Bloomberg reports that despite the latest balm to the credit markets, that of offers of emergency funds that would tide banks over the typical end-of-year reduction in liquidity, Libor has nevertheless increased to the highest level since 2001. The problem, of course, is the the reason funding is tight is that banks are worried about […]
Read more...Do we see a pattern here? The much-covered, little-loved SIV rescue program (formally known as the Master Liquidity Enhancement Conduit and informally called the Entity or Super SIV) was announced prematurely, didn’t clearly solve the problem it was meant to address, involved a lot of failing around to try to resolve irreconcilable interests (those of […]
Read more...Martin Wolf, the well respected lead economics editor of the Financial Times, turns to a favorite topic: why banks regularly get themselves in trouble. His answer: it’s “a risk-loving industry guaranteed as a public utility.” Privatizing gains and socializing losses, particularly if the employees share in that arrangement, is a formula for reckless behavior. Wolf […]
Read more...John Dizard of the Financial Times thinks foreign exchange restricitons will soon be upon us. Those who function in the real economy find it hard to live the with exchange rate uncertainty and volatility, but Dizard reminds us that efforts to dampen it down will help speculators. Dizard also provides an off-topic human interest story […]
Read more...One not-widely-reported element of this credit mess is the sub rosa role that various organizations have played in shoring up some of the weakened players. Case in point: the Federal Home Loan banks, which during the acute phase of the credit crunch stood in for commercial paper buyers. From an earlier Bloomberg story: The FHLBs […]
Read more...In an article in today’s New York Times, Yale Professor Robert Shiller makes a very important point: the remedies proposed by the powers that be for the burgeoning housing mess are woefully inadequate: ….our reaction to the current crisis is anemic….The “Super S.I.V.” rescue plan, instigated in October by Henry M. Paulson Jr., the Treasury […]
Read more...Henry Paulson is becoming the spokesperson for half-baked proposals, first the SIV rescue plan, and now his idea for what sounds like standard-form loan modifications for stressed mortgage borrowers. Paulson’s fondness for Big Schemes That (Purport To) Fix The Problem With A Master Stroke may be a sign of grandiosity. Doesn’t he understand that the […]
Read more...Joseph Stiglitz, who was chief economist of the World Bank during the emerging markets crisis a decade ago, discusses in a Project Syndicate article (hat tip Mark Thoma) how the US is now unwilling to take the harsh medicine it prescribed back then. While this may be a revelation to some US readers, this inconsistency […]
Read more...One of our ongoing beefs is that with all the ink that has been spilled on our snowballing credit crisis, there are almost no decent proposals as how to keep it from happening again. Too few commentators and policymakers have gone beyond either fixating on the size and complextion of the mess, and when they […]
Read more...Perhaps I am attributing too much importance to a single speech, but the Minneapolis Fed President Gary Stern’s “Credit Market Developments: Lessons for Central Banking,” reveals a lot of what is wrong about the way policymakers are thinking about our credit crisis. And if Stern’s position is widely held within the Fed, we are in […]
Read more...Nouriel Roubini, in his latest post, “With the Recession Becoming Inevitable the Consensus Shifts Towards the Hard Landing View. And the Rising Risk of a Systemic Financial Meltdown,” takes his somber views one step further and discusses the possibility of a crisis in some detail. Even by Roubini standards this is grim reading. I have […]
Read more...A colleague was so kind as to send me the text of a speech given at the Graham & Dodd breakfast a few weeks ago by David Einhorn, CEO of hedge fund Greenlight Capital. The speech has gotten play only in some personal-investment-oriented blogs like Seeking Alpha and Naked Shorts. Even though they are fine […]
Read more...Bloomberg reports today that a downgrade of the monoline bond insurers MBIA and Ambac, which had been the subject of concern for some time (see here and here), may cost investors as much as $200 billion. If they lose their AAA rating, then any securitized deals that relied on them for credit enhancement will be […]
Read more...As readers probably know, because Fannie Mae was found to have engaged in “extensive” fraud, its CEO and CFO were fired late in 2005 and the government sponsored agency was put on a short leash by its regulator, the Office of Federal Housing Enterprise Oversight. So it is a bit surprising to learn in a […]
Read more...This quote, from Countrywide’s CEO Angelo Mozilo, has the potential to be one of those career-death-wish utterances, in the same league as Citigroup ex-CEO Chuck Prince’s “We’re still dancing,” when asked in July if he saw any cause for pause in the recent wobbles in the credit markets. The worst is that Mozilo’s proclamation isn’t […]
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