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 […]
Read more...Reader Bernard pointed us to a story in Fortune, “Wall Street playing with more funny money.” The cause for pause is the rising tide of Level 3 assets. By way of background, investment banks and other financial firms are subject to new accounting rules that require them to specify how they value their assets. Level […]
Read more...In a sign of increasing desperation, some central banks are imposing currency controls in an effort to arrest the dollar’s decline. Oddly, none of them seem to be taking the most direct measure, which would be to sell their own currency. This may be due to the fact that traditionally, the job of trying to […]
Read more...Readers likely know that new accounting standards are forcing investment banks and other financial firms to specify how the value the assets on their balance sheet. Level 1 assets are ones whose prices can be readily obtained (i.e., they trade actively); Leve 2 assets may not trade often, but they are very similar to assets […]
Read more...The equity markets seem to have finally realized that conditions are ugly in the credit markets, due to get uglier, and the mess will pull down the real economy. And the bad news continues. The dollar index fell to a new low. Wachovia said the value of its subprime securities, largely “super senior” tranches of […]
Read more...Normally, I have a pretty good feeling for the dynamics behind turf wars, but on this one, I freely admit to sticking my neck out, and welcome any reader insight. As you probably know, the New York Attorney General Andrew Cuomo filed a suit against title insurer and appraiser eAppraiseIT, a unit of First American. […]
Read more...The recent excesses of the financial services industry seem to be coming home to roost at the same time. Just when the arcane paper that sold like hotcakes a mere few months ago is now languishing in dealer inventories, so to is coming accounting treatment that gives the firms far less latitude in how they […]
Read more...A guy whose nickname is “the Hammer” might not seem a great fit with public service, where finesse generally goes further than brute force. So it isn’t a complete surprise that a Bloomberg article, “Paulson’s Focus on `Excesses’ Shows Goldman Gorged” by Mark Pittman, contains some harsh criticisms of the Treasury secretary. We’ve commented before […]
Read more...An excellent post at Vox EU, “Subprime crisis: the policy response and filling the information gap,” by Alberto Giovannini, Chief Executive Officer, Unifortune SGR SpA, and Luigi Spaventa, Professor of Economics at the University of Rome. The article gives a nice recap of the credit crisis and focuses on regulatory failure. It zeros in on […]
Read more...Paul De Grauwe, professor of economics at the University of Leuven, makes a persuasive and succinct case as to why central banks need to combat asset bubbles. Reading his argument, one might even wonder why the topic is controversial. Yet it is. Beyond insuring the safety of the banking system, central bankers’ mandates extend only […]
Read more...If this factoid about barter being used to effect distressed subprime trades (and she admits it is, at least so far, an isolated example) had come from anyone other than Gillian Tett, the captial markets editor for the Financial Times, I’d be inclined to discount it. But the fact that it is happening at all […]
Read more...I had wondered why, given the swift and brutal contraction of the commercial paper market in August and September, that there weren’t more apparent signs of distress. Outstandings fell an eyepopping $368 billion. Commercial paper is short-term borrowings, maximum 270 days, but typically much shorter. If a borrower can’t roll his commercial paper but still […]
Read more...I am beginning to feel like announcer at a prizefight where it’s obvious that one boxer is hopelessly outmatched, but the contest will still go a full twelve rounds due to the stubbornness of the underdog and the failure to land a knock-out punch. The SIV plan continues to take body blows, the supporters appear […]
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