Relevant and even prescient commentary on news, politics and the economy.

Dear Brad, This is the person you say we "don ‘t have time" to worry about

My Loyal Reader sends another example of those glorious, worthy individuals about whom “we do not have time” to worry: Former [AIG] Chief Executive Officer Maurice “Hank” Greenberg may try to end government involvement in the company “as prompt [sic] as possible,” his attorney David Boies said in an interview this week. Greenberg…has said the […]

What is an Asset?

I like Brad DeLong, conceptually. Even his errors in judgment are based on rational principles. And he has a really useful piece up right now about “dealing with financial crises.” (One of the nice things about it is that it also completely undermines his earlier suggestion that the Fed was wrong not to ease on […]

We have part of an answer

Documentation of a minor disruption: Lehman won’t return “billions” of frozen prime-brokerage assets “in the short term,” said PricewaterhouseCoopers, administrator for the Lehman bankruptcy. Meanwhile, several hedge funds are planning to sing the Bono phrase from “Do They Know It’s Xmastime?”* to their cohorts at Morgan Stanley: Hedge funds that account for less than 10 […]

Its All Just a Little Bit of History Repeating

Bruno Behrend wrote a layman’s view of the Repo Market. As he noted, …the entire US (and international) financial system is so laden with funny money (essentially un-quantifyable assets), that even after billions have been written down, no one is willing to price them. This “plain vanilla” repo market, that is “decades old” is so […]

Bear Stearns – The End of the Beginning, and a Preview of the Ending

I had a few posts in the past few weeks noting that whatever terms were announced for the Bear Stearns deal (and related deals), it was irrelevant, because in the end, the taxpayer would be footing the bill. The Fed’s M.O. so far has been to announce a little bit of help, then to announce […]

What Scares Me

Reader João Carlos notes in comments: The real problem guys isn’t that the FED needs to save the banks or the economy goes caput. The real problem is that maybe the FED doesn’t have enough ammunition to save the banks. There are a lot of derivatives in the banks’ books. While all mortgages’ securities are […]

Yves Smith on Bear Stearns

Yves Smith has a post about JPM’s buyout of Bear Stearns, that, coincidentally, says something that I was thinking when I woke up this morning. If I hadn’t read his post, I might have written something like this myself after letting it simmer for a bit: A hedge fund correspondent pointed us to an article […]

Why the Bailout of Bear Stearns Really is a Bailout

There seems to be a reluctance among many people to accept that the whole Bear Stearns thing constitutes a bailout. Let me try an analogy… Let’s say The Cactus Corp. sells squirrel carcasses as fillet mignon. After a few years, The Cactus Corp. is a strong business with a market cap of $150 million. Eventually, […]

The Bailout of Greater Fools

While I was away, Tyler Cowen wrote something with which I strongly disagree: If you’re a critic of bailouts, you can’t have it both ways. If the Fed or Treasury is guaranteeing loans, yes that does put taxpayer dollars on the line. But if you think the system can hold up, as do most bailout […]