BloggingStocks http://www.bloggingstocks.com BloggingStocks http://www.blogsmithmedia.com/http://www.bloggingstocks.com/media/feedlogo.gif BloggingStocks http://www.bloggingstocks.com en-us Copyright 2012 Weblogs, Inc. The contents of this feed are available for non-commercial use only. Blogsmith http://www.blogsmith.com/<![CDATA[Fed, Treasury's Bank of America bailout suggests they know more than we know]]>http://www.bloggingstocks.com/2009/01/16/fed-treasurys-bank-of-america-bailout-suggests-they-know-more/http://www.bloggingstocks.com/2009/01/16/fed-treasurys-bank-of-america-bailout-suggests-they-know-more/http://www.bloggingstocks.com/2009/01/16/fed-treasurys-bank-of-america-bailout-suggests-they-know-more/#commentsFiled under: , , , , ,

The U.S. Treasury, U.S. Federal Reserve, FDIC's joint decision Friday to inject $20 billion into the Bank of America (NYSE: BAC) and guarantee $118 billion in assets provides another case study. Bank of America's shares fell 80 cents to $7.52 in Friday afternoon trading.

[ Earlier, my BloggingStocks colleague Peter Cohan provided an analysis of the bail-out's cost to taxpayers. ]

Economists and other public policy wonks love the theoretical and they love 'taking the other side' in arguments.

Hey, they can't help it: it's the stuff they were trained to do - - the stuff they love. And, after all, it's frequently a major source of their income.

And my economist and policy wonk colleagues and friends are no different.

Now, on the surface, it looks like yet-another taxpayer bailout of bad decisions by bankers, mortgage lenders, and borrowers. In other words, another "profits - - the bankers win, losses - - the U.S. taxpayer foots the bill." Further, because it occurs on the heels of the Bank of America's buy-out of Merrill Lynch, it looks like, in some sense, U.S. taxpayers are subsidizing a financial institution merger.

Continue reading Fed, Treasury's Bank of America bailout suggests they know more than we know

Fed, Treasury's Bank of America bailout suggests they know more than we know originally appeared on BloggingStocks on Fri, 16 Jan 2009 14:27:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>bank bailoutbank rescuebank sectorFDICinthenewsMerrill LynchU.S. Federal ReserveU.S. TreasuryFri, 16 Jan 2009 14:27:00 EST<![CDATA[Yogi is right: 'When you come to the (economic) fork in the road, take it']]>http://www.bloggingstocks.com/2008/12/11/yogi-is-right-when-you-come-to-the-economic-fork-in-the-road/http://www.bloggingstocks.com/2008/12/11/yogi-is-right-when-you-come-to-the-economic-fork-in-the-road/http://www.bloggingstocks.com/2008/12/11/yogi-is-right-when-you-come-to-the-economic-fork-in-the-road/#commentsFiled under: , , , ,

These days, investors large and not so large are following the financial markets more closely than they have perhaps in decades. Is the U.S. recession worsening? Are there any more problematic banks? Is the market bottoming? There's a lot to assess, particularly if you have a 401K.

In times like these investors/readers turn to the likes of Warren Buffett or George Soros to analyze the financial and economic state of things.

However, today we turn to another trusted source, for time-tested counsel, advice, and wisdom: Lawrence Peter 'Yogi' Berra, retired Hall of Fame catcher for the New York Yankees, owner of 10 World Series championship rings and author of 'yogiisms' - - incisive malapropisms that reveal eternal truths.

Those who know Yogi know that his northern New Jersey home is accessible via two different routes, starting from a fork in the road. Hence, when Yogi gives directions to his house he says, "When you come to the fork in the road, take it."

Yogi's adage applies to economics, as well. When you come to the (economic) fork in the road, take it.

The United States is coming to an economic fork in the road, of sorts: it can get to its destination - - economic recovery - - by one of two paths.

The first would involve primarily using the Federal Reserve and quantitative easing. The Fed has already said it will purchase more than $600 billion of private debt, including commercial paper, mortgage-backed securities, and other asset-baked securities. (In order to cover potential losses associated with the Fed's purchases, the U.S. Treasury has set aside $20 billion in TARP funds authorized by Congress.) However, while additional quantitative easing in the aforementioned commercial segments (especially mortgage-backed securities) may trigger an increase in economic activity, such as an increase in mortgaged-based home purchases, it may not represent the segment where the Fed wants the extra growth to be.

Continue reading Yogi is right: 'When you come to the (economic) fork in the road, take it'

Yogi is right: 'When you come to the (economic) fork in the road, take it' originally appeared on BloggingStocks on Thu, 11 Dec 2008 14:38:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>banking systembanksCongressFedfiscal policyfiscal stimulusgdpinthenewsmonetary policyObamaObama Administrationquantitative easingTARPU.S. economyU.S. Federal ReserveU.S. TreasuryThu, 11 Dec 2008 14:38:00 EST<![CDATA[Americans say bailed-out banks should cancel all bonuses]]>http://www.bloggingstocks.com/2008/12/11/americans-say-bailed-out-banks-should-cancel-all-bonuses/http://www.bloggingstocks.com/2008/12/11/americans-say-bailed-out-banks-should-cancel-all-bonuses/http://www.bloggingstocks.com/2008/12/11/americans-say-bailed-out-banks-should-cancel-all-bonuses/#commentsFiled under: , , ,

The typical American's tolerance for federally rescued banks and other institutions that continue to award bonuses? Very little.

