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Just call it U.S. Government AIG

Posted Mar 6th 2009 1:30PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Amer Intl Group (AIG), Federal Reserve, Financial Crisis

In the film version of Tennessee Williams' 'Cat On A Hot Tin Roof' (1958), Maggie 'The Cat' (Elizabeth Taylor), knows her husband Brick (Paul Newman) is hiding something, but she can't figure out what it is.

Later, we learn that Brick is hiding the truth about his father, millionaire Big Daddy (Burl Ives), and he slowly gathers the courage to end the mendacity that has permeated their lives.

At some point the nation will, likewise, end the mendacity about American International Group (NYSE: AIG) and announce the full, probable cost of the orderly stabilization of AIG. For economic conservatives, market absolutists, most Republicans, and others who oppose government intervention, the above would be bad news, but at this juncture, it appears to be unavoidable.

Continue reading Just call it U.S. Government AIG

Investment banks said to be developing credit derivatives clearing house

Posted Apr 18th 2008 11:27AM by Joseph Lazzaro (RSS feed)
Filed under: International markets, Other issues, Housing

Deutsche Bank and other investment banks are apparently working on plans to develop a clearing house for the credit derivatives markets, in an effort to allay rising regulatory concern and investor skittishness about counterparty risk, The Financial Times reported Friday.

Deutsche Bank (NYSE: DB) and other banks are apparently trying to develop a plan that would allow only institutions with strong capital bases and credible trading histories to clear trades in the credit default swap markets with a central counterparty, The FT reported.

The derivatives market has experienced explosive growth in the past decade, with the instruments' value totaling $350-$450 trillion, depending on the methodology used. At the same time, the credit default swaps market has grown to $45-50 trillion.

Global clearing house

Economist David H. Wang told BloggingStocks Friday that, ideally, a global derivatives clearing house should take the form of a public, international organization administered by member nation states. Failing that, he'd like to see a private international organization administered by the major investment banks.

Continue reading Investment banks said to be developing credit derivatives clearing house

Global banking system asks: 'Who's next?'

Posted Mar 17th 2008 11:18AM by Peter Cohan (RSS feed)
Filed under: Market matters,

Reuters reports that the bargain sale of The Bear Stearns Companies (NYSE: BSC) is making global bankers question the solvency of their "counterparties" -- whichever bank, hedge fund, or other financial institution is on the other end of the phone line seeking to borrow money or conduct a trade.

Like the alphabet soup I've learned over the last year -- Structured Investment Vehicles (SIVs), Collateralized Debt Obligations (CDOs), etc. -- counterparties is a concept I think we'll be hearing more about in the coming weeks. The basic point here is that financial markets run on trust -- after all, the word credit is derived from the Latin word credere, to believe. And when trust evaporates, the financial markets freeze up.

Reuters quotes BNP Paribas strategist Edmund Shing who said, "There's turmoil in all markets after Bear Stearns. Everyone's asking: Who's next? Is there a Bear Stearns in Europe? Could investment banks start to fail?" And trading volume is way down as a result: major players on the interbank market had been doing as little as 700 million pounds a day of business over the past week, a fraction of the several billions that would have been executed a year ago, and far less on Monday.

Continue reading Global banking system asks: 'Who's next?'

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Last updated: November 11, 2009: 02:45 PM

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