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Disappearance of capital sources is true cause of Lehman failure and AIG rescue

Why did Lehman really fail? The equity window is effectively closed for most financial services companies. This fact was the true trigger for the meltdown in AIG and Lehman and the problems at WaMu, HBOS and Merrill Lynch.

Moreover, it will be the trigger for a lot of the financial services bankruptcies going forward.

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Definition of the day: the law of unintended consequences

Given the fact that the regulatory authorities in the U.S. and the UK have taken the unusually manipulative step of banning all short sales of financial institutions outright, it bears remembering that all actions have consequences, both intended and unintended.

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Short-selling financial shares is now illegal

The latest government intervention into the capitalist system is the move by the UK and U.S. governments to ban short-selling of all financial stocks outright. In the wake of the severe market turbulence unleashed by the failure of Lehman Brothers, the government has decided to insert itself into the marketplace and prop up share prices by banning short-selling outright. This […]

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Chart of the day: the largest bankruptcies in US history

The bankruptcy of Lehman Brothers, with assets of over $600 billion is the largest in U.S. history. Wikipedia has catalogued the list of the largest U.S. bankruptcies of all time. (Hat tip: Börsennotizbuch) Drum roll, please. The current Bankruptcy Code was enacted in 1978 by § 101 of the Bankruptcy Reform Act of 1978[34], and generally became effective on October […]

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AIG: a short post-mortem

The meltdown of the world’s largest insurer AIG (AIG) makes the stakes of this credit crisis plain to all. In my view, the AIG situation and the subsequent turmoil in financial markets could have been avoided. The markets were clearly on edge at this time last week. However, Hank Paulson and Ben Bernanke, worried about moral hazard, simply let Lehman […]

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Presidential debates crucial in test of economic leadership

Edward Harrison here. In the last post, Marshall commented on the need for the U.S. Presidential candidates to show their mettle in a time of financial volatility. As I write this, the Dow Jones Industrial average has just finished the day up over 400 points — a relief after some heavy selling pressure the past few days. Yet, the need […]

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The 3 AM call: financial crisis has that phone ringing

Marshall Auerback here. This crisis is an audition for the presidency in real time — and an opportunity for a candidate to step up to the plate. If handled the right way, it could decide the election. If it is treated like another political issue, it could fade with the next news cycle. So far, Obama is failing the test. […]

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US unemployment claims rise, labor market is weak

US unemployment claims rise, labor market is weak

U.S. jobless claims registered an increase to 455,000, bringing the widely followed 4-week average to 445,000, its highest level since 2002. Recently, the jobless claims numbers have been creeping up indicating the labor market in the U.S. is contracting. This particular report does not change that outlook.Starting in late June, jobless claims exploded, going from the high 300,000s to over […]

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Dick Fuld feels horrible about Lehman collapse

Dick Fuld, the Chief Executive of the beleaguered and now bankrupt investment bank Lehman Brothers, finally addressed staff after the worlds largest bankruptcy in history. He told staff he felt horrible for their personal and financial loss. Below is Bloomberg’s summary of the event. Lehman Brothers Holdings Inc. Chief Executive Officer Richard Fuld told the employees of the firm that […]

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News round-up: 18 Sep 2008 – foreign press alert

Today, in the wake of a mammoth banking deal in the UK between Lloyds TSB and HBOS, it is time to look at some of what is happening outside of the U.S. as a result of the credit crisis and market panic. I will principally using Canadian, British, Australian, Irish and South African press sources (since they are all in […]

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Lloyds gets HBOS for a song

Lloyds TSB has announced that it will buy rival HBOS for 232 pence a share. Back in May 2007, just over a year ago, HBOS shares were trading for almost £17 each. However, HBOS closed trading today at £1.47, sustaining a loss of over 90% in 16 months time. While HBOS is often touted as the largest mortgage lender in […]

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