Three-quarters of Americans say Goldman Sachs (NYSE: GS), Citigroup (NYSE: C) and other bailed-out and taxpayer-assisted companies should cancel all bonuses this year, a new Bloomberg News / Los Angeles Times poll shows.

Further, a majority of respondents also said the U.S. government should have a voice in how these companies are managed, while two-thirds favor tighter financial sector regulation. The poll was conducted December 6-8.

Economist Richard Felson said it's understandable that Americans would express concern about bonuses in financial institutions that accepted federal assistance.

"Awarding bonuses does send the wrong signal. It's also arrogant in the view of many citizens. In our nation, hundreds of thousands of taxpayers are being laid-off with no federal assistance to cushion their loss of income, and down the street a bank executive of a bank who received federal bailout money could be collecting a $300,000 bonus. It gives the appearance of the federal government paying for these bonuses . . . paying for large compensation despite these business flops," Felson said. "It's an arrogant and incorrect policy."

Continue reading Americans say bailed-out banks should cancel all bonuses

Americans say bailed-out banks should cancel all bonuses originally appeared on BloggingStocks on Thu, 11 Dec 2008 12:57:00 EST. Please see our terms for use of feeds.

Read | Permalink | Email this | Comments]]>bank bailoutbanking sectorbanksbonusescCongressexecutive compensationfeaturedFedgsTARPU.S. Federal ReserveU.S. TreasuryThu, 11 Dec 2008 12:57:00 EST<![CDATA[Congress may have to approve a 'TARP 2,' economist says]]>http://www.bloggingstocks.com/2008/11/21/congress-may-have-to-approve-a-tarp-2-economist-says/http://www.bloggingstocks.com/2008/11/21/congress-may-have-to-approve-a-tarp-2-economist-says/http://www.bloggingstocks.com/2008/11/21/congress-may-have-to-approve-a-tarp-2-economist-says/#commentsFiled under: , , ,

With credit markets remaining under stress, and with uncertainty growing regarding the status of megabank Citigroup (NYSE: C), the U.S. Congress may have to take more action to maintain financial system stability and prevent the U.S. economy from spiraling into a deeper recession, so says economist David H. Wang.

"The U.S. Congress may have to approve a 'TARP 2,'" Wang told BloggingStocks Friday. "Whether Congress does it as part of a fiscal stimulus package, or separately, it is clear we will need more money to purchase toxic assets, improve bank capitalization and allocate funds for home mortgage refinance programs, and other financial stabilization measures. At this stage of the crisis, the $700 billion TARP is not going to be enough, in my interpretation."

Bank sector stress remains

Wang said that if Citigroup, whose CEO Vikram Pandit said has adequate capital, for some reason cannot, when needed, find additional capital in the private sector, then "the Fed and or U.S. Treasury will step in, and take necessary measures to stabilize the bank," Wang said. If the U.S. Treasury is the primary funder, "that action, and other forthcoming, planned actions by the Treasury may use up a considerable amount of TARP funds, requiring a TARP 2."

Continue reading Congress may have to approve a 'TARP 2,' economist says

Congress may have to approve a 'TARP 2,' economist says originally appeared on BloggingStocks on Fri, 21 Nov 2008 16:35:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>banking sectorbankscommercial mortgage backed securitiesCongressdefaultsFedfiscal stimulusinthenewsmortgage defaultsTARPU.S. Federal ReserveU.S. TreasuryFri, 21 Nov 2008 16:35:00 EST<![CDATA[Bulls vs. Bears battle for Dow 8,000 continues]]>http://www.bloggingstocks.com/2008/11/20/bulls-vs-bears-battle-for-dow-8-000-continues/http://www.bloggingstocks.com/2008/11/20/bulls-vs-bears-battle-for-dow-8-000-continues/http://www.bloggingstocks.com/2008/11/20/bulls-vs-bears-battle-for-dow-8-000-continues/#commentsFiled under: , , , ,

Once again, Dow 8,000 has come back into focus.

For those investors who may not follow indices closely, the 8,000 level has a psychological but not technical support, the latter of which measures such things as the number of investors who are buying / selling, whether investors are committing more money to the market etc.

Even so, right now, a battle is taking place between the bulls and the bears: the bears argue the worst economic news stemming from the financial crisis is yet to come; the bulls argue that the worst news is behind us, and that government stimulus, fiscal and monetary, will get the U.S. economy moving again.

The Dow Jones Industrial Average Wednesday closed below 8,000 at 7,997. If the bears can keep the Dow below 8,000 and then push it through 7,800, then 7,600, it will not be a pleasant time for investors.

Let's do a condensed, cross-methodology analysis to see if we can arrive at an informed investment decision / conclusion regarding where the Dow is headed, near-term.

