A Bloomberg exclusive story reports that the efforts to clean up the relationship between equity analysts and corporate clients appear have failed to produce more candid ratings. While there is no sign of the overt corruption of the dot-com era, sell ratings are even scarcer than before, despite considerable and obvious signs of stress in […]
Read more...Wolfgang Munchau of the Financial Times provides an excellent and from what I can tell, overlooked argument against central banks’ eagerness to cut interest rates to shore up wobbly financial markets. His point is simple, and I am annoyed that I didn’t think of it. The reason that monetary authorities are so quick to lower […]
Read more...Many commentators on the bailout of E*Trade by hedge fund Citadel focused on either the terms of the deal (costly to E*Trade) or the fact that Citadel, like some other risk-minded investors, are starting to pick and choose among distressed mortgage assets, a sign they believe that the bottom is nigh. But a Reuters story, […]
Read more...Yesterday, we posted some thoughts about the subprime rescue plan under development among the Treasury, some leading servicers, other regulators, and some investors (most notably Freddie and Fannie). A few additional items: We had commented that the plan would be limited to only borrowers who were current on payments. That appears to be incorrect, or […]
Read more...The Wall Street Journal’s page one story, “Rate Plan Has Skeptics, Fans,” offers little new information about the substance of the program (not surprising) but gives mainly positive reviews. In case readers somehow haven’t figured it out, I believe this program to be a Bad Idea in any form, although some variants could be worse […]
Read more...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 […]
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