Green Shoots or Smoking Weed?

Asset bubbles are strange animals. Ideally, you would like to punch the air out of them relatively early before they become a real danger but, in practice, it is not quite so simple. Ben Bernanke and Alan Greenspan have actually both argued that asset bubbles cannot be detected and monetary policy should therefore not in

What Home-Loan Banks reveal about the effects of mark-to-market

Back on the 16th, I posted a link to a Wall Street Journal article by James Hagerty which detailed how the Federal Home Loan Banks were able to prevent asset writedowns because of guideline changes to mark-to-market accounting.  I think the implications will be significant.  Here is what the article said (emphasis added): A change

CNBC gives primer on counterparty credit default swap risk

This is a very good explanatory piece from CNBC on how counterparty credit risk makes the credit default swap market a financial weapon of mass destruction.  Note they are not talking about eliminating the CDS market, but merely regulating and standardizing it to prevent a potentially catastrophic domino effect

Japanese opposition would avoid U.S. dollar bonds if elected

It is not just the Chinese making noises about the reliability of the United States as a debtor.  Now, Japanese politicians are doing it too.  In fact, the Democratic Party of Japan (which is not in power) have said they would not buy U.S. bonds if elected.  An excerpt from a BBC story covering these

Chrysler dissident lenders lose fight and disband

Reuters is reporting that the dissident Chrysler lender group has disbanded. Apparently, the lenders have finally figured out that they have zero chance of getting what they want as I have been saying all along (see posts here and here).  Let’s see what is in store at General Motors now. A group of Chrysler LLC’s

Daimler washes its hands of Chrysler

The German car maker Daimler wants to put the Chrysler chapter behind it, so it will give up its remaining 19.9% stake and forgive all remaining loans. See BBC story

GM offers a debt for equity swap to bondholders

As the possibility of bankruptcy draws nearer, General Motors is moving to sell non-core assets and to broker arrangements with bondholders and unions alike which will keep it out of bankruptcy. In a 9AM press conference today, new General Motors head Fritz Henderson announced a debt-for-equity swap offer for GM bondholders which would cut debt

Massive debt issuance in the U.S. and elsewhere

This contribution comes from Marc Chandler of Brown Brothers Harriman, one of my favourite currency strategists. His latest missive highlights the huge amount of debt being issued by sovereigns. It is not just the United States.: Much of the supply angst on Wall Street appears aimed at the US Treasury, which due to the bailouts

More credit card writedowns are coming

Of course you know I think credit cards are going to produce a tsunami of writedowns, right? Things are looking more and more like that tsunami is right around the corner: Credit card writedowns soared to record levels in February, representing an all-time high in the 20-year history of the Moody’s Credit Card Index, as

Community banks getting no love in this crisis

Recently, I posted a Wall Street Journal article that suggested smaller banks and new banking enterprise can supply the lion’s share of additional credit needed for the U.S. banking system. While President Obama is off meeting the heads of the big banks, we should keep in mind that there are other institutions out there that

Moody’s anticipates huge increase in leveraged loan defaults

This comes via Angus Robertson at Research Recap. Just as the RMBS post yesterday confirmed, moe writedowns are coming in other credit classes: In a trend likely to accelerate in 2009, the default rate on bank loans to speculative-grade corporations rose sharply in 2008 and recovery rates on leveraged loans dropped over the same period,

It’s a great time to start a bank

With the shadow banking system of hedge funds and non-bank financial institutions in shambles and the banking system’s credit shrinking, U.S. government officials are desperate to get credit into the system any way they can. A key part of that is the TALF, which is a back-door recapitalization of the shadow banking system, albeit not yet with the necessary regulatory oversight to prevent future excess leverage.

One often overlooked piece to this puzzle is fresh capital injecting into brand new lending institutions. The Wall Street Journal has a good article today demonstrating banks are still opening. (Hat tip Judith) And depositors are rushing in