Continue reading Bulls vs. Bears battle for Dow 8,000 continues

Bulls vs. Bears battle for Dow 8,000 continues originally appeared on BloggingStocks on Thu, 20 Nov 2008 10:10:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>banking sectorbanksbearsbond marketbullsCCitigroupcredit default swapscredit marketsDJIADowearningsfeaturedFedgdpresistancesupportU.S. economyU.S. Federal ReserveunemploymentThu, 20 Nov 2008 10:10:00 EST<![CDATA[How much more for AIG?! ]]>http://www.bloggingstocks.com/2008/11/11/how-much-more-for-aig/http://www.bloggingstocks.com/2008/11/11/how-much-more-for-aig/http://www.bloggingstocks.com/2008/11/11/how-much-more-for-aig/#commentsFiled under: , , , ,

With apologies to actor William Shatner, How big could the bailout of AIG get? Really big.

The U.S. government -- which is all of us, citizens and taxpayers -- may have to increase its investment in American International Group (NYSE: AIG) by still another $70-80 billion to keep the insurer solvent through the end of 2009.

Just call it USG-AIG

AIG, which reported $43 billion in losses tied to home mortgages in the past quarter, "will probably not function properly if it doesn't receive another cash infusion by September 2009," economist David H. Wang told BloggingStocks Tuesday. Wang based his forecast on his projection for cashed-in credit default swaps stemming from home mortgage defaults.

AIG is a major issuer of credit default swaps, actually a type of credit default insurance, which many holders of mortgage backed securities and bonds purchased to hedge against bond issuer defaults.

"If we project a rise in home mortgage defaults through Q2 2009, that will likely take credit default claims to levels that will require more money for AIG in late 2009," Wang said, although he qualified his projection by stating that it is contingent on negative U.S. GDP for Q1/Q2 2009. A U.S. economic recovery in Q2 2009 is possible, but not likely, Wang said.

AIG's shares fell 15 cents to $2.14 on Tuesday at mid-day, amid a broader market sell-off.

Continue reading How much more for AIG?!

How much more for AIG?! originally appeared on BloggingStocks on Tue, 11 Nov 2008 16:45:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>AIGbudget deficitcredit default swapsdollarFedfiscal policyinterest ratesinthenewsmonetary policymortgage backed securitiesnational debtU.S. Federal ReserveTue, 11 Nov 2008 16:45:00 EST<![CDATA[Short-term interest rates drop further ]]>http://www.bloggingstocks.com/2008/10/15/short-term-interest-rates-drop-further/http://www.bloggingstocks.com/2008/10/15/short-term-interest-rates-drop-further/http://www.bloggingstocks.com/2008/10/15/short-term-interest-rates-drop-further/#commentsFiled under: , , ,

The credit market thaw continues.

Interest rates for three-month loans in dollars fell again early Wednesday, after three major central banks offered lenders unlimited dollars for the first time.

The London three-month rate for dollars decreased 9 basis points to 4.55%, Bloomberg News reported Wednesday. Meanwhile, a comparable euro rate dipped 5 basis points to 5.18% and the London interbank overnight rate, or LIBOR, fell 4 basis points to 2.14%.

The European Central Bank, Bank of England, and Swiss National Bank all offered lenders unlimited dollars for the first time, Bloomberg News reported.

Short-term rates, including overnight rates, are key sources of cash for corporations and other large institutions, which use the cash to pay suppliers, make payroll, roll over debt etc. Hence, very high overnight and short-term rates will discourage corporations from conducting business, restricting commerce and slowing the economy, economists say.

Coordinated dollar offering helps

Economist Peter Dawson told BloggingStocks Wednesday the coordinated dollar offering, combined with Tuesday's $250 billion U.S. bank recapitalization by the U.S. Treasury, should keep short-term interest rates heading in the right direction: lower.

Continue reading Short-term interest rates drop further

Short-term interest rates drop further originally appeared on BloggingStocks on Wed, 15 Oct 2008 11:00:00 EST. Please see our terms for use of feeds.

Read | Permalink | Email this | Comments]]>Bank of Englandbond marketcredit marketsECBEuropean Central BankFedinterest ratesinthenewsmonetary policySwiss National BankU.S. Federal ReserveU.S. TreasuryWed, 15 Oct 2008 11:00:00 EST<![CDATA[The government should just get out of the way and other economic myths]]>http://www.bloggingstocks.com/2008/10/15/the-government-should-just-get-out-of-the-way-and-other-economic-m/http://www.bloggingstocks.com/2008/10/15/the-government-should-just-get-out-of-the-way-and-other-economic-m/http://www.bloggingstocks.com/2008/10/15/the-government-should-just-get-out-of-the-way-and-other-economic-m/#commentsFiled under: , , , ,

As the United States, Europe and worlds other major economic powers implement programs and policies to end a financial crisis that threatens to severely damage economies worldwide, a number of myths and misnomers -- some promoted by the current U.S. administration -- are being dispelled, and we'll review each in the months ahead.

