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German Press: Fiat to sign a deal with Opel, not Chrysler

I want to make clear the significance of the Treasury’s Chapter 11 bankruptcy plan for Chrysler if Fiat pulls out.  It will mean massive job losses and and a huge down-tick in consumer demand.  There will be no second half recovery. Geithner and Obama will look very much like greenhorns and lose a lot of credibility. This is a very […]

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Opel and Fiat spells bankruptcy for Chrysler and GM

Press reports coming out of Germany are suggesting that the Germans are looking to hook up Opel with Fiat in order to prevent a lot of job losses when General Motors goes under.  In my view, this means curtains for both Chrysler and GM and could spell some massive increases in jobless claims and unemployment this summer. GM as already […]

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Links: 2009-04-23

Raghuram Rajan Speaks at 2009 Homer Jones Lecture – St. Louis Fed Financial institutions considered “too big to fail” could be asked to develop a bankruptcy contingency plan that would lay out how they would resolve themselves quickly. He said such a “shelf bankruptcy” plan would require banks to track and document their exposures much more carefully and in a […]

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How weak is the U.S. employment market?

How weak is the U.S. employment market?

Initial jobless claims came in above 600,000 for the 12th straight week at 640,000. Continuing claims came in at a record 6.1 million, up 3 million from this time last year. Both of these numbers suggest a very weak market and you can bet you bottom dollar this will be reflected in the unemployment report due out early next month. But, how weak is the jobs picture really?

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BofA CEO confirms government coerced him into Merrill deal

Bank of America CEO Ken Lewis is fighting to keep his job because earnings at his company have plummeted. BofA’s acquisition of Merrill Lynch has been a large part of the problem.  Now, understanding that he is being made out to be the fall guy, he has fessed up that BofA was coerced into the deal. Federal Reserve Chairman Ben […]

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Pre-payments are reducing value of mortgage-backed securities

If you read my recent post on How big banks earned so much money this quarter you would see that much of the income at Wells, JPMorgan, US Bank and others came from refinancing old mortgages. While this may be a boon to present income, it is very much a problem for the legacy mortgage-backed securities which contain the old […]

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Reinhart: Not everybody can be above-average in stress tests

Irrespective of whether one thinks the stress tests used to test the U.S. banking system is a sham (10% unemployment is not a worst-case scenario), the fact of the matter is these tests MUST show some differentiation in order to be credible.  Vincent Reinhart, a former Fed official now at the AEI, makes this case in the video below with […]

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McCulley: We need the political will to socialize the losses

Paul McCulley of PIMCO made a few comments back in March which caught my attention.  Given how well banks are doing this earnings season, I thought it relevant to quote him here.  The essence of his remarks was this: Deleveraging is a self-reinforcing vicious cycle brought upon by the Paradox of Thrift.  In order to stop this downward deflationary spiral, […]

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The German econblogger space is just fine

This past Sunday Felix Salmon wrote a post called “10 reasons for the lack of German econobloggers.” I found it inaccurate and offensive. Let me tell you why. I was in Germany at the time I read the post and had been there for the better part of the week. In reading and watching German news, I was very heartened […]

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How big banks earned so much money this quarter

We are a few weeks into earnings season and it should be abundantly clear that financial institutions are firing on all cylinders.  In fact, financials are leading the broader market for the first time since 1993.  Yet, loan losses have been absolutely enormous.  What gives? The Great Giveaway is the essence of recent market performance in a nutshell.  Let’s look […]

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The New Credit Writedowns

I am just back from the Easter Holidays and have had a good two weeks for self-reflection.  In truth, I am feeling a bit exhausted despite the fact that I was supposed to have just had a two weeks’ holiday. So, I have decided to make a few changes.  Before I do, I would appreciate some feedback from you regarding […]

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Links: 2009-04-22

FT Alphaville – The world’s 50 ’safest’ banks UBS as one of the safest? rubbish. Japan suffers first trade deficit since 1980 – guardian.co.uk Exports fell 16.4% last year to ¥71.1 trillion as makers of consumer electronics and cars – the driving force of the economy – counted the cost of plummeting demand in the US, Europe and China U.K. […]

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