Monthly Archives: December 2008

The Problem With Option ARMs

Posted on December 25, 2008 by Felix

The NYT’s Christmas Day installment of its big series on the financial crisis, The Reckoning, concentrates on Herbert and Marion Sandler, mortgage lenders in California who more or less invented the toxic option ARM. The Sandlers come across as sympathetic … Continue reading →

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GMAC: Who’s in Charge?

Posted on December 24, 2008 by Felix

To me, the most interesting part of the Fed’s decision to allow GMAC to become a bank is the fact that it will be broken up to the point at which its owners will effectively have no control over it … Continue reading →

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Extra Credit, Tuesday Edition

Posted on December 23, 2008 by Felix

More on Existing Home Sales: Some great charts from CR. How Much Has Harvard Really Lost? As much as half its total endowment, according to one anonymous source. Latvia is the new Argentina: Reform without devaluation can only end in … Continue reading →

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Bailouts: The Darling Approach

Posted on December 23, 2008 by Felix

Robert Peston talks to UK finance minister Alistair Darling about the fateful week in October when the UK took the lead in terms of injecting massive amounts of capital into its banking system, in the process effectively nationalizing a large … Continue reading →

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The Limited Usefulness of Shared-Equity Mortgages

Posted on December 23, 2008 by Felix

Paul Kedrosky pleads: I’d be delighted if someone would explain to me why we aren’t talking more seriously about shared equity home mortgages in the U.S. The answer is very simple, I think: the perceived cost to the borrower of … Continue reading →

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Celebrating Wealth Destruction

Posted on December 23, 2008 by Felix

Dean Baker sees the upside of the recession: You probably didn’t see this in the newspapers, but real wages rose at an incredible 14.8% annual rate over the last three months. The basic story is straightforward. While nominal wages have … Continue reading →

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Housing Gets Even Worse

Posted on December 23, 2008 by Felix

November is never a great month for home sales, but don’t let that fool you: today’s reports are truly gruesome, falling significantly short of very bearish expectations. New home sales, at an annualized rate of 407,000, are at their lowest … Continue reading →

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Extra Credit, Monday Edition

Posted on December 22, 2008 by Felix

Money market funds reel as yields near zero How India Avoided a Crisis: Nocera on the Reserve Bank of India’s YV Reddy. The Shill Owns Up: Lereah’s very bearish. Fool Him Twice: Jerome Fisher: Yet more evidence that successful entrepeneurs … Continue reading →

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Fund of Funds Indemnification Clause of the Day

Posted on December 22, 2008 by Felix

A prescient bit of CYA was inserted into the fund prospectus for Kingate Global, a Madoff feeder fund: Kingate warned in its fund prospectus “there was always the risk that the assets with the investment adviser could be misappropriated”. “In … Continue reading →

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The Housing Unwind: Who Suffers?

Posted on December 22, 2008 by Felix

Tyler Cowen is impressed by this sentence from Paul Krugman: Anyway, it’s striking that the worst of the crisis is hitting states that largely didn’t experience a housing bubble. I would actually consider this to be one of the more … Continue reading →

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Madoff’s Volatility

Posted on December 22, 2008 by Felix

A longtime reader of this blog got himself Bernie Madoff’s return series from a Fairfield Sentry marketing document and plugged it into an Excel spreadsheet; he then graphed the one-year rolling volatility of Madoff’s returns. The results are interesting: click … Continue reading →

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The White House vs the NYT, Economic Meltdown Edition

Posted on December 22, 2008 by Felix

In what Mike Allen calls "an unusual double-header", the White House has issued both a 100-word statement and a longer 900-word rebuttal of Sunday’s big NYT feature on how George W Bush contributed to the housing crisis. What’s interesting to … Continue reading →

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Rent vs Buy: Buying Becomes More Attractive

Posted on December 22, 2008 by Felix

I’ve been playing around with mortgage calculators this morning, after getting an email from a renter in Long Island who wants to buy but isn’t happy with falling mortgage rates: I have saved enough for a substantial down payment – … Continue reading →

