MOAB Revisited

A good friend pointed out that the real problem is the mortgages. Those are the things behind the dodgy assets, or most of them anyway. (The reasoning being that if you sort out the RMBS problem the CMBS will come mostly good.) So, if you are the US government and you want to spend a […]

Libor At Five Year High

It’s probably more than five years… From Bloomberg:

EU to US: You broke it, you own it

The European Commission adopts the pottery barn principle according to Reuters.

The Loss Count

$591B so far according to Bloomberg. I honestly remember the time when a $10M loss in investment banking was shocking. Now? Now there is more uncertainty than I have ever known. In ’33 the banking crisis came just before FDR was inaugerated – 08’s is a bit early, and that is of course making things […]


The noise you just heard was the FED’s balance sheet exploding. S&P down 4%, FTSE down 5, TED spread at 3.5% and the FED is injecting $630B of extra liquidity. 630. Not 25 or 75 or even 200. If the combination of this and the bailout does not work, where is there to go from […]

Goodbye to Consolidated Supervised Entities

With Bloomberg reporting that the bailout has been agreed after days of intense debate, the last few days have been a great time to sneak out financial news that you do not want too well read. One would never suspect the SEC of acting that way, of course, but it is interesting that the audit […]

Oh tis bliss to be a bondholder tonight

Or perhaps not. One phenomenon we have seen in the recent failures – Lehman in particular but also WaMu – is that the senior bondholders have been really screwed. Suddenly the difference between bank and bank holding company really matters. You want to be where the cash is, as Bloomberg illustrates.

Call for Jesse Jones

I have a question. Why not just spend the $700B on buying bank capital instruments, ideally equity? Of course the price of that equity will be an issue, but if the need for capital is the real issue, why not just supply capital? After all, that way the good guys (who bought reasonable assets and […]

Mark to Paulson

Everyone is worried about the prices that Hank will pay with the taxpayer’s money in his bailout plan. That is understandable, and I would be worried too if it was my money. However there is some possibility that it won’t be a disaster every time the MOAB buys an asset. Here’s why. On average, across […]

On ‘Fundamental Value’

There is a lot of talk at the moment about fundamental value. This mostly focusses on how good it would be if the market prices of assets rose back towards ‘fundamental value’, and what the government could do to assist that process. There’s only one problem. You can never know what the number is. Consider […]

An Important Intervention

The markets can breathe easy. A deal has been done. Read about it here. Or if you must, here. But the first one is better, I promise. Update. Turning from the flippant story to the serious one, it seems that in the cold hard light of morning, nothing has been agreed. As Bloomberg reports: Negotiations […]

Holding The Wrong-doers to Account

On a day when piffle seems to be widespread, Bloomberg reminds us that there may well be a case to answer in some quarters: Frank Raiter says his former employer, Standard & Poor’s, placed a “For Sale” sign on its reputation on March 20, 2001. That day, a member of an S&P executive committee ordered […]

Is $700B enough?

Just one data point. The RFC, the New Deal era `save the banks (and everyone else)’ vehicle, ended up spending fifty billion dollars. From 1933 to 1938, they spent roughly ten billion on bank capital alone. In 2008 dollars fifty billion is roughly (using the Oregon State adjustments to 1935) $780B. So the sizing of […]

The Site That Supports our Shorts

I am joining FT alphaville’s campaign in support of shorts. Hot pants are obviously a big winner. Board shorts need your help. I will even go as far as culottes. But leiderhosen are obviously completely beyond the pale. (OK, OK, here is an earlier post on Naked Shorts.)

New York really wants London to succeed

According to Bloomberg: New York State will begin to regulate part of the $62 trillion market for credit-default swaps, Governor David Paterson said. The state will treat contracts in which the buyer also owns the underlying security as insurance, Paterson said today in a news release. That’s it then. London always was ahead of New […]

And then there were none

The US now has zero broker/dealer. Bloomberg reports: Goldman Sachs Group Inc. and Morgan Stanley concluded there is no future in remaining investment banks now that investors have determined the model is broken. The Federal Reserve’s approval of their bid to become banks ends the ascendancy of the securities firms, Now it gets interesting. I […]

I bought a bank – and I liked it. With apologies to Katy Perry

This was never the way I plannedNot my intentionI got so brave, pen in handLost my discretionIt’s not what, I’m used toJust wanna try you onI’m curious for youCaught my attention I bought a bank and I liked itThe size of her assets, her leverageI bought a bank just to try itI hope my regulator […]

Linky goodness

Some morning reading: On the duty of auditors. A taxing matter addresses the inherent conflict of interest and suggests that it might be a good idea for auditors to be hired by the SEC rather than the company. Ultimate loss projections are increased by Moody’s. MBIA and Ambac have not been in a train wreck […]

How SEC Regulatory Exemptions were too little, too late

The Big Picture (which I usually love) has picked up a story from the American Banker (which I cannot link to as it is behind a firewall). It seems: “The Securities and Exchange Commission can blame itself for the current crisis. That is the allegation being made by a former SEC official, Lee Pickard, who […]

Market update

Some amazing numbers: 3m TED spread 275bps, 1 month OIS/Libor over 100. AIG CDS at 1500 over, down from 3500 over earlier. Goldie down 20%, Morgan Stanley 30% odd. WaMu not bust yet, but give it a few days. Russian market shut after the index fell 17% yesterday. And the FED has run out of […]