Bloomberg today reports that the SEC is looking into whether issuers leaned on rating agencies to provide the desired ratings on structured credit transactions. However, there may be less here than meets the eye. SEC chief Christopher Cox, along with senior executives from the rating agencies, are testifying before the Senate Banking Committee today. Query […]
Read more...Investment banks are learning about reputation risk the hard way. First we had Bear Stearns winding down two troubled hedge funds it would have rather cut loose and let sink on their own. Then Lehman was pilloried in the Wall Street Journal, in “How Wall Street Stoked the Mortgage Meltdown, for its particularly close relationship […]
Read more...By happenstance, Bloomberg has an interesting trio of prognostications for the financial markets. Admittedly, they have differing degrees of authority. Most would give the IMF considerably more credence than either Jim Rogers or Goldman. However, all three have a following with investors. Not surprisingly, Goldman’s report is upbeat, the IMF’s is cautious tending towards the […]
Read more...Goldman, on the back foot about the truly abysmal performance of its Global Alpha fund, is trying to shore up investor confidence, or more accurately, forestall a revolt. However, a Wall Street Journal article reports that they aren’t taking the sort of measures they did in August with the troubled Global Equity Opportunities Fund, when […]
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...Bloomberg reports that Goldman’s big hedge fund, Global Alpha, which took a beating along with other quantitatively oriented traders, was down 22.5% in August. Even among quant funds, this was lackluster performance. James Simons’ Renaissance Technologies recouped the 8.7% loss it suffered at the beginning of the month. But here comes the juicy bit: of […]
Read more...The Financial Times’ John Gapper had an interesting piece today, “Patience on debt can ease distress.” I’ll give you the section that caught my eye to see if you react to it the same way I did: Last week, I went to a dinner in Manhattan that ostensibly had nothing to do with the credit […]
Read more...With the credit crunch in high gear, investors are shunning borrowers that look risky, might have subprime exposure, and are opaque (meaning it’s hard to tell what they own). Wall Street firms have all of those qualities and are thus particularly hard hit. A Bloomberg story reports that securities firms are facing high interest rates […]
Read more...Readers have probably figured out that I think the reporting in the Wall Street Journal is overrated. We have a prime example on page one today, “How Market Turmoil Waylaid the ‘Quants’.” My understanding is that newspapers are in the business of providing news. The story that the quants are in trouble is a month […]
Read more...Boy, is sentiment changing. The latest indicator: an article in MarketWatch bemoaning the demise of Glass Steagall, the law enacted in 1933 that separated commercial banking from investment banking. The article by Thomas Kostigen gets the history wrong. It makes it sound as if the repeal of Glass Steagall in 1999 was a watershed event. […]
Read more...As concern about tightening conditions in the credit markets and the continued erosion of the US supbrime and broader housing market has grown, so too have calls for Extreme Measures to combat these snowballing problems. The first was from Bill Gross at Pimco, who suggested that the US government “rescue” the 2 millionish homeowners who […]
Read more...Jim Hamilton should get an award for his remarks today at the Federal Reserve’s conference at Jackson Hole. His talk sought to step away from the issue du jour, namely what if anything, to do about housing, and look at larger structural and regulatory concerns. He brought up uncomfortable issues, in particular, the rising level […]
Read more...Today, in a comment at the Financial Times, “This is where Freddie and Fannie step in” (subscription required), Harvard’s Larry Summers argued that the subprime crisis highlights three questions. Most commentators focused on the one question he not only posed but answered, namely, what role government should play in aiding the flow of credit to […]
Read more...Recently, we’ve noticed a new theme among economics writers: Extreme Measures. Commentators have looked toward the end of the road we are on and fear it leads to a precipice. Hence the calls for radical course correction. Paul Krugman and Bill Gross of Pimco, each of whom proposed large scale rescues of homeowners at risk […]
Read more...Bloomberg tells us that sales of £2 million ($4 million) homes and flats in London are on hold as buyers pull back, expecting subprime woes to put a damper on City bonuses this year. Note that that price level is considered mere “mid level luxury,” and still won’t get you very far in uber pricey […]
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