Monthly Archives: October 2008

Extra Credit, Monday Edition

Posted on October 27, 2008 by Felix

Greasing the Slide: On vicious cycles in the financial markets. More here. Mark to market for Social Security? Seems reasonable. Paulson Explains Himself: Calling Frank Drebin! Why didn’t Paulson tell Fuld to sell Lehman?

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Did the End of the Investment Banks Cause the Latest Sell-Off?

Posted on October 27, 2008 by Felix

Robert Peston thinks that much of the recent sell-off can be attributed to the decision by Goldman Sachs and Morgan Stanley to convert into banks: It was caused, to a large extent, by an exceptional and unprecedented shrinkage in the … Continue reading →

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Libor, or the Tango of White-Hot Hate

Posted on October 27, 2008 by Felix

The exegesis on the global financial crisis that you’ve all been waiting for has finally arrived. Ladies and gentlemen, I present to you the incomparable Bernard-Henri Levy: One recalls "Leviathan," Rousseau’s "Social Contract," de la Boetie’s "Discourse on Voluntary Servitude"… … Continue reading →

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The TED Debate

Posted on October 27, 2008 by Felix

Alex Tabarrok puts up a chart of the TED spread over the past 40 years or so, with the clear implication that it’s not at unprecedented levels right now. Alea responds with a chart of something he calls the "TED … Continue reading →

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Ben Stein Watch: October 26, 2008

Posted on October 26, 2008 by Felix

Here’s a quick pop quiz for you, to see how well you understand the credit crisis. There’s only one question: What makes a bank insolvent? (a) When it doesn’t have enough money to pay all its obligations, because the loans … Continue reading →

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Credit Market Datapoint of the Day, AIG Edition

Posted on October 25, 2008 by Felix

What was that about the credit markets improving? Not so fast: American International Group Inc. has used $90.3 billion of a U.S. government credit line since it was bailed out last month… AIG’s latest balance was revealed yesterday by the … Continue reading →

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Stocks: A Bear Case

Posted on October 24, 2008 by Felix

If stocks fall, that means they’re cheaper than they were. And if they’ve gotten cheaper, they must be a better investment, right? That’s the gist of a blog entry from Jim Surowiecki today. But that’s not necessarily how this is … Continue reading →

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How the Lehman Bailout Increased Moral Hazard

Posted on October 24, 2008 by Felix

David Schelicher emails with a provocative question, in the wake of my IM exchange with John Carney yesterday: what if letting Lehman fail actually increased the amount of moral hazard involved in lending to banks? "Moral hazard is based on … Continue reading →

Posted in bailouts, banking | 1 Comment

Second-Hand Book Datapoint of the Day

Posted on October 24, 2008 by Felix

"Dow, 30,000 by 2008": Why It’s Different This Time, by Robert Zuccaro, is, unfortunately, out of stock at Amazon.com, so you can’t buy it for its cover price of $24.95. But there are three used copies available. One is $48.79; … Continue reading →

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Extra Credit, Friday Afternoon Edition

Posted on October 24, 2008 by Felix

Paulson & Co. Scores Again This Year: His three main funds are up between 15% and 25% this year. FIG vs SHLD vs GS vs GLRE: The hedge-fund plays. If you’re down 40% in the past three months, that’s pretty … Continue reading →

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Germans Suffer from Exposure in Iceland

Posted on October 24, 2008 by Felix

Iceland has three banks. Between them they have $61 billion in liabilities, or about 12 times Iceland’s GDP — which clearly makes it impossible for the Icelandic government to bail them out. But who lent Iceland’s banks so much money? … Continue reading →

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Volatility Datapoint of the Day, Cable Edition

Posted on October 24, 2008 by Felix

Check out what happened to the pound today: it closed at $1.633, and dropped as far as $1.53 before rallying back in the UK afternoon. That’s a ridiculous move for what’s ostensibly one of the world’s major currencies. But if … Continue reading →

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NYC’s Fiscal Crisis

Posted on October 24, 2008 by Felix

How did Mike Bloomberg end up changing the rules so that he could run for a third term as mayor? Let’s ask NYC speaker Christine Quinn: “It’s a piece of legislation and a vote and a choice that is a … Continue reading →

Posted in cities, Politics | 1 Comment

Here We Go Again

Posted on October 24, 2008 by Felix

Wow. I go off the grid for one afternoon, and the world falls apart? Whatever force it was that caused my JetBlue flight to sit on the tarmac for hours yesterday clearly is much more malign than I’d thought, at … Continue reading →

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Should Lehman Have Been Rescued?

