Category Archives: Credit markets

Quelle Surprise! Bond Investors Notice that Servicers Let Houses Fall Apart

Investors cry crocodile tears over subprime blight even though it helped line their pockets.

Ann Pettifor on Combatting the Despotic Power of Finance

Economist Ann Pettifor discusses how economies around the world moved from using borrowing to support productive investments to fueling speculation and consumption, and how that led to the financial crisis. She also describes how the post-crisis response to the debt overhang isn’t merely ineffective but in fact counterproductive.

China Credit Worries Rise as Large Shadow Banking Default Looms

China faces the first big test of its shadow banking system, in the form of a pending default. How is it likely to fare?

Your Humble Blogger Speaks on BBC Radio About Why Bankers Make So Much Money

I very much enjoyed this chat on why banker are able to extract such extortionate pay so much and hope you do as well (as in the talk, not the underlying fact set).

On Elizabeth Warren’s Bill Against Using Credit Scores in Employment Screening

Since I give Elizabeth Warren a hard time when she pulls her punches, I am remiss in not giving a thumb’s up to her proposed Equal Employment for All Act, which would bar the use of credit reports in most hiring decisions.

Banks May Have Scored Hollow Victory on Volcker Rule/TRuPS CDO Compromise

Readers may recall that banks, in their eagerness to depict the final Volcker rule as a terrible miscarriage of justice, made a great deal of noise about the case of Zions Bank, which was blaming $378 million of prospective losses on the Volcker-rule requirement that banks sell these dubious instruments called TruPS CDOs by July 21, 2015. The regulators clarified the relevant rules, which looks like a concession. But how much of a concession is it?

In Echo of Runup to Crisis, Bond Investors Reaching for Yield

An article in the Financial Times by Tracy Alloway gives yet another sighting that bond investors are getting a bit frantic in their hunt for yield. The piece has the eyepopping title, Yield-hungry investors snap up US homeless bond. It uses recent deals in the CMBS (commercial mortgage backed securities) market as a proxy for bond investors’ QE-driven hunt for more return.

Wolf Richter: How the Fed’s “Wealth Effect” Quack Medicine Hurts Renters and With Them, Consumption

The Fed is explicitly relying on the wealth effect to stimulate spending. It’s theory is that if asset values rise, people will feel richer and spend more. But that’s not exactly how this movie is playing out.

Your Humble Blogger Speaks on RT: “Banks Are Still Getting Away With a Lot”

I had fun on this interview…

How Serious is China’s Shadow Banking/Wealth Management Products Problem?

George Soros has caused a bit of a frisson by calling China the greatest risk to the global economy. The Chinese shadow banks are the trouble spot to watch.

Ilargi: The Taper And The China Credit Power Struggle Squeeze

Yves here. We described the funding mismatch with Chinese wealth management products during the first liquidity crunch earlier in the year, but given that most readers aren’t familiar with these structures, it’s good to have another summary as to how they work and more discussion of why they pose a risk to the Chinese economy. They are troublingly similar to structured investment vehicles, which were one of the detonators of the credit crisis in the US and UK.

Philip Pilkington: Interest Rates and Animal Spirits – A Response to JW Mason

Clarifying what believing in risk versus uncertainty means for how you view the role of interest rates.

Essays in Monetary Theory and Policy: On the Nature of Money (Continued)

Yves here. I thought this essay on money was useful in and of itself, and it also contains a useful primer on the views of major schools of thought in orthodox economics.

Wolf Richter: What Happens Next, Now That The 10-year Treasury Yield Hit The Psycho-Sound Barrier Of 3%

Yves here. As Wolf describes, in our brave new work of super-low interest rates, the 10 year Treasury breaching 3% was regarded with fear and loathing by the officialdom. Now with the Fed’s reassurances that the Fed funds rate will remain at just about zero for the foreseeable future, the stock market has popped the Champagne. But will the impact of the withdrawal of support for bond prices impact stocks sooner than the current rally would have you believe?