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[Are auto companies, key corporations, being managed well?]]>http://www.bloggingstocks.com/2008/11/07/are-auto-companies-key-corporations-being-managed-well/http://www.bloggingstocks.com/2008/11/07/are-auto-companies-key-corporations-being-managed-well/http://www.bloggingstocks.com/2008/11/07/are-auto-companies-key-corporations-being-managed-well/#commentsFiled under: , ,

There's an old academic joke that goes, 'Put two economists in a room and you have a conversation. Put three economists in room and you have enough for a new world order, or disorder.'

One of the topics that came up at a recent economists chat attended by yours truly concerned not the global economic order, but the state of corporate America and moral hazard.

Is 'gov' insurance encouraging corporate abuses?

Most economists agree that banks and comparable financial institutions (FI) critical to the financial system should be backstopped by the U.S. Government, at least to some degree. A backstop is particularly critical if a bank failure would create systemic risk, i.e. jeopardize the financial system. The recent bank rescue and AIG (NYSE: AIG) takeovers are two examples.

More recently, however, a push has been made by various lobbies (corporate, labor union, regional states, among others) to rescue key industrial institutions, with the ailing auto companies, General Motors (NYSE: GM), Ford (NYSE: F), and Chrysler being front and center. Moreover, the logic of an auto sector rescue is reasonable enough: the economic and social consequences of a failure by one or more auto companies would be far worse than the costs of a government rescue.

Continue reading Are auto companies, key corporations, being managed well?

Are auto companies, key corporations, being managed well? originally appeared on BloggingStocks on Fri, 07 Nov 2008 13:32:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>auto sectorChryslerCongresscorporate AmericaFFordGeneral MotorsGeneralMotorsGMinthenewsmoral hazardFri, 07 Nov 2008 13:32:00 EST<![CDATA[Dear Fed: If it acts like a bank, regulate it like a bank!]]>http://www.bloggingstocks.com/2008/07/16/dear-fed-if-it-acts-like-a-bank-regulate-it-like-a-bank/http://www.bloggingstocks.com/2008/07/16/dear-fed-if-it-acts-like-a-bank-regulate-it-like-a-bank/http://www.bloggingstocks.com/2008/07/16/dear-fed-if-it-acts-like-a-bank-regulate-it-like-a-bank/#commentsFiled under: , , , , ,

During the recent testimony by Fed Chairman Ben Bernanke, Treasury Secretary Hank Paulson and SEC Chairman Christopher Cox, it has become increasingly clear that the Federal Reserve will be forced at least in the near term to extend a financial lifeline to any and all U.S. financial entities that are too big to fail. This refers to entities whose failure cold endanger the U.S. economy and in some cases the global financial markets.

I have learned during my investment career to watch what the Fed does much more than what it says. This has been demonstrated by Chairman Bernanke's extension of the discount window to Fannie Mae and Freddie Mac in recent days despite initial indications by Secretary Paulson to the contrary. Hawkish talk remains just that, not action.

The discount window was initially intended only for regulated banks to prevent a meltdown of the financial system from bank failures. In return for this financial insurance, banks are regulated, including the charging of fees. One can debate the alternatives to such an arrangement. However, this regulatory framework will probably be with us for the foreseeable future.

Continue reading Dear Fed: If it acts like a bank, regulate it like a bank!

Dear Fed: If it acts like a bank, regulate it like a bank! originally appeared on BloggingStocks on Wed, 16 Jul 2008 15:33:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>banking industryBankingIndustryBernankefeaturedFederal ReserveFederalReservemoral hazardMoralHazardregulationsWed, 16 Jul 2008 15:33:00 EST<![CDATA[Who's afraid of coordinated central banks?]]>http://www.bloggingstocks.com/2007/12/14/whos-afraid-of-coordinated-central-banks/http://www.bloggingstocks.com/2007/12/14/whos-afraid-of-coordinated-central-banks/http://www.bloggingstocks.com/2007/12/14/whos-afraid-of-coordinated-central-banks/#commentsFiled under: , , , ,

Once again, the ever-incisive Financial Times columnist Martin Wolf, an economist, identifies with laser-accuracy what ills the current market. The problem, Wolf argues, is not a lack of solvency but a lack of liquidity (i.e. 'panic').

