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 […]
Read more...More customers lined up today to withdraw cash from troubled UK building society Northern Rock after the Bank of England provided emergency funding. Bloomberg reported that there were expressions of interest in the bank, and given the continuing run, Northern Rock’s best course of action would be to make some kind of deal ASAP. The […]
Read more...We’ve never understood why regulation has such a bad name in America. Yes, there are all kinds of terrible specific implementations of the concept “regulation.” But the difficulty of getting it right doesn’t mean the concept should be rejected out of hand, since it turns out the alternative of “no regulation” isn’t so hot. And […]
Read more...Bloomberg and the Financial Times both have reports on the fact that British customers have been queuing up to pull their funds out of Northern Rock, ironically as a result as the emergency cash infusion by the Bank of England announced yesterday. There’s a potent message here; the information conveyed by regulatory action can counteract […]
Read more...Sorry to be brief, but a good article by Charles Goodhart, emeritus professor at the London School of Economics, acknowledges that lack of transparency and dubious ratings have played a major role in the current credit crisis. Unlike most other writers, however, he points to a looming third culprit: insufficient bank capital. Observers may find […]
Read more...Pretty much everyone who reads the financial press knows that investment banks are stuck with large LBO fundings and commitments that are under water. That means that. properly accounted for, the reduction in value of these positions is a loss. Yet there are increasingly indications that the soon-to-be released third quarter earnings may not be […]
Read more...One of our forms of recreation is keeping an eye on how coverage of certain news stories in the Wall Street Journal is curiously different than elsewhere. We’ve noted before that the WSJ tends to put a happy face on economic and market news (its company reporting is considerably more evenhanded). The latest reporting disparity […]
Read more...This Bloomberg story, which cites a newly-released Fed report that says that minorities are denied loans more often than Caucasians and often pay higher rates, isn’t a surprise. If anything, what is surprising is first, that this is treated as news, and second (and related), that the Fed and other regulators have been slow to […]
Read more...Faithful readers, I have looked around quite a bit tonight, but I am not coming up with much grist for blogging. Yes, there is a Wall Street Journal front page story that tells us that homebuilders are putting up smaller houses. And there is some chat everywhere about OPEC’s small production increase, one that the […]
Read more...Financial Times writer John Authers passed along an interesting observation from UBS’s George Magnus (the man who popularized “Minsky moment”) about the credit crisis: Issuance of commercial paper – short-term borrowing central to many financial institutions – is drying up, while Libor, reflecting the interest rates at which banks lend to each other, is spiking […]
Read more...I’m late to this item, “Task Force Will Seek More Loan Revisions,” which appeared in the Saturday Wall Street Journal. It seemed to merit comment and I haven’t seen much online. Here’s the premise: Attorneys general and banking regulators from 10 states have formed a task force hoping to persuade mortgage-servicing companies and investors in […]
Read more...With today’s weak non-farm payrolls report, financial markets participants have turned up the volume on their calls to the Fed to lower interest rates. Even Barney Frank, chairman of the House Financial Services Committee, has weighed in, urging a “meaningful” cut. So the Financial Times comment today by Raghuram Rajan, professor of finance at the […]
Read more...