Time to get away

I will be away for two weeks. Please try not to let Fannie or Freddie fail while I’m gone: I would hate to miss a big splash. And if MER, C, UBS and the rest can keep the writedowns under $10B each for a few weeks, that would be good too. But hey, I’m a […]

Run rat run

Labour MPs are, of course, far more concerned for themselves than either the governance of the country or their party. Here’s just some of the utter nonsense, the self-serving anti democratic idiocy they and their leaders have been up to recently. Spending £3bn on new nuclear warheads despite not providing British troops in a war […]

Salt n’ pepper with that?

No, not a US rap act. But I do think that Fitch is not really pushing it in their new ratings model. According to Housing Wire: Fitch Ratings said Thursday that it had enhanced its U.S. residential mortgage loss model, called ResiLogic, a key component of the agency’s overall approach to assessing U.S. RMBS new-issue […]

And now you die…

This was my favourite blog title of the day: And now young monoline… you will die. Accrued Interest makes some good points, and indeed it must be frustrating trying to run a monoline when one’s de facto regulator, the ratings agencies, keep changing the capital model. However: It was clear that the capital models used […]

Ship, meet iceberg

Loath though I am to quote from a Murdoch publication – just look at the sad decline of the WSJ to see what being owned by him does to a paper – I do want to comment on something by Anatole Kaletsky yesterday. Fortunately it is an utterly wrong-headed piece which misunderstands fair value accounting. […]

Should the government take mortgage price risk?

Felix Rohatyn and Everett Ehrlich had some suggestions in the FT yesterday for how the bailout of the agencies (and the rest) might proceed. One option would be to design terms on which the Treasury would create “certificates” that would be swapped for conforming mortgage assets up to a predetermined percentage of banks’ capitalisation, together […]

Jamie’s right

The WSJ reports that JP Morgan’s CEO is skeptical of the broker/dealer’s newly published capital ratios: “I challenge those numbers,” Mr. Dimon said, throwing a verbal roundhouse at rivals Goldman Sachs Group, Morgan Stanley, Merrill Lynch and Lehman Brothers. He went on to question whether the methods the investment banks used to calculate a measure […]

Keeping the party orderly

A post on VoxEU discusses the debate between Larry Summers style ‘the FED must drop money on Wall Street until the problems end’ interventionists and the moral (and I believe broadly correct) position that banks ought to be left hanging to pay for their sins. Governments ought to be worried about their taxpayers, not bank […]

Eat (a little of) what you kill

FT alphaville is I fear too tough on some of the European Commission’s proposals to alter the Capital Requirements Directive. There is in fact much to like about the Commission’s original approach (if not its subsequent pirouettes). The key section of the original is: the originator credit institution shall calculate the risk-weighted exposure amounts … […]

Five into ten does not go

Bloomberg points out: The [U.S.] debt limit is $9.815 trillion and the current outstanding public debt subject to that limit is about $9.4 trillion, according to the Treasury. In other words, actual US borrowing is within $415B of the maximum permitted by Congress. Now while more or less everything I know about the US budget […]

Papering over the window

The Economist points out something really cute about the GSE’s having access to the FED window: The Fed does not just accept any old assets as collateral; it wants assets that are “safe”. As well as Treasury bonds, it is willing to accept paper issued by “government-sponsored enterprises” (GSEs). But the two most prominent GSEs […]

(Eat my) Naked Shorts

Naked shorting is wrong. To see why, consider a company with 1,000,000 shares, trading at $10: it has a market cap of $10M. If a hedge fund sells shares it does not own and does not borrow – a naked short – it creates new shares. Suppose it shorts 250K shares. Then there are 1.25M […]


I had to travel via Heathrow today, so I went on the airport website to check the state of the public transport links to Terminal 5. It said `Service not available.’ And you can’t fault a short and wholly accurate summary like that. Please, Gordo, would you nationalise BAA — or shall I just give […]

Fantasy capital

A post on Accrued Interest concerning Fannie and Freddie caught my eye. Two quotes. First: delinquencies on their guarantee portfolio remain relatively small (0.81% for Freddie Mac and 1.22% for Fannie Mae)… And second Under current statues, the GSEs minimum capital required is 0.45% of of their guarantee portfolio So their current level of losses […]

The pain in Spain stays mainly away from the plain

From Reuters via a decidedly dubious post on FT alphaville (which signally fails the ask if the large European retail banks are hiding all the pain in accrual accounted books): the largest Spanish corporate default ever happened yesterday. Spanish property company Martinsa Fadesa said it would file for administration after it failed to raise funds […]

Harbingers of Doom

You can tell you are in a bad market when all the old bull stories come out again. I remember in 2000 being told by a fervent believer in Lernout & Hauspie (RIP) how if a stock went down 2% a day and you bought every day on the way down until it had halved […]

When do Fannie and Freddie consolidate?

A question to anyone who knows _a lot_ about public sector accounting. Just how much help exactly can the U.S. provide to Fannie and Freddie before those $5T of mortgages consolidate onto the government balance sheet? And would the US still be AAA with another $5T of liabilities? Update. Bloomberg has caught up with this […]

Keep the red flag flying here

Over the White House, that is. Willem Buiter is most entertaining on the GSE bailout: The financial assistance offered to US homeowners through the spagetti of federal financial inducements (ranging from the tax deductability of nominal interest payments to the subsidisation of mortgage financing provided by the FHA and the GSEs) is not primarily socialism […]

The real estate bust in pictures

Some Friday illustrations. First the Markit ABX AAA 0702s, down again this week. And a heat map of foreclosures. Note the California and Nevada clusters are joining up, and Arizona is also a problem area – get not so much your kicks, but certainly your bargain properties on Route 66. Michigan isn’t going down as […]

Calculated Bunk

Calculated Risk has a post on Fannie and Freddie that defies belief. Commenting on the suggestion that the US government should bail out the agencies without screwing the stock holders – for instance by buying new sub debt to provide liquidity – they say: If this blog’s comment threads are any kind of representation of […]