The reputation of drug companies has taken a beating in recent years. Their prices have risen much faster than inflation (except for last year, when generics had some impact), makes them almost universally suspect. The industry’s claim that its fat margins are warranted by its investment in research doesn’t bear much inspection. 45% of drug […]
Read more...Bloomberg Magazine, in “Unsafe Havens,” reports that money market funds run by Bank of America Corp., Credit Suisse Group, Fidelity Investments and Morgan Stanley owned over $6 billion of CDOs with subprime debt in June. The reason this is a serious issue is that money market funds have a $1 NAV, meaning “net asset value” […]
Read more...As rating agencies came into renewed focus this week as a result of Senate Banking Committee hearings on their role in the structured credit mess, one suggestion appears to have been gotten little play in the financial media. Yesterday, the Financial Times reported that Eric Mindich, CEO of Eton Park Capital and newly appointed head […]
Read more...Bloomberg today reports that the SEC is looking into whether issuers leaned on rating agencies to provide the desired ratings on structured credit transactions. However, there may be less here than meets the eye. SEC chief Christopher Cox, along with senior executives from the rating agencies, are testifying before the Senate Banking Committee today. Query […]
Read more...The results of the Bank of England’s auction today reveals that ideas that should work in theory may not work so well in practice. The auction was to make funds available at a penalty rate (1% above prevailing interbank rates). The mechanics are different, but intent is similar to the use of the discount window […]
Read more...Like our own Fed governors in the run up to the FOMC meeting that produced a 50 basis point Fed funds rate cut, so too have European Central Bank been sending mixed signals on domestic versus international priorities in their interest rate policies. But their actions are the mirror image of ours. For them, member […]
Read more...By happenstance, Bloomberg has an interesting trio of prognostications for the financial markets. Admittedly, they have differing degrees of authority. Most would give the IMF considerably more credence than either Jim Rogers or Goldman. However, all three have a following with investors. Not surprisingly, Goldman’s report is upbeat, the IMF’s is cautious tending towards the […]
Read more...The New York Times today, in “More Profit and Less Nursing at Many Homes,” describes the often shameful behavior of private equity owners of nursing homes towards their charges: Some excerpts: As such investors have acquired nursing homes, they have often reduced costs, increased profits and quickly resold facilities for significant gains. But by many […]
Read more...In an intriguing article today, “The Bank loses a game of chicken,” Martin Wolf, the Financial Times’ chief economics writer, followed the lead of the Bank of England’s Governor Mervyn King in backing down from their shared view that central bankers should be willing to let all but those banks “too big to fail” go […]
Read more...At least in the US, the Fed rate cut yesterday crowded out most other financial news. As the Wall Street Journal’s MarketBeat blog put it (hat tip Paul Kedrosky): Lehman Brothers probably could have reported that it was shutting down operations and moving to Kazakhstan and the Fed move would have still inspired a rally. […]
Read more...It’s generally not a good sign when a regulator exhibits distaste for his job. Recall that Federal banking supervision takes place through a variety of channels, but the main actors are the Fed and the Treasury, through the Office of the Comptroller of the Currency and the Office of Thrift Supervision. So Treasury Secretary Hank […]
Read more...In an amazing instance of collateral damage, the new bankruptcy law that took effect in October 2005, designed to enable banks to wrestle more money from overextending credit card users, hascaught hedge funds in its net. The old law exempted many types of bank securities lending, such as repo agreements, to be included in a […]
Read more...Yet another indicator of the seriousness of the Northern Rock crisis: UK overnight rates increased 60 basis points on liquidity concerns. As Bloomberg reports: The cost of overnight borrowing in pounds rose the most since June as the bailout of U.K. lender Northern Rock Plc stoked concern other home-loan providers will be forced to seek […]
Read more...In today’s Financial Times, Willem Buiter, professor of political economy at the London School of Economics, and and Anne Sibert, professor of economics at Birkbeck College, University of London, take stock of the impact of the Northern Rock bailout on the Bank of England’s reputation. The article points out various dimensions on which the Bank’s […]
Read more...As the credit crisis has worsened, we no longer hear the argument once commonly made in support of subprime mortgages, namely, that they were good for people with poor credit, since it enabled them to buy housing they could not otherwise afford Maybe it’s because the problems we are seeing resulted from the fact that […]
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