BloggingStocks has asked economist David H. Wang, a colleague and friend of yours truly, to help dispel a few of these myths.

Wang approaches the economic scene from a unique perspective. Wang was born and raised in Communist China for 22 years, before moving permanently to the United States in 1989 for graduate school, completing his Ph.D. in economics in 1995.


Myth: "The best thing government can do for business is get out of the way."

Pretty thin argument here, Wang said. As the events of the last year demonstrate, government getting out of the way -- creating a no- / low- regulation banking sector and market -- can lead to very negative and in some cases disastrous results.

"Businesses in financial services and mortgage financing were permitted to have free rein over mortgages and mortgage finance," Wang said. "The market was the judge."

Continue reading The government should just get out of the way and other economic myths

The government should just get out of the way and other economic myths originally appeared on BloggingStocks on Wed, 15 Oct 2008 07:32:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>corporate taxesfiscal policygdpincome taxesmonetary policytaxesU.S. economyU.S. Federal ReserveU.S. TreasuryWed, 15 Oct 2008 07:32:00 EST<![CDATA[E.U. commits $2.4 trillion and says ball is now in your court, U.S.]]>http://www.bloggingstocks.com/2008/10/13/e-u-commits-2-4-trillion-and-says-ball-is-now-in-your-court-u/http://www.bloggingstocks.com/2008/10/13/e-u-commits-2-4-trillion-and-says-ball-is-now-in-your-court-u/http://www.bloggingstocks.com/2008/10/13/e-u-commits-2-4-trillion-and-says-ball-is-now-in-your-court-u/#commentsFiled under: , , ,

Gosh. Golly. Gee Whiz.

That was the reaction Monday of traders and economists to the European Union's coordinated decision to invest a staggering $2.4 trillion in interbank loan guarantees and bank recapitalizations, ft.com reported, to end the global financial crisis.

(Of course, 'gosh, golly' etc. were not exactly the reactions of traders and economists -- this is a family-appropriate financial blog -- but you get the point.)

Europe's decision sparked a global rally in stocks. The Dow closed up 936.42 points -- the largest one-day point gain in its history -- to 9,387.61.

Europe takes the lead

At minimum, Europe is saying that its economic stake in the current global financial system is so large that it's willing to err on the side of over-committing public funds, economist Peter Dawson said.

"Europe's response is very large, unexpected, and it could prove to be the pivotal move in this crisis," Dawson said. "Europe appears to be saying, 'well the United States is doing what it can do, given its political constraints' now let's do what our political culture allows. Basically, Europe is saying 'the storm of fear starts to lose its strength here.' "

The measures were both sweeping and unprecedented in size and scope, Dawson said. Germany said it offered about $680 billion in loan guarantees and will invest $108 billion in its banking system, ft.com reported. France said it would provide up to $435 billion in loan guarantees and invest as much as $52 billion. The United Kingdom has committed about $70 billion for investment in key banks, along with a guarantee for banks deposits and interbank lending. The Netherlands, Spain, and other nations announced similar plans.

Continue reading E.U. commits $2.4 trillion and says ball is now in your court, U.S.

E.U. commits $2.4 trillion and says ball is now in your court, U.S. originally appeared on BloggingStocks on Mon, 13 Oct 2008 17:09:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>Bank of Englandbond marketcredit marketsdollarECBEUeuroeuro zoneEuropean Central BankEuropean UnionEuroZoneFedfiscal policyFranceGermanyinterest ratesmonetary policymoney supplymortgage backed securitiesU.S. Federal ReserveU.S. TreasuryUnited KingdomMon, 13 Oct 2008 17:09:00 EST<![CDATA[Fed, ECB lead effort to increase dollar supply in global markets]]>http://www.bloggingstocks.com/2008/10/13/fed-ecb-lead-effort-to-increase-dollar-supply-in-global-markets/http://www.bloggingstocks.com/2008/10/13/fed-ecb-lead-effort-to-increase-dollar-supply-in-global-markets/http://www.bloggingstocks.com/2008/10/13/fed-ecb-lead-effort-to-increase-dollar-supply-in-global-markets/#commentsFiled under: , , ,

The U.S. Federal Reserve is leading an unprecedented effort by major central banks to push dollars into the global financial system, the Fed announced Monday, backstopping government fiscal policies to restore confidence,

The European Central Bank, Bank of England, and the Swiss Central Bank, will offer unlimited dollar fund auctions with maturities of seven days, 28 days, and 84 days at a fixed interest rate. The Bank of Japan may offer similar measures, the Fed said.

The Fed added that "central banks will continue to work together and are prepared to take whatever measures are necessary to provide sufficient liquidity in short-term funding markets."

Dollar falls on increased currency supply

The dollar fell early Monday against the world's other major currencies on the news, as traders adjusted positions to the increased supply of dollars. The dollar fell one half cent to $1.3615 versus the euro, 1.5 cents to $1.7286 versus the British pound and one-third yen to 100.37 versus Japan's yen.

Economist Richard Felson told BloggingStocks Monday the major central banks' effort is clear: keep financial markets adequately supplied with dollars amid a world that's hoarding dollars.