Posted on October 23, 2008 by Felix

I have to get on plane to Chicago, so don’t expect much more here any time soon. In the meantime, here’s an IM I just had with John Carney of Clusterstock about whether Treasury was right to let Lehman fail. … Continue reading →

Posted in bailouts | 1 Comment

Ken Heebner, Former High Flier

Posted on October 23, 2008 by Felix

Jim Surowiecki is wondering whether it would make sense to put money into CGM Focus, the formerly high-flying mutual fund run by Ken Heebner, which has managed to lose half its value in less than four months. The answer, I … Continue reading →

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Hank Paulson, Revisionist

Posted on October 23, 2008 by Felix

Did you know that Hank Paulson is one of the most powerless finance ministers in the world? While his counterparties in other countries feel responsible for saving systemically-important banks, Paulson’s hands, until recently, were tied, and he could do nothing … Continue reading →

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Extra Credit, Wednesday Edition

Posted on October 22, 2008 by Felix

30-year Swaps: Look’s like we’ve got a bad transmittor: More craziness in the fixed-income markets. Chartgame.com: How good are you at technical analysis? Running A Country Can’t Be All That Difficult: Paul Wilmott thinks that butlers and footmen should be … Continue reading →

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The Credit Crunch Isn’t a Myth

Posted on October 22, 2008 by Felix

Joe Wiesenthal points to a new paper from the Minneapolis Fed which seems to show that bank lending’s quite healthy. A lot of bank lending is going up, say the authors, and therefore the banking system can’t be in as … Continue reading →

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Idiotic CDS Proposal of the Day, Ben Stein Edition

Posted on October 22, 2008 by Felix

On Sunday, I was quite rude about Karen Shaw Petrou, who thinks it would be a good idea to ban all CDS trading in the future: I explained that total CDS losses would skyrocket as a result, since no one … Continue reading →

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How Originate-to-Distribute Brought Down Wachovia

Posted on October 22, 2008 by Felix

Zubin reckons there’s reason to believe the originate-to-distribute business model wasn’t responsible for the subprime mortgage crisis. He might be right. But I’m not at all convinced by some of his arguments. Consider this one: If you believe that incentives … Continue reading →

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The Lease-Back Bailout

Posted on October 22, 2008 by Felix

David Leonhardt’s column today is about moral hazard in the world of homeowner bailouts: how can we help people who are genuinely having difficulty making their mortgage payments, without needlessly bailing out any old homeowner who’d simply like to pay … Continue reading →

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Why Stock-Market Volatility is Perfectly Natural

Posted on October 22, 2008 by Felix

With the Dow down another 300 points this morning (yawn), we’re all getting used to stock-market volatility. Traders are all psychologists now: "Psychology and emotion are a big part of what moves the market," said Andrew Brooks, head of stock … Continue reading →

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Remuneration Datapoint of the Day, Risk-Free Edition

Posted on October 22, 2008 by Felix

You know that "trader" who got a $2.1 million bonus in 2006 but is suing for another $150,000 on top? Well, he’s not really a trader at all: the FT says that he "has worked for the inter-dealer broking arm … Continue reading →

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Argentina: Sinking

Posted on October 22, 2008 by Felix

Bloomberg has changed its headline from the alarmist "Argentina Default Looms" to the slightly more sober "Argentine Bonds Sink as Pension Takeover Fuels Default Concerns". But it was right, the first time round, as is evidenced by the prices on … Continue reading →

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