This informative discussion that sheds further light on the stresses created by credit default swap settlements comes in the current issue of the Institutional Risk Analytics weekly, “In the Fog of Volatility, the Notional Becomes Payable“: Another example of the ongoing discontinuity in the markets comes in the linkage between the unwind of credit default […]
Read more...I’ve kept seeing mention of a possible 75 basis point cut by the Fed. As much as some traders seem to be lobbying for it, your humble blogger would regard Fed setting its policy rate at that level as entering the famed ZIRP (zero interest rate policy) land that has played a big part in […]
Read more...While none of the changes in interest rates were dramatic, and both interbank rates and stress levels remain elevated, improvement continues and all the metrics moved in the right direction. From Bloomberg: Money-market rates in London declined as cash injections by European central banks showed signs of easing the paralysis among lenders. The London interbank […]
Read more...Today the Financial Times has a comment penned by Morgan Stanley’s Asia chief Stephen Roach, “Add ‘financial stability’ to the Fed’s mandate.” A regulatory backlash is under way as the US body politic comes to grips with the financial crisis. Wall Street – or what is left of it – is first in the line […]
Read more...We have written before how many of the various government interventions to try to produce specific outcomes in financial markets have either not proven very successful or produced adverse outcomes elsehwhere. The latest example is the Fed’s new program by which it is buying commercial paper, a form of short-term corporate debt, directly from companies […]
Read more...Morgan Stanley’s money market funds were hit by major redemptions in September, and the firm stepped in to fund half of the withdrawals itself, presumably out of a view that selling the underlying fund assets into a deteriorating market would only lead to distressed prices. But one has to wonder whether the positions that Morgan […]
Read more...In case you weren’t keeping tabs (the number and variety of handout-recipients grows with every passing day), AIG was first given a loan (really, akin to a maximum borrowing authorization) of $85 billion with much fanfare and high drama, which was later quietly increased by another $37.8 billion. In the last ten days, AIG has […]
Read more...Now that Greenspan has thrown in the towel, the free market ideologues have lost one of their most loyal advocates. From Bloomberg: Former Federal Reserve Chairman Alan Greenspan called for tighter regulation of financial companies, distancing himself from the free-market culture that he helped to create. Firms that bundle loans into securities for sale should […]
Read more...The New York Times is publishing a series on the financial crisis, “The Reckoning,” and today’s installment is “Struggling to Keep Up as the Crisis Raced On.” While this is a useful recap, there are some tidbits that merit commentary, such as: “Ben said, ‘Will you go to Congress with me?’ ” said Mr. Paulson, […]
Read more...The Fed is throwing a massive lifeline to money market funds AFTER the crisis has passed and investors are entering the pool again on their own. Consider today’s story from the Financial Times: The US Federal Reserve on Tuesday said it would finance up to $540bn (€410bn) in purchases of short-term debt from money market […]
Read more...AIG is becoming a recidivist petitioner for government largesse. First it was $85 billion, then another $38 billion, and now the giant insurer also wants access to the Fed’s commercial paper facility. From Bloomberg (hat tip reader Steve): American International Group, the insurer that agreed to a government takeover in exchange for a federal loan, […]
Read more...The reader/investor who sent the link to this Bloomberg story provided the comments below. Not he does not resort to capital letters casually: THIS IS HARD TO BELIEVE. THOSE CB’S DON’T HAVE UNLIMITED $’S, SO IF TRUE, THEY WILL BE BORROWING THEM FROM THE FED VIA AN EXTENSION OF FED SWAP LINES, THE FOMC HAS […]
Read more...Equity analyst and market commentator James Bianco of Arbor Research e-maileda a discussion of the breakdown of interbank lending to us along with a few others, His note illustrates a point made by FT Alphaville a couple of weeks ago that we have harped on since, namely, that central banks’ efforts to provide liquidity to […]
Read more...Nearly two weeks ago, it was becomimg apparent that central bank liquidity operations were not merely ineffective, but had become counterproductive in getting banks to lend to each other. As FT Althaville noted: Liquidity is being thrown at the system, but it’s just making things worse. By pumping in more money central banks aren’t addressing […]
Read more...There is a new press release up at the Fed on its latest loan to troubled insurer AIG (hat tip Dealbreaker): The Federal Reserve Board has authorized the Federal Reserve Bank of New York to borrow securities from certain regulated U.S. insurance subsidiaries of the American International Group (AIG), under section 13(3) of the Federal […]
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