Wolf does not deny that there have been bad loans (there have been) or that no companies will go out of business (some will). But the circumstance that froze credit markets, that caused quality corporate bonds to fail to price, and that leads to 100-point spreads between the LIBOR rate (what banks charge each other) and the ECB's benchmark interest rate, is rooted more in a lack of confidence, than a lack of sound economic fundamentals or a lack of resources.

A lack of liquidity

And a lack of liquidity or 'panic' is something that central bankers can address. With the above in mind, the U.S. Federal Reserve's plan, in consultation with the European Central Bank, the Bank of England, the Swiss National Bank, and the Bank of Canada, to inject $40 billion via auctions into the financial system is appropriate and prudent. (Further, in addition to reciprocal currency arrangements, the companion central banks will take related actions, including the Bank of England's decision to accept a wider range of collateral on 3-month loans).

Continue reading Who's afraid of coordinated central banks?

Who's afraid of coordinated central banks? originally appeared on BloggingStocks on Fri, 14 Dec 2007 18:08:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments]]>Bank of CanadaBank of Englandbanking regulationbanking sectorBen BernankeBernankebond marketcredit crunchcredit marketsCreditCrunchECBEuropean Central BankFederal Reservehousinginterest ratesLIBORliquidityMartin Wolfmonetary policymoral hazardmortgage backed securitiesmortgage defaultsmortgage lendersSIVssolvencysubprime defaultssubprime mortgageSwiss National BankU.S. CongressU.S. Federal ReserveWolfFri, 14 Dec 2007 18:08:00 EST<![CDATA[As U.S. economy slows, spotlight on Fed grows]]>http://www.bloggingstocks.com/2007/12/05/as-u-s-economy-slows-spotlight-on-fed-grows/http://www.bloggingstocks.com/2007/12/05/as-u-s-economy-slows-spotlight-on-fed-grows/http://www.bloggingstocks.com/2007/12/05/as-u-s-economy-slows-spotlight-on-fed-grows/#commentsFiled under: , , , , , , ,

Bald eagle There are days when the U.S. Federal Reserve probably feels like it's part of a well-researched, coordinated public policy effort to both keep the U.S. economy growing at an acceptable rate with low inflation, and serve as an engine for global growth. Then there are days like today, when the Fed undoubtedly feels like it's out there on its own, like that well-known bald eagle -- a solitary guardian amid ever-present risks and dangers.

The Fed meets December 11 to decide whether to continue to ease monetary policy. The consensus among economists and Wall Street analysts is that the Fed will lower key short-term interest rates by a quarter-percentage point to 4.5%, with some analysts predicting a half-percentage point cut by the Fed.

In an effort to stimulate domestic demand amid a U.S. economy slowed by subprime mortgage defaults, the Fed has twice lowered key interest rates this year, cutting the Fed funds rate -- the rate banks charge each other -- to 4.50%, and the discount rate -- the rate the Fed charges banks for short-term loans -- to 5.00%.

Continue reading As U.S. economy slows, spotlight on Fed grows

As U.S. economy slows, spotlight on Fed grows originally appeared on BloggingStocks on Wed, 05 Dec 2007 14:17:00 EST. Please see our terms for use of feeds.

Read | Permalink | Email this | Comments]]>Bush AdministrationcommoditiesDiscountRateECBEuropean Central Bankfeaturedfed funds rateFederal Reservefiscal policyGDPhousinghousing sectorMiddle Eastmonetary policymoral hazardmortgage defaultsmortgagesoiloil pricesOPECraw materialsSaudi Arabiasubprime loansU.S. economyWed, 05 Dec 2007 14:17:00 EST