Monthly Archives: September 2008

Are The Credit Markets Still Healthy?

Robert Higgs has a long list of healthy-credit-market datapoints to support his contention that any talk of a frozen market is "hyperbole". Commercial and industrial loans of all commercial banks, which are reported monthly, have grown rapidly. The most recent … Continue reading

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Who Will Manage the Bailout Fund?

The jockeying for who is going to get the mandate to run the government’s bailout fund has begun in serious. Bill Gross, giving an interview to the NYT, says he’ll do it for free — which doesn’t mean he wouldn’t … Continue reading

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Extra Credit, Wednesday Edition

The oil price spike: John Hempton thinks it’s a short squeeze, and that the US has a massive profit opportunity. Dr. Strangelove, Paulson, and the Face-Slap Theory: Paulson has a secret plan which will only work if it’s unexpected! Or … Continue reading

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Didn’t Panic

I was right about what Bush was going to say, but I was wrong about how he said it. This was one of the best speeches of his presidency, if not the best. I was watching in a noisy bar, … Continue reading

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Don’t Panic

I have a feeling I know what President Bush is going to say in his address to the nation tonight, but the single biggest message has already been sent, thanks to his decision to schedule the last-minute broadcast coming on … Continue reading

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The Bailout’s Auction Design: How About a Market?

Ben Bernanke and Hank Paulson spent a bit of time yesterday talking, in pretty vague terms, about auction design and how important it would be to any eventual bailout mechanism. The idea is pretty simple: assume argumento that "fundamental" prices … Continue reading

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Crisis: The Book

Leon Neyfakh reports that Joe Nocera and Bethany McLean are putting together a proposal for what Nocera calls "a book for the ages" on the financial crisis. And they’re not the only journalists writing a book on this subject: Neyfakh … Continue reading

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News Doesn’t Move Markets, Goldman Sachs Edition

Above is a five-day chart of the Goldman Sachs share price. The first arrow shows what happened when Goldman announced it was becoming a bank holding company; the second arrow shows what happened when Berkshire Hathaway announced it was putting … Continue reading

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House Price Datapoint of the Day

The National Association of Realtors has a hard time this month spinning their own data release: The national median existing-home price for all housing types was $203,100 in August, down 9.5 percent from a year ago when the median was … Continue reading

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Academic Economists vs Paulson

A very long list of economists has signed a letter critical of Hank Paulson’s bank bailout plan. I’m not a huge fan of the Paulson version of the plan myself, but the arguments given in the letter are, I think, … Continue reading

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The Rehabilitation of Christopher Dodd

The biggest and most pleasant surprise of the past week, for me, has been Chris Dodd. If you had told me a year ago that right now we’d be staring down the worst financial crisis yet, I’d’ve believed you. But … Continue reading

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Extra Credit, Tuesday Edition

A nation of morons, led by idiots Nomura buys Lehman’s Euro assets: "Nomura expects to retain a ‘significant proportion’ of Lehman’s roughly 2,500 employees at the businesses, of which about 1,500 are employed in London." WaMu’s fate could be sealed … Continue reading

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Why Bulk Mortgage Modifications are a Bad Idea

Matthew Yglesias: There really is an urgent need to “do something” and also an urgent need to try to make sure we do the right thing. Middle class people are pretty desperately in need of some form of bulk modification … Continue reading

Posted in housing | 1 Comment

Beware ETNs, Part 2

Exchange-traded notes come with a monstrous amount of counterparty risk, as investors in Lehman’s ETNs are now discovering: Holders of Lehman Brothers’ structured products “have the same standing as other Lehman holding company senior, unsecured debt, which is trading at … Continue reading

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Answers for David Cay Johnston

David Cay Johnston has a long list of questions; let me see if I can provide a few answers. Ask this question — are the credit markets really about to seize up? They already have seized up. That’s the problem. … Continue reading

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Does Paulson’s Lie Matter?

Paul Krugman today catches Hank Paulson in a lie (chapter and video and verse at Think Progress). Does this mean that Paulson is Not To Be Trusted? That’s what Krugman thinks: If Paulson can’t be honest about what he himself … Continue reading

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Markets in Everything, Vegas Edition

Reuters reports: The Sapphire Pool charges men $30 to $50 admission and is fenced off from the Rio pool, where the women keep their swimsuit tops on.

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Another Knee-Jerk Proposal From Christopher Cox

I’m getting rather annoyed at Christopher Cox. His short-selling ban was a bad idea, but at least it got us through the weekend to a point at which a bailout plan could start taking shape. His work here is done; … Continue reading

Posted in derivatives, regulation | 4 Comments

Bernanke Gives Up on Reverse Auction Idea

Maybe the bailout won’t be structured as a reverse auction after all. This comes from Ben Bernanke, testifying to Congress today: "I believe that under the Treasury program, auctions and other mechanisms could be designed that will give the market … Continue reading

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How Investment Bankers are Helping Argentina

Amazingly, amidst all the financial-market chaos, there is still old-fashioned shoe-leather investment banking going on, and some of it is very ambitious: Citigroup Inc., Barclays Plc and Deutsche Bank AG proposed a debt-restructuring plan to Argentina that may help the … Continue reading

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Can Hank Paulson Lead?

I’m not particularly fluent in the language of political theater, but I get two clear messages from today’s testimony. Paulson is the grown-up, telling Congress what to do: I need literally unimaginable sums of money, he’s saying, because everything we’ve … Continue reading

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Extra Credit, Monday Edition

Dodd Proposes Giving U.S. Equity Stake for Bad Debt: Dodd’s alternative to the Paulson plan. A matched preferred stock plan for government assistance: Calomiris’s alternative to the Paulson plan. Emerging market divergence: The long-debt short-equity trade unwinds. That Costs What?!? … Continue reading

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Financial One-Liner of the Day

As shared with David Altig: "The problem with financial institution balance sheets is that on the left hand side nothing is right and on the right hand side nothing is left."

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The End of the Chaos Trade

Nassim Taleb famously made his (first) fortune in the stock-market crash of 1987, and went on to an entire career based on using the derivatives market to bet on "black swan" events. Which raises the obvious question: what if the … Continue reading

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Abstract of the Day, Ponzi Scheme Edition

The Optimal Design of Ponzi Schemes in Finite Economies, by Utpal Bhattacharya, in the Journal of Financial Intermediation, January 2003: As no rational agent would be willing to take part in the last round in a finite economy, it is … Continue reading

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