […]
Read more...Wolfgang Munchau provides a sober comment at the Financial Times. He agrees with our view (shared by other) that the central bank actions of last week to try to stimulate more interbank lending (which will show up as a fall in the spread between Libor and risk-free rates) are likely to be ineffective and that […]
Read more...Steve Cecchetti, Professor of Global Finance at Brandeis, has a nice post at Vox EU, “The Art of Crisis Management: Auctions and Swaps.” The title’s misleading; Cecchetti describes it as a FAQ on the central bank actions of last week to try to close the unusually high and troubling spread between interbank rates like Libor […]
Read more...Willem Buiter ought to annoy me, and yet he doesn’t. While it is no doubt unconscious, he seems overly intent on impressing his readers with his intelligence, which is considerable; he wears his erudition on his sleeve. Yet he manages not to come off as an intellectual snob. While I’m not about to do an […]
Read more...The Wall Street Journal has officially sounded taps for the SIV bailout plan that once garnered front-page business news coverage: This week’s decision by Citigroup Inc. to bail out seven investment entities and bring $49 billion in assets onto its balance sheet effectively killed one of the centerpieces of the Bush administration’s approach. The balance […]
Read more...The actions announced by five central banks two days ago continue to leave the money markets unpersuaded. From Bloomberg: The biggest concerted effort by central banks in six years to restore confidence in global money markets is showing little sign of success. The rates banks charge each other for three-month loans held at seven-year highs […]
Read more...Shock and awe indeed. The markets remain unimpressed after yesterday’s coordinated action by five central banks explicitly to address the lack of liquidity in the money markets. The cost of dollar borrowing did fall slightly, but less than expected. From Bloomberg: The interest rates banks charge each other for short-term loans remained close to the […]
Read more...Bloomberg reports on the coordinated effort by major and even some not-so-major central banks (Canada’s and Switzerland’s central banks are included) to tackle high interbank lending rates. One investor called it to “shock and awe,” which is a worrying comparison. In fact, the plan does not add net liquidity, but merely provides additional one-month term […]
Read more...Martin Wolf, the Financial Times’ lead economics writer, is often most interesting when he is agitated. In his current offering, “Why the credit squeeze is a turning point for the world,” he is sufficiently charged up that he has dashed off a piece that in some way is more impressionistic than his usual offering, but […]
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