Author Archives: Felix

Bad News for Bear Shareholders is Good News for the Markets

Posted on March 17, 2008 by Felix

Two dollars per share is an astonishingly low price to pay for Bear Stearns: when I first saw it I honestly thought it was a misprint. If Bear is essentially worth nothing, that means other banks – Lehman seems to … Continue reading →

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The New Committee to Save the World

Posted on March 16, 2008 by Felix

Ben Bernanke hasn’t caught very many lucky breaks of late, but the fact that Bear Stearns hit its liquidity crunch and got downgraded by all three ratings agencies on a Friday is probably one of them. The downgrade wasn’t welcome, … Continue reading →

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Extra Credit, Weekend Edition

Posted on March 15, 2008 by Felix

Nothing to Fear but Fearmongers Themselves: A Look at the Sovereign Wealth Fund Debate Official: Euroland GDP Passes U.S. Betting the Bank: Krugman on the desperation of Bernanke. Triple-A Trouble: Justin Fox on the ratings agencies. Common Wealth: Jeff Sachs … Continue reading →

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How Systemically Important is Bear Stearns?

Posted on March 14, 2008 by Felix

Nouriel Roubini thinks the world could absorb the failure of Bear Stearns: It is true that Bear is a large broker dealer; but its systemic importance is much smaller than that of much larger institutions. The world and financial market … Continue reading →

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Did the Fed’s Bear Bailout Prevent a Stock-Market Panic?

Posted on March 14, 2008 by Felix

Willem Buiter explains today why he thinks the Bear bailout was unwarranted. I apologise for quoting at some length, but believe me, it’s a lot shorter than the 2,150-word blog entry: While the Fed, like any public institution, should support … Continue reading →

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Whither Bear’s Chinese Billion?

Posted on March 14, 2008 by Felix

Heidi Moore has the understatement of the day: CITIC has not yet closed its proposed investment in Bear, and today’s moves suggest that will be more difficult. Er, yes. Not least because at today’s closing price Citic’s proposed $1 billion … Continue reading →

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The Death of the Moral Hazard Play

Posted on March 14, 2008 by Felix

Brad DeLong has a good point today: whatever happened to the moral hazard play? It’s an easy enough game: if you think a bank is going to get bailed out, you go long, safe in the knowledge that Ben Bernanke … Continue reading →

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How to Privatize Fannie and Freddie

Posted on March 14, 2008 by Felix

Matt Cooper has a column in the April issue of Portfolio advocating the privatization of Fannie Mae. The big problem is how to do that: for all that the US government repeatedly reiterates that there is no federal guarantee, no … Continue reading →

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The Bear Facts

Posted on March 14, 2008 by Felix

Are here.

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Liveblogging the Bear Stearns Conference Call

Posted on March 14, 2008 by Felix

12:56: It’s over. They put on a brave face, and clearly tried to indicate that they’re profitable, they have high-quality collateral, and they’re looking out for shareholders. It didn’t seem to help the share price, though. 12:55: "This is a … Continue reading →

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Bear Stearns Could Go Bust

Posted on March 14, 2008 by Felix

So, those liquidity rumors? Turns out they were true – or, at the very least, self-fulfilling. The official statement from Bear Stearns CEO Alan Schwartz: Bear Stearns has been the subject of a multitude of market rumors regarding our liquidity. … Continue reading →

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John Mack: Overrated

Posted on March 14, 2008 by Felix

Dan Colarusso takes his stiletto knife to John Mack today, and I’m very happy he did. As Dan shows, Mack has a long history of pulling defeat from the jaws of victory, and it’s far from obvious why he’s the … Continue reading →

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Google: Not Buying the New York Times

Posted on March 14, 2008 by Felix

Russ Mitchell has a must-read interview with Eric Schmidt in the April issue of Portfolio. It gets off to a cracking start, with Schmidt saying that a combined Yahoo-Microsoft would have "certain applications–like instant messaging and email–that could be used … Continue reading →

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The Prius Conundrum

Posted on March 14, 2008 by Felix

Dan Ariely asks why people are more willing to shell out for a Prius than they are to spend a similar amount of money to save much more CO2 by making their houses energy-efficient. And I think a large part … Continue reading →

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Extra Credit, Friday Edition

Posted on March 14, 2008 by Felix

Credibility and public borrowing: "Forecasts for public borrowing have always been subject to huge margins of error. There’s a rule of thumb, which dates back at least as far as Nigella’s dad, which says that the average error is 1% … Continue reading →

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The Price-to-Book League Table

Posted on March 13, 2008 by Felix

It’s not just Bear Stearns which is trading below book value. Here are some closing prices from Yahoo Finance: Bank Price/Book Countrywide 0.19 Bear Stearns 0.73 Wachovia 0.74 Citigroup 0.93 JP Morgan Chase 1.06 Lehman Brothers 1.12 Bank of America … Continue reading →

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Off-Target Reporting

Posted on March 13, 2008 by Felix

A lot of people are very worried about credit card debt right now: there’s a feeling that it might be the next shoe to drop, now that people can’t use home equity to pay off their plastic. So you can … Continue reading →

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Crazy Like a Bear

Posted on March 13, 2008 by Felix

Bear Stearns stock first traded this week at $70.28 a share. Earlier today it was at $50.48 a share: basically a $20 drop in the space of three and a half trading sessions. Right now, it’s at $54.68, which puts … Continue reading →

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What’s Missing in Paulson’s Report: Regulatory Consolidation

Posted on March 13, 2008 by Felix

Looking over the full report from the President’s Working Group today, I’m struck by one thing above all: that it makes no mention of the alphabet soup in Washington which enabled regulatory arbitrage and a general lack of accountability or … Continue reading →

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Steve Schwarzman Takes a Pay Cut

Posted on March 13, 2008 by Felix

Talk about adding insult to injury. Not only have Steve Schwarzman’s Blackstone shares plunged since its IPO, knocking billions off his net worth, but the firm has also cut his annual pay to less than $1 million per day. Stephen … Continue reading →

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Fuel Datapoint of the Day

Posted on March 13, 2008 by Felix

Steven Mufson reports on rising gas prices: Gasoline rose to a nationwide average of $3.246 a gallon for regular unleaded. Diesel, which has been setting records almost daily for the past three weeks, hit a nationwide average of $3.876 yesterday. … Continue reading →

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Carlyle Deserved to Collapse

Posted on March 13, 2008 by Felix

Should Carlyle Capital be aggrieved that its lenders are seizing its assets? There is a case to be made – and it’s made quite well by Robert Peston – that this is all the fault of the Fed and its … Continue reading →

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Moody’s to Rerate Munis

Posted on March 13, 2008 by Felix

Laura Levenstein of Moody’s says that she’s going to start rating munis on the same scale as corporates. Alistair Barr reports: "Moody’s recognizes that the municipal bond market has evolved, and with it we have taken steps to respond to … Continue reading →

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Should the US Government Buy Bank Equity?

Posted on March 13, 2008 by Felix

David Wessel has been hanging out with Myron Scholes, who wants the US government to start buying equity in US banks. Yikes! Should the government (the U.S. government, that is, not foreign governments’ sovereign wealth funds) put capital into banks? … Continue reading →

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Paulson Seeks to Prevent Future Crises

Posted on March 13, 2008 by Felix

We’ll get all the details later this morning, but judging from Damian Paletta’s curtain-raiser in the WSJ, Hank Paulson has some pretty good ideas about shoring up the US financial system and ensuring that a crisis like the one we’re … Continue reading →

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