In another move indicating that Mr. Paulson has experience outside of Washington he appears to be poised to suggest a new set of regulators and consolidated roles among Washington beaurocrats. The moves are discussed here: Paulson to Propose New Regulators, SEC-CFTC Merger and here: Treasury’s Plan Would Give Fed Wide New Power Acknowledging that part [...]
A number of you have asked me when I think housing prices will bottom. The short answer is: I have no idea, but most smart people I have asked think it will be 2010 before housing prices stop falling. Here is a realistic view from Irvine Housing Blog that suggests that in least in the [...]
Courtesy of Paul Krugman’s commentary on Weird Interest Rates Always, that is, until now. Treasury rates have plunged close to zero, even though Fed funds is still 2.25%. Since open-market operations take place in Treasuries, I take this to mean that the Fed may not actually be able to reduce short-term rates much from current [...]
Goldman, Lehman Reduce Loan Backlog With Discounts U.S. banks from Goldman Sachs Group Inc. to Lehman Brothers Holdings Inc. have whittled their holdings of leveraged buyout loans to $129 billion from $163 billion at the beginning of the year by offering the debt at discounts, according to analysts at Bank of America Corp. The decline [...]
Alan Greenspan recognizes in clear terms one of the fundamental problems with our current financial system, as enunciated in the title of his oped: We will never have a perfect model of risk The essential problem is that our models – both risk models and econometric models – as complex as they have become, are [...]
After Friday’s Bailout of Bear Stearns, less than 2 days later, it turns out that the Fed has encouraged a deal in which JP Morgan has agreed to completely bail out the company for $2/share. J.P. Morgan Rescues Bear Stearns Bear Stearns Cos. reached an agreement to sell itself to J.P. Morgan Chase & Co., [...]
Paulson, Bernanke Plan Tougher Scrutiny of U.S. Banks This is a reassuring companion to the bail out announced yesterday. An honest and clear assessment of the excesses of the CDO market (among other financial innovations) will lead one to conclude that banks, originators, credit rating agencies, mortgage brokers, and borrowers (yes borrowers too) were far [...]
In case you were on another planet today, the stock market popped the most it has since 2002 after the Fed announced that it is going to bail out bad banking decisions at the expense of the American Taxpayer. The details are discussed here: Fed’s Loan Rescue Sparks Big Stock Rally: Fed Offers $200 Billion [...]
This article makes me laugh inside: Credit Swaps Thwart Fed’s Ease as Debt Costs Surge The punch line of the article, similar to the signs we have seen at quant hedge funds is that we are not as smart as we thought we were. In other words, the same over-confidence that led people to believe [...]
It looks like my intuitions about regulatory capital and bank failures are starting to materialize in a major way at Citi. This paints a dark picture for those hoping that the fed interest rate cuts would stem a decline in the housing market Citigroup to Pare Mortgage Holdings by $45 Billion Citigroup Inc., the fourth-largest [...]