Category Archives: Investment banks

Bear: Did the Fed and Treasury Push Too Hard?

Andrew Ross Sorkin in the New York Times provides some important background on how the Bear deal wound up being retraded today. But he does his readers and the greater public a huge disservice by telling the story so as to flatter Wall Street. According to Sorkin, the $2 price for Bear was the Fed’s […]

It’s Official: JP Morgan Capitulates, Raises Bear Offer to $10 a Share

What a complete and utter fiasco (see earlier post for background). And you have to get a load of the face-saving. No official acknowledgment of the legal screw-up that made this retrade necessary. Note there is no mention of any change in the Fed’s, role, something that was rumored earlier. This will not go down […]

Does Bear Have JP Morgan Over a Barrel?

This is the nuttiest situation I can recall in some time in deal land, assuming the rumor in the New York Times is true. The Grey Lady reports that JPM is working to increase its offer for Bear from $2 (well, roughly $2 since it is a stock-for-stock deal) to $10. Yes, Bear’s stock price […]

Did the Fed Prevent a Financial Chernobyl?

There are two useful but frustrating articles addressing different aspects of the extraordinary measures implemented by the Federal Reserve in the last ten days, in particular the bailout of Bear Stearns. A New York Times article, “What Created This Monster,” is very much worth reading despite its shortcomings. It attempts to say how we got […]

"How sovereign wealth funds were left nursing multibillion losses"

A nice recap in the Guardian of how far underwater the various sovereign wealth funds are on their investments in large Western financial institutions. The tally is not pretty. It isn’t simply that the losses are large in percentage terms, but the falls came fast, making the buyers look like chumps. And these were high […]

Desperate Central Bankers to Bail Out MBS Market? (Not Yet, Perhaps….)

I quoted Lucy Kellaway, who once said (apropos management fads), “No idea is too ridiculous to be put into practice,” and warned that the credit crisis would soon get that sort of treatment. A story in the Financial Times indicated we are getting closer to that stage: Central banks on both sides of the Atlantic […]

Why Didn’t Bear Use its Credit Lines?

I am mystified at the efforts by soon-to-be-ex chairman of Bear Stearns and still-barely-a-billionaire Joe Lewis, who took a large stake in the securities firm, to try to find another buyer for Bear. My pet theory is that Lewis et all are bluffing, knowing they have a very bad hand, to scare bondholders and CDS […]

Extreme Measures V and VI; Drop Mark-to-Market; Beg Oil Producers to Rescue Banks

A sign of the times: we haven’t sighted an Extreme Measure since October, and here we have two in one day (note that day was Thursday; we started on this last night but there were so many news-driven items that we are getting to this only now). By way of background, an Extreme Measure is […]

Credit Suisse Bombshell: Surprise Warning of 1Q Loss

The market had taken some comfort from Lehman’s and Goldman’s first quarter better-than-expected results; these will likely be undone by the surprise warning by Credit Suisse, which heretofore had looked comparatively unscathed, by virtue of remaining profitable. That was undone today when the Swiss bank announced it expected to lose money this quarter. What is […]

Deflation Watch: US Short Term Rates Fall Below Japan’s

Investors are so nervous that they are willing to take almost nothing in nominal terms, which is tantamount to a meaningful negative real return, to sit in the safety of three-month T-bills, which are now a mere 0.56%. One explanation is the large number of fails in the repo market, which as Alea reports, is […]

Primary Dealers Get Flattering Marks on Collateral for Fed Loans

A professional investor alerted me to a not-widely-noted element of the Fed’s new discount window clone for primary dealers, the so-called Primary Dealers’ Credit Facility (I am going to lose track of the acronyms given the speed with which the Fed is coming up with new ways to socialize losses). This overview is from the […]

Are European Banks in Trouble?

A colleague I’ve cited occasionally who has extensive contacts at the Treasury and pretty good ones at the Fed has been muttering for some time that European banks are in every bit as bad shape as US banks and he has been waiting for that shoe to drop. He also sees that as intermediate good […]

Banks Cut Unsold Buyout Loan Inventories

A bit of good news on the generally gloomy credit markets front: banks have managed to unload some of the LBO loans they have held on their balance sheets. Admittedly, however, they still have great deal more to place, nearly $130 billion of buyout debt. However, they have had to offer large discounts. Recent reports […]

Quelle Surprise! Wall Street Reluctant to Borrow at New Discount Window

The Wall Street Journal reports that primary dealers have been loath to use their new-found access to the discount window (technically, it’s a “temporary clone of the discount window”), despite the favorable rates on offer. Why? For commercial banks, the assumption is that only the distressed would go to the Fed for dough (the discount […]

Fed Opens Discount Window to Broker Dealers

The Fed opened the window to broker dealers. This is a shocker, a sign of the Fed’s desperation. Recall that one of the reasons the Fed was able to assure us it wasn’t taking too much risk in its Term Auction Facility was that it said the institutions involved were sound. It doesn’t supervise broker-dealer […]