The Merkel-Sarkozy Bailout Plan: Europe’s Markets on the Morning After
When you’ve been on the edge of having a convulsion for months, you could be excused for clutching at anything to convince yourself at least temporarily that you’ve turned the corner. Today, this is looking like a fair characterization of last week’s big relief rally at the euro “rescue” plan that was “agreed” in Brussels. Markets are trading significantly lower this morning, and much is | Read More »
Cram Down the Investors of Chrysler LLC and Tesla Motors
And we have more expert coverage of the grand special-interest giveaway that is the automaker-bailout legislation currently being negotiated between the White House and Congressional Democrats. The bailout contemplates a numerically-unspecified amount of public money to be donated to certain eligible automakers. You’re “eligible” if you filed a straw-man recovery plan in Congress on December 2. That means you’re either GM, Ford Motor, or Chrysler | Read More »
At What Price A Domestic Auto Industry?
This week, Congress returns to the question of what to do with the domestic auto industry, Detroit’s humbled Big Three. And the options range from awful to unthinkable. Yesterday we got a reading of auto sales in November. The story was extremely bad. Continuing the trend from October, sales were down anywhere from a third to a half, across all the manufacturers who sell in | Read More »
Last week was Citigroup’s turn. Citi is one of the world’s best-known banking brands, and was once America’s largest bank by market capitalization. Last week, investors knocked 60% off the value of Citi’s stock, in a nerve-rattling selloff that was too reminiscent of Bear Stearns and Lehman Brothers for comfort. Citigroup is too large to fail. It has about 200 million accounts in more than | Read More »
Stay Calm, Everyone. We’ll Get Through This.
The ground is shifting in the acute financial crisis that started around Labor Day, and erupted like a boil into public consciousness about three weeks ago. While Congress continues its indecision over whether to respond with forceful measures, the crisis has begun to have a powerful impact on the Main Street economy. None other than Warren Buffett (who’s been around for a lot of years | Read More »
Congress Says “We Have A Deal”
During my daily chronicle of the Panic of 2008, I’ve had occasion once before to say that the fever has broken. That was a week ago Friday, after Secretary Paulson first announced the outlines of his plan to buy up to $700 billion in distressed mortgage-backed paper. I’ve also had several occasions to tell you that officials at the Fed had taken extraordinary actions in | Read More »
Financial Markets On Edge
The basic storyline in financial markets remains unchanged today, as everyone waits for Congress to act on the Paulson bailout plan. In the meantime, overnight conditions in the world’s money markets are again approaching the extreme stress levels we saw exactly one week ago. Keep reading…
What Happens If There’s No Bailout?
Yesterday morning, the new week started off on a hopeful note in world financial markets, as all eyes turned to the action in the US Congress. Secretary Paulson and Chairman Bernanke had managed to create enough fear among lawmakers to convince them that a large emergency bailout is needed, in order to repair the balance sheets of banks, Wall St. firms, and other financial intermediaries. | Read More »
The Root Causes of the Financial Crisis
Let me tell you a story about mortgage-backed securities purchased with borrowed money (“leverage”). An MBS is basically a package of individual home mortgages pooled together so that it can be priced and analyzed like a bond. (And usually the pool is also divided horizontally into credit-quality tranches too.) MBS are a big hit with institutional investors, because their bond-like analytics made it possible to | Read More »
The United States Acquires AIG, the Largest American Insurance Company
There’s no way to understate the enormity of what happened yesterday evening, ladies and gentlemen. Yesterday morning, I wrote in this space that it was the first day of the rest of Wall Street’s life. But then, the Federal Reserve rebooted the financial world. Today is the first day of a brand new life. The events of the past four days have been so momentous | Read More »
Stand By For The Next Federal Bailout
It’s been widely reported that Timothy Geithner (the President of the New York Fed) summoned a group of Wall St. and banking CEOs to a pow-wow in lower Manhattan on Friday evening, with Treasury Secretary Paulson in attendance. The subject: Lehman Brothers, the 158-year-old investment bank which is in dire need of new capital, partly because of losses in its large portfolio of commercial (not | Read More »