"It's one of the paradoxes of this current global financial crisis that despite the fact that the crisis originated in the United States, banks and financial institutions around the world are hoarding dollars. The reason is the dollar is still the world's reserve currency and investors are engaging in a flight to safety. The consequence has been a credit crunch," Felson said. "The central banks' policy should help alleviate that crunch by ensuring that there's adequate dollar liquidity. It's the correct move."

Continue reading Fed, ECB lead effort to increase dollar supply in global markets

Fed, ECB lead effort to increase dollar supply in global markets originally appeared on BloggingStocks on Mon, 13 Oct 2008 10:31:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>Bank of EnglandBank of Japanbanking sectorbanksBOEBOJBritish pounddollarECBeuroEuropean Central BankFedfiscal policyFranceGermanyJapanmonetary policyU.S. Federal ReserveUnited KingdomyenMon, 13 Oct 2008 10:31:00 EST<![CDATA[Is the market always right?]]>http://www.bloggingstocks.com/2008/10/11/is-the-market-always-right/http://www.bloggingstocks.com/2008/10/11/is-the-market-always-right/http://www.bloggingstocks.com/2008/10/11/is-the-market-always-right/#commentsFiled under: , , ,

Readers of this space know that economist David H. Wang, a colleague and friend of yours truly, approaches the economic scene from a unique perspective.

Wang was born and raised in Communist China for 22 years, before moving permanently to the United States in 1989 for graduate school, completing his Ph.D. in economics in 1995.

Of course Wang still talks with family and friends in China, and right now there's this joke making the rounds in the great centers in Beijing and Shanghai.

Question: What's the difference between U.S. President George W. Bush and Chairman Mao?

Answer: Chairman Mao actually put some bankers in jail.

**

As officials and citizens in China, India, Russia, Brazil, and many other developing nations look on, the United States is attempting to end a financial crisis that threatens to severely damage economies worldwide.

In the process, Wang and other economists agree, a number of myths and misnomers -- some promoted by the current U.S. administration, are being dispelled, and we'll review each in the months ahead.

Continue reading Is the market always right?

Is the market always right? originally appeared on BloggingStocks on Sat, 11 Oct 2008 18:10:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>banking sectorbanksChairman MaoChinaDavid H. WangfeaturedFedfree marketfree marketsgdpGeorge W. BushMaomortgage backed securitiesPresident BushU.S. economyU.S. Federal ReserveU.S. TreasurySat, 11 Oct 2008 18:10:00 EST<![CDATA[NYU's Roubini: 'All fronts' approach necessary to end global financial crisis ]]>http://www.bloggingstocks.com/2008/10/10/nyus-roubini-all-fronts-approach-necessary-to-end-global-fin/http://www.bloggingstocks.com/2008/10/10/nyus-roubini-all-fronts-approach-necessary-to-end-global-fin/http://www.bloggingstocks.com/2008/10/10/nyus-roubini-all-fronts-approach-necessary-to-end-global-fin/#commentsFiled under: , , , ,

Nouriel Roubini, the once obscure New York University economics professor who two years ago predicted the current global financial crisis, now says leaders of the world's major industrialized economies and developing countries must implement an 'all fronts' approach to avert a financial calamity and a global depression.

"It will take a significant change in leadership of economic policy and very radical, coordinated policy actions among all advanced and emerging-market economies to avoid this economic and financial disaster," Roubini said on his web site, RGE Monitor.

Roubini urged that national policy makers take immediate action to end the crisis, which has dramatically tightened credit conditions worldwide, constraining the ability of corporations to undertake daily operations, which will hurt GDP growth rates in every region.

And, ironically or by coincidence, leaders will have an opportunity to dialogue and implement a common strategy: officials from the International Monetary Fund, World Bank, and Group of Seven (G-7) nations meet in Washington, D.C. this weekend for their previously-scheduled annual meeting.

Continue reading NYU's Roubini: 'All fronts' approach necessary to end global financial crisis

NYU's Roubini: 'All fronts' approach necessary to end global financial crisis originally appeared on BloggingStocks on Fri, 10 Oct 2008 14:18:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>banking sectorbanksbond marketChinacredit marketsEUEuropean UnionfeaturedFedfiscal policyG7G8IMFInternational Monetary FundJapanmonetary policymortgage backed securitiesmortgagesNew York UniversityNouriel RoubiniRGE MonitorRussiaU.S. Federal ReserveU.S. TreasuryWorld BankFri, 10 Oct 2008 14:18:00 EST<![CDATA[Credit markets remain super-stressed; hint of liquidity seen in LIBOR rate]]>http://www.bloggingstocks.com/2008/10/10/credit-markets-remain-super-stressed-hint-of-liquidity-seen-in/http://www.bloggingstocks.com/2008/10/10/credit-markets-remain-super-stressed-hint-of-liquidity-seen-in/http://www.bloggingstocks.com/2008/10/10/credit-markets-remain-super-stressed-hint-of-liquidity-seen-in/#commentsFiled under: , ,

Thus far, credit conditions remain almost as cold as the ice in the Arctic.