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The Commercial Real Estate Bailout

Posted on December 22, 2008 by Felix

I can see the case for extending Fed loans to hedge funds, when those hedge funds invest in consumer loans. The credit-card business has been built on securitization, and now that market has dried up, there’s a serious risk that … Continue reading →

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Extra Credit, Sunday Edition

Posted on December 22, 2008 by Felix

Madoff Teaches Lessons in Due Diligence: Donald Trump on Bernie Madoff: "Just because someone is well established doesn’t mean they’re not above being a total crook." Madoff Scandal Parallels 1905 Play: Me, on NPR, talking Mamet and Madoff. And finally, … Continue reading →

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Extra Credit, Saturday Edition

Posted on December 21, 2008 by Felix

Hedge funds gain access to $200bn Fed aid: If they buy securitized consumer loans. I want to be a cockroach: Why many companies may be doomed. How Long Has This Been Going On? "It’s simply amazing how much of what … Continue reading →

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Ben Stein Watch: Now on NYTimes.com

Posted on December 20, 2008 by Felix

The NYT has a contributor’s page for Ben Stein; I go there at weekends to see whether he’s lobbed another softball in my direction. What I never dreamed, however, was that I could hit those balls straight back onto nytimes.com, … Continue reading →

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Extra Credit, Friday Edition

Posted on December 20, 2008 by Felix

The World’s Largest Hedge Fund is a Fraud: Harry Markopolos in 2005. Vilsack: Big Agriculture has a man in the White House: Which is probably a good thing, biotechnology-wise, but a bad thing, ethanol-wise. Hope Grows for a Taiwan Chipmaker … Continue reading →

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TARP’s Intended Beneficiaries

Posted on December 19, 2008 by Felix

Tom Brown has launched another broadside against Elizabeth Warren and her questions for Treasury; it’s worth reading if only to understand just how weak the arguments against her really are. Here’s how he gets started: Take, for example, her Question … Continue reading →

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Madoff Fallout Datapoint of the Day

Posted on December 19, 2008 by Felix

From Robert Peston: A well-known wealthy entrepreneur told me last night that he’d lost about 1% of his net worth on an investment in Madoff and is setting about getting his money back from every hedge fund that he’s invested … Continue reading →

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Blogonomics, Grey Lady Edition

Posted on December 19, 2008 by Felix

Five years after blogging went mainstream and more than seven years after the WSJ’s editorial page launched Best of the Web Today, the Grey Lady is finally dipping its toe into the editorial blogosphere. If you saw this news story … Continue reading →

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Paulson Grasps the Automaker Nettle

Posted on December 19, 2008 by Felix

Last night, I asked Hank Paulson, in a submitted question for his appearance at the 92nd St Y, why he was dilly-dallying over an automaker bailout and whether or not to ask for the second tranche of TARP funds, after … Continue reading →

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Extra Credit, Thursday Edition

Posted on December 18, 2008 by Felix

Brilliant: Credit Suisse To Pay Top Execs With Illiquid Mortgage Securities: It really is an astonishingly good idea. This one Goes to Eleven: "It doesn’t make a lot of sense to look for the X,Y,Z ’causes’ of the crash because … Continue reading →

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Alan Greenspan, Perennial Optimist

Posted on December 18, 2008 by Felix

Alan Greenspan has a solution to the economic crisis: a rising stock market! What, then, will be the source of the new private capital that allows sovereign lending to be withdrawn? Eventually, the most credible source is a partial restoration … Continue reading →

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Against Lower Mortgage Rates

Posted on December 18, 2008 by Felix

Glenn Hubbard and Charlie Mayer have a WSJ op-ed saying, in the clear words of their headline, that "Low-Interest Mortgages Are the Answer"; Brad DeLong agrees, and yes, he’s more astonished than anybody else that he’s siding with Hubbard. I, … Continue reading →

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