The major news this morning affecting financial markets is that the Treasury is making a drastic change in its approach to the current crisis. You know about the $700 billion Troubled Assets Relief Program (TARP). As originally conceived, the idea here was to contrive ways of purchasing assets like mortgage-backed securities from banks and Wall Street firms. The purchases were to have been done at | Read More »
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 »
Well, the sausage factory worked overtime this weekend. What a bizarre result we got. Secretary Paulson came to Capitol Hill about ten days ago with a very simple, three-page plan to do something I could describe in three paragraphs. Congressional Democrats gave us over one hundred pages of additional weirdness that is either ineffectual, noxious, off the point, or will work against the goals of | Read More »
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 »
The attention of financial markets yesterday was fixed on the Congressional testimony of Treasury Secretary Paulson and Fed Chairman Bernanke. It was an up and down day, mostly down. Bernanke finally gave us an (elliptical) answer to one of the questions that most concerns Wall Street about the bailout plan: the valuation at which distressed mortgage-backed securities will be purchased. The other question, whether there | Read More »
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 »
We’re now into our second day of market reactions to the Treasury and Fed’s Troubled Assets Relief Program (“TARP”), or if you prefer, Mother of All Bailouts (“MOAB”). Market reaction in general is quite positive, which I’ll get to shortly. But the action is moving to Capitol Hill, where Paulson and Bernanke need to convince Congress to pass enabling legislation for the plan before they | Read More »
Today is Day 6 of the “New Trade”: the death and rebirth of the financial system as we know it. Every single day this week has brought things that no one working today has ever seen before. Yesterday was no exception It was a day of unprecedented volatility in the credit and money markets. The prices of short-duration Treasury securities traversed ranges that are usually | Read More »
As I described here, this is the weekend that the Treasury and the Federal Reserve decided to stop bailing everyone out. Secretary Paulson has been hinting for weeks now that we have to let capitalism work the way God intended it to. Which means: if you screw up, you die. This is what we free-market conservatives have been saying we wanted all along, folks. We’ll | Read More »
Ladies and Gentlemen, I’ve been faithfully chronicling the global credit and financial crises for you since the first cracks started appearing in early summer of last year. Tonight, with the almost-certain collapse of the investment bank Lehman Brothers, the crisis moves into a new and possibly very dangerous phase. I’m going to keep you up-to-date on the key developments over the next few days, or | Read More »
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 »
There are two points I want to make to you this morning, as the impact of yesterday’s nationalization of the mortgage GSEs works its way through the system. Here’s more information. First: while this is most definitely a fundamental change in the structure of the mortgage markets, it is not a change in our government’s existing policy of deep intervention in housing. The people who | Read More »
At 11AM Eastern Time on Sunday, September 07, 2008, the Treasury Department released the text of a joint statement regarding the GSEs, Fannie Mae and Freddie Mac. The statement contains remarks by Treasury Secretary Henry Paulson, and Director James Lockhart of the newly-chartered Federal Housing Finance Agency. (The FHFA now has regulatory oversight over the GSEs.) As expected, the GSEs will enter government conservatorship (which | Read More »
About two weeks ago, I wrote in this space that some very large tectonic plates were starting to move far below sea level in the financial world. That was based on some unusual patterns I was seeing in the overnight repo and money markets. I guessed (but had no information to confirm) that whatever was in the breeze had something to do with Fannie Mae | Read More »
Markets will be very, very quiet until next week as everyone finishes up his vacation. Inside the quiet backdrop, there was a lot of weekend chatter about the money markets, which continue to be essentially non-functional after more than a year. It’s impossible to imagine anything that will unfreeze interbank lending, especially in London. This is going to be a boot planted on the neck | Read More »
In the financial markets, last week was the wildest and most dramatic one since the Bear Stearns Companies collapsed last March. The subject was whether we would see a collapse of Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) that together own or guarantee $5.3 trillion in US home mortgages. And by extension, the fear spread to the entire US financial sector. The popular | Read More »
Update: 9:40am EDT, 14Jul08: Overseas markets reacted well to the Paulson “we have a plan” statement. Asian markets ended lower on regional concerns while Euro markets are somewhat higher. The US stock market has opened up over 100 points, while the US Treasury market is only slightly lower. FNM and FRE stock were both up about 20% in pre-market trading, while their bonds, swaps, and | Read More »
![[RS]](/t/img/logo-footer.jpg){kind=logo}