Interest rates for three-month loans in dollars continued to rise early Thursday, as a coordinated interest rate cut by the world's major central banks failed to jump-start bank-to-bank lending.

The London three-month rate increased 7 basis points to 4.82%, Bloomberg News reported Friday. However, the London interbank offered rate, or LIBOR -- the rate banks charge each other for overnight dollar loans -- plunged 262 basis points to 2.47% early Friday morning, a hint that some liquidity may be creeping back into super-stressed credit markets.

Also, Hong Kong's three-month interbank offered rate, or HIBOR, climbed 1 basis point to 4.41% Friday. Singapore's three-month dollar loan rate increased for a fourth straight day, climbing 23 basis points to 4.74%, the highest this year.

Overnight rates are key sources of cash for corporations and other large institutions, which use the cash to pay suppliers, make payroll, roll over debt etc. Hence, a very high overnight will discourage corporations from conducting business, restricting commerce and slowing the economy, economists say.

Continue reading Credit markets remain super-stressed; hint of liquidity seen in LIBOR rate

Credit markets remain super-stressed; hint of liquidity seen in LIBOR rate originally appeared on BloggingStocks on Fri, 10 Oct 2008 10:35:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>banking sectorbanksbond marketcredit marketsFedinterest ratesinthenewsLIBORU.S. Federal ReserveU.S. TreasuryFri, 10 Oct 2008 10:35:00 EST<![CDATA[Trichet's ECB 'cash cavalry' is on the move - and not a moment too soon ]]>http://www.bloggingstocks.com/2008/10/09/trichets-ecb-cash-cavalry-is-on-the-move-and-not-a-moment-t/http://www.bloggingstocks.com/2008/10/09/trichets-ecb-cash-cavalry-is-on-the-move-and-not-a-moment-t/http://www.bloggingstocks.com/2008/10/09/trichets-ecb-cash-cavalry-is-on-the-move-and-not-a-moment-t/#commentsFiled under: , ,

The resources of the central bank of the world's second strongest economy have now been marshaled to address the global financial crisis.

The European Central Bank, led by President Jean-Claude Trichet has shifted policy - - a remarkable, historic change - - and is now working in coordination with its companion major central banks - - the U.S. Federal Reserve, Bank of England, Bank of Japan, and the Bank of China - - and others, to end a credit crisis that threatens to cripple international business and seriously damage economies, worldwide.

A legendary inflation hawk,Trichet, whose ECB lowered its key, short-term interest rate by 50 basis points in conjunction with the other major central banks on Wednesday, declined to rule out further steps to solve the crisis, including additional interest rate cuts, Bloomberg News reported Thursday.

ECB: banks offered unlimited cash at 3.75%

Further, and equally significant, Trichet offered banks unlimited cash at 3.75% to help them cope with tight credit markets, Reuters reported Thursday. Previously, the ECB had offered funds to the highest bidders, a tactic that pushed average rates as high as 4.99% - - almost 75 basis points above the official rate.

In addition, the ECB cut in half the premium it charges for overnight emergency loans and increased the interest rate it pays on deposits, Reuters reported Thursday.

Continue reading Trichet's ECB 'cash cavalry' is on the move - and not a moment too soon

Trichet's ECB 'cash cavalry' is on the move - and not a moment too soon originally appeared on BloggingStocks on Thu, 09 Oct 2008 13:57:00 EST. Please see our terms for use of feeds.

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If overnight interest rates do not fall as a result of the Fed's guarantee for commercial paper and related efforts to create incentives for banks to lend, the leaders of world's central banks and treasury departments may have to try a more creative approach to end the financial crisis: a global distressed asset summit.

As economist David H. Wang told BloggingStocks Wednesday, the major economies may have to hold a global 'out & price' summit to get distressed and bad assets -- the source of so many of the defaults and resultant fear among banks -- out of the financial system.

The problem, Wang said, is not just that the subprime and Alt-A mortgage backed securities represent distressed and bad debt, it's that "banks and other financial institutions can't determine the value or price of many of these securities."

Unknowns about toxic assets driving fear

Wang believes that "lack of certainty about price is the biggest factor in banks' unwillingness to lend."

"Banks can't determine the price of these assets, it represents a big uncertainty, therefore because they're uncertain regarding what their competitor banks hold, they aren't lending, and they're charging higher rates for short-term loans," Wang said. "Both are restricting commerce and will continue to slow economies all over the world if the problem is not addressed."

Continue reading We need a global summit to get toxic assets out of the system

We need a global summit to get toxic assets out of the system originally appeared on BloggingStocks on Wed, 08 Oct 2008 13:50:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>banking sectorbanksbond marketcredit marketsFedfiscal policyG7G8interest rateslendingLIBORmonetary policymortgage backed securitiesout and priceovernight interest ratesprice discoveryU.S. Federal ReserveWed, 08 Oct 2008 13:50:00 EST<![CDATA[Overnight interest rates continue to rise, likely to constrain business]]>http://www.bloggingstocks.com/2008/10/08/overnight-interest-rates-continue-to-rise-likely-to-constrain-b/http://www.bloggingstocks.com/2008/10/08/overnight-interest-rates-continue-to-rise-likely-to-constrain-b/http://www.bloggingstocks.com/2008/10/08/overnight-interest-rates-continue-to-rise-likely-to-constrain-b/#commentsFiled under: , , ,

Overnight interest rate continued to rise Wednesday, despite a decision by the major central banks to cut interest rates, as banks continued to hoard cash and charge very high interest for short-term loans on fears the global financial crisis will worsen.

