Monthly Archives: September 2008

The Goldman U-Turn

David Viniar, September 16: Bank deposits can basically be used to fund the business of the bank, what a bank does, largely not the capital markets businesses that we are in. And so I think the answer is there would … Continue reading

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Andrew Cuomo, Subprime Booster

Last month, Wayne Barrett published a monster 5,000-word article in the Village Voice explaining how Andrew Cuomo bears much responsibility for the subprime mortgage crisis. Now, John McCain is suggesting that he might appoint Cuomo to run the SEC. Caveat … Continue reading

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The NYC Bailout

New York and other big cities always complain that they provide vastly more in federal tax revenues than they receive back from the government in benefits. But John Gapper makes an excellent point: The U.S. government’s latest plan to buy … Continue reading

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AIG: The CDS Market Bailout

I would never presume to understand what Hank Paulson is thinking. But here’s one idea of why he bailed out AIG but not Lehman: the asymmetry in their respective CDS positions. Back in the blissful days of April 2007, I … Continue reading

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The Trillion-Dollar Question

It’s always worth remembering the famous question that Dsquared posed back in February 2003: Can anyone, particularly the rather more Bush-friendly recent arrivals to the board, give me one single example of something with the following three characteristics: 1. It … Continue reading

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Did Lehman Brothers Steal $8 Billion?

My Lehman story from last week has finally been picked up by the WSJ: Lehman moved more than $8 billion between Lehman’s European headquarters in London and New York, where Lehman collects money from its global units and then disperses … Continue reading

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Extra Credit, Sunday Edition

Senator Obama’s Statement of Principles for the Treasury Proposal: "Thus far, the Administration has only offered a concept with a staggering price tag, not a plan. " ASIC in total ban on short selling: That’s the Australians, and with them … Continue reading

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Should Paulson’s Fund Welcome Outside Investors?

Here’s an idea I probably haven’t thought through properly, but shouldn’t outside investors be not only allowed but welcome in the new fund being set up by Hank Paulson? The fund is, after all, a distressed-debt fund at heart, and … Continue reading

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Why the Blogosphere has Turned on Paulson

What has happened to the vibrant heterogeneity of views and voices in the blogosphere? Among finance and economics blogs, I can’t think of a single one which thought that the short-selling ban was a good idea, and I also can’t … Continue reading

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No More Investment Banks

If you had to point to one part of the financial markets which contributed the most systemic risk to the system, it would probably be the lightly-regulated investment banks. Not a problem any more: there aren’t any left!

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Extra Credit, Saturday Edition

Flight to Quality: Worries over ABCP — again — only this time it’s all asset-backed commercial paper, not just subprime. McCain on banking and health: Another jaw-on-the-floor moment from John McCain. It’s The "Absurd Financial Product Some Rich Person Actually … Continue reading

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Hank Paulson, Buy-Sider

The details of RTC II are emerging, and it’s pretty simple: give Hank Paulson $700 billion, let him buy up mortgage-related toxic waste, and thereby rescue the banks and save the global financial system. Henry Blodget asks one key question: … Continue reading

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The Curse of the Public Investment Banks

Jim Surowiecki is quite convincing when he blames Lehman’s demise on the fact that it was a public company: The perception of weakness exacerbates the reality of weakness. And although there are myriad measures of a company’s health, nothing looks … Continue reading

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Lehman: A Victim of Necessary Unfairness

It was inevitable that we would see this sooner or later: From the perspective of a few days, the big mistake was letting Lehman go, without saving the creditors. Which is basically another way of saying: If the government bailed … Continue reading

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Extra Credit, Friday Edition

To whom and for what? "The cancer is on Main Street, and the tumor has been growing there for years. Wall Street provided drugs to hide the pain and keep us going, palliative but not curative. What is happening now … Continue reading

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Convertibles: Collateral Damage of the Shorting Ban

It seems a long time ago now, but back at the beginning of the credit crisis, when US banks were being bailed out recapitalized by foreign governments rather than their own, one of their favorite methods of raising new capital … Continue reading

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The Bumpy Ride Ahead

Dealbreaker has a most germane chart of what happened when Pakistan banned short selling: a brief and large rally, followed by a slow and devastating collapse. Could the same thing happen with the US stock market? Absolutely, yes. Banning short-selling … Continue reading

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Why is the Dow Outperforming?

Here’s a chart of how the Dow and the S&P have performed over the course of September to date. I chose the time frame because it was basically the period in which AIG, a Dow component, imploded. The point of … Continue reading

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Stocks: Still Down on the Week

Whee! Isn’t this fun? Stocks are "skyrocketing" today, after "soaring" yesterday — the Dow’s up 700 points from where it closed on Wednesday. Let’s not tell anybody that at its current level of 11,316 it’s actually lower than where it … Continue reading

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When Bankers Meet Co-op Boards

Quote of the day comes from a distressed heiress: "Five years ago, if you were an investment banker that meant big bucks and automatic entry. And today it is a dirty word," said author Holly Peterson, the wife of a … Continue reading

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Can Pundits Help?

I like Floyd Norris when he’s angry. Lehman did not measure up because its chief executive, Richard S. Fuld Jr., simply was not reckless enough as he ran Lehman into the ground. Had he had the foresight to make a … Continue reading

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Citi, Rejuvenated

A sign of the times in a WSJ headline today: Citi, Looking Rejuvenated, Weighs a WaMu Takeover Bid Yes, "rejuvenated". Young, fresh-faced, carefree. Or, alternatively, just as haggard and battered as it ever was, but looking increasingly healthy in comparison … Continue reading

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A World Without Shorts

The SEC has now implemented its short-selling ban: it’s on 799 financial stocks, which, interestingly, do not include XLF, the biggest ETF for financial stocks. In theory, if you wanted to short a given stock in the XLF basket, you … Continue reading

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Extra Credit, Thursday Edition

How Wall Street Lied to Its Computers: "The people who ran the financial firms chose to program their risk-management systems with overly optimistic assumptions and to feed them oversimplified data." Running Down Wall Street: Carney on why the share price … Continue reading

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Banning Terrorism

I have a nasty feeling that Christopher Cox watches Jim Cramer. Today, Cramer started waxing conspiratorial about the dastardly types who would be so unpatriotic as to sell investment-bank stocks: "It could be financial terrorism. What a great way to … Continue reading

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