The London interbank offered rate, or LIBOR -- the rate banks charge each other for overnight dollar loans -- increased 144 basis points to 5.38% early Wednesday morning -- a very high rate for short-term cash. It was the second straight day the LIBOR had risen more than 100 basis points.

Overnight rates are key sources of cash for corporations and other larger institutions that use the cash to pay suppliers, make payroll, roll over debt, etc. Hence, a very high overnight rate will discourage corporations from conducting business, restricting commerce, and thus slow the economy, so says economist Richard Felson.

"We have to force overnight rates lower and encourage banks to lend. High overnight interest rates will discourage companies from conducting typical business and will slow the economy. We've got to stop this bad momentum, eliminate fear, and get the ball rolling in the other direction or GDP will contract more," Felson said.

Continue reading Overnight interest rates continue to rise, likely to constrain business

Overnight interest rates continue to rise, likely to constrain business originally appeared on BloggingStocks on Wed, 08 Oct 2008 10:30:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>banking sectorbanksFDICFedgdpinterest ratesinthenewsLIBORmonetary policyovernight interest ratesU.S. economyU.S. Federal ReserveU.S. TreasuryWed, 08 Oct 2008 10:30:00 EST<![CDATA[Fed, ECB, BOE, China cut interest rates to fight global financial crisis]]>http://www.bloggingstocks.com/2008/10/08/fed-ecb-boe-china-cut-interest-rates-to-fight-global-financia/http://www.bloggingstocks.com/2008/10/08/fed-ecb-boe-china-cut-interest-rates-to-fight-global-financia/http://www.bloggingstocks.com/2008/10/08/fed-ecb-boe-china-cut-interest-rates-to-fight-global-financia/#commentsFiled under: , , , ,

In an unprecedented, emergency, coordinated move, the Fed and other major central banks cut interest rates Wednesday, in an attempt to prevent the global financial crisis from spreading further and damaging economies.

The Fed, European Central Bank, Bank of England, Bank of Canada, Sveriges Riksbank, and the Swiss National Bank each lowered their benchmark rates by 50 basis points. The Bank of Japan was not involved in this round of rate cuts, but said it fully supported the action.

Separately, China's central bank also lowered its one-year lending rate by 0.27 percentage points.

"`The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability,'' the banks said in joint statement. "Some easing of global monetary conditions is therefore warranted."

The action brought the Fed's benchmark rate to 1.5%; the ECB's main rate is now 3.75%; Canada's declined to 2.5%; the U.K.'s rate fell to 4.5%; Sweden's rate declined to 4.25%. China's rate fell to 6.93%.

Continue reading Fed, ECB, BOE, China cut interest rates to fight global financial crisis

Fed, ECB, BOE, China cut interest rates to fight global financial crisis originally appeared on BloggingStocks on Wed, 08 Oct 2008 08:28:00 EST. Please see our terms for use of feeds.

Read | Permalink | Email this | Comments]]>Bank of Englandbanking sectorbanksbond marketChinacontagioncredit marketsECBEuropean Central BankfeaturedFedinterest ratesmonetary policyRiksbankU.S. Federal ReserveWed, 08 Oct 2008 08:28:00 EST<![CDATA[Massachusetts postpones $750 million short-term debt sale due to credit crunch]]>http://www.bloggingstocks.com/2008/10/07/massachusetts-postpones-750-million-short-term-debt-sale-due-to/http://www.bloggingstocks.com/2008/10/07/massachusetts-postpones-750-million-short-term-debt-sale-due-to/http://www.bloggingstocks.com/2008/10/07/massachusetts-postpones-750-million-short-term-debt-sale-due-to/#commentsFiled under: , ,

To see the impact of credit market strain in the United States one need not travel farther west than The Bay State.

On Tuesday, Massachusetts, which would rank in the top 100 countries in the world in terms of GDP if ranked as a nation, postponed the sale of $750 million in short-term notes for the second time in two weeks, due to a lack of demand.

However, it should be pointed out that Massachusetts's decision occurred before the U.S. Federal Reserve's decision, announced Tuesday at 9 a.m. EDT, to buy all corporate commercial paper to ease tight credit markets.

Further, although the municipal market differs from the corporate commercial paper market, the Fed's action aimed at easing conditions in the credit market overall, via both guaranteeing debt payment and by moral suasion. Many economists see this as the Fed's attempt to change market psychology via the central bank's enormous financial resources, monetary policy stance, and regulatory powers.

Still, economists caution that the Fed's commercial paper guarantee does not end counterparty risk; it simply eliminates a segment of that counterparty risk. According to economist David H. Wang, more actions by the Fed and U.S. Treasury undoubtedly will be needed to get credit flowing more freely and also reduce perhaps the biggest systemic problem: fear. Commercial paper is about a $1.5 trillion market, while states and local governments borrow about $2.8 trillion, Wang said.

Continue reading Massachusetts postpones $750 million short-term debt sale due to credit crunch

Massachusetts postpones $750 million short-term debt sale due to credit crunch originally appeared on BloggingStocks on Tue, 07 Oct 2008 14:45:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>banking sectorbanksbond marketcredit marketFedgdpinterest ratesinthenewsMassachusettspublic sectorState of MassachusettsU.S. Federal ReserveU.S. TreasuryTue, 07 Oct 2008 14:45:00 EST<![CDATA[Banks' fear still high as overnight interest rates continue to climb]]>http://www.bloggingstocks.com/2008/10/07/banks-fear-still-high-as-overnight-interest-rates-continue-to-c/http://www.bloggingstocks.com/2008/10/07/banks-fear-still-high-as-overnight-interest-rates-continue-to-c/http://www.bloggingstocks.com/2008/10/07/banks-fear-still-high-as-overnight-interest-rates-continue-to-c/#commentsFiled under: , , ,

The mood of banks toward banks remains cautious and guarded. The London interbank offered rate, or LIBOR -- the rate banks charge each other for overnight dollar loans -- increased 157 basis points to 3.94% early Tuesday morning.

The Euribor, a similar rate for the euro, rose 22 basis point to 4.37%. However, the Euribor has fallen from Monday's all-time high of 5.35%.

Currency Trader Andrew Resnick told BloggingStocks Tuesday overnight interest rates remain at elevated levels mainly due to fear.

"The biggest problem, clearly, is the lack of confidence. There are distressed and bad bonds out there, but it should not be affecting the financial system this much. The reason it has is fear. No one knows who owns what bonds, and no one trusts anyone," Resnick said. "This is the worst condition I've seen in the credit markets in my 20 years of trading." Resnick added that he was presently flat, or had no open currency trading positions.

Resnick said central banks may have to guarantee the assets of creditors to banks and/or provide insurance (credit default swaps) to purchasers of corporate commercial paper to lower overnight interest rates and increase the flow of credit. Or central banks may have to "undertake a large investment in banks to recapitalize them," he said.

Continue reading Banks' fear still high as overnight interest rates continue to climb

Banks' fear still high as overnight interest rates continue to climb originally appeared on BloggingStocks on Tue, 07 Oct 2008 09:35:00 EST. Please see our terms for use of feeds.

Read | Permalink | Email this | Comments]]>British poundcommercial paperdollarEuriboreuroFedinterest ratesinthenewsLIBORmonetary policyovernight interestU.S. Federal ReserveU.S. TreasuryyenTue, 07 Oct 2008 09:35:00 EST<![CDATA[Economists: Fed, ECB, BOJ, others will fight the fire now, address costs later ]]>http://www.bloggingstocks.com/2008/10/06/economists-fed-ecb-boj-others-will-fight-the-fire-now-addre/http://www.bloggingstocks.com/2008/10/06/economists-fed-ecb-boj-others-will-fight-the-fire-now-addre/http://www.bloggingstocks.com/2008/10/06/economists-fed-ecb-boj-others-will-fight-the-fire-now-addre/#commentsFiled under: , , , ,

A debate on 'How much money does the Fed have?' is premature, several economists told BloggingStocks Monday.

Instead Fed policymakers, in conjunction with the U.S. Treasury, and major central banks in industrialized economies, should and will focus on the huge task at hand: using traditional and new tools to stabilize the financial system. Investors/traders should concentrate on that, as well, the economists say.

'Fight the fire, now; worry about water costs, later'

"Questions regarding the ultimate size of the Fed's resources are not appropriate at this juncture, in my view," Economist David H. Wang said. "The immediate task is to prevent a panic, a panic that could cause this financial crisis to turn into a financial calamity."

"The Fed, ECB [European Central Bank], Bank of England, Bank of Japan, and others must fight the fire that's pretty big right now, and determine the water costs later," Wang added. "They have to maintain liquidity and create new tools and mechanisms that keep overnight credit available to banks, companies and institutions, Otherwise commerce is going to slow down like a car with an oil leak."

Economist Richard Felson agreed with Wang, adding that the Fed and or the U.S Treasury have to make sure corporations and other key institutions - - including state governments - - have adequate overnight and related short-term capital. "They have to prevent the financial crisis from choking off credit to sound companies and of course to the states. The crisis can not be allowed to prevent companies from conducting typical business or states from paying suppliers, making payroll, rolling over debt etc. or the economy will contract further," Felson said. "We've got to stop the momentum and get the ball rolling in the other direction."

Continue reading Economists: Fed, ECB, BOJ, others will fight the fire now, address costs later

Economists: Fed, ECB, BOJ, others will fight the fire now, address costs later originally appeared on BloggingStocks on Mon, 06 Oct 2008 17:19:00 EST. Please see our terms for use of feeds.

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