Category Archives: bailouts

Europe to the Rescue?

Posted on October 12, 2008 by Felix

While all eyes were on Washington this weekend, who would have thought that the real breakthrough would happen in Paris? European financial and political leaders agreed late Sunday to a plan that would inject billions of euros into their banks … Continue reading →

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The Amazing Ballooning RBS Bailout

Posted on October 12, 2008 by Felix

Robert Peston/BBC, Saturday afternoon: I would expect Royal Bank to raise the capital it needs over the weekend. On paper its balance sheet looks okay. But its board has concluded it needs a further cushion of capital, perhaps as much … Continue reading →

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Hank Paulson, Drowning Scorpion

Posted on October 12, 2008 by Felix

Why has Gordon Brown found it so much easier to bite the nationalization bullet than Hank Paulson? Simple: it’s a question of old-fashioned ideology. Here’s John Quiggin: It’s fascinating to wonder how Gordon Brown and Alistair Darling must feel about … Continue reading →

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The Bar Fight on the Titanic

Posted on October 12, 2008 by Felix

Steve Waldman asked on Saturday: Why did Ben Bernanke, widely respected among economists as both a scholar and gentleman, support a rescue plan that very few of his colleagues considered "first-best" or even "second-best"? While there was no firm consensus … Continue reading →

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HBOS, RBS to be Nationalized

Posted on October 11, 2008 by Felix

Gordon Brown shows how it should be done: THE government will launch the biggest rescue of Britain’s high-street banks tomorrow when the UK’s four biggest institutions ask for a ߣ35 billion financial lifeline… The British bank rescue could leave the … Continue reading →

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Paulson’s Failure

Posted on October 10, 2008 by Felix

Why am I not reassured by Hank Paulson’s latest press conference? "We’re going to do it as soon as we can do it and do it properly and do it effectively and right," Paulson said. "Trust me, we are not … Continue reading →

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Recapitalization and the Implicit Treasury Guarantee

Posted on October 10, 2008 by Felix

Tyler Cowen has a very good question: Treasury equity is not the same as debt to the Fed, but are they so different? In some ways the Fed’s I-can’t-just-stop-rolling-it-over-when-I-want contribution is a bit like preferred equity. I think main key … Continue reading →

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The Guarantee Plan

Posted on October 10, 2008 by Felix

The bad news is that Hank Paulson seems to have run out of ideas. The good news is that, with no bright ideas of his own, he’s turning to the bright ideas of Gordon Brown: first direct equity injections into … Continue reading →

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The Unwinding of the Moral Hazard Trade

Posted on October 9, 2008 by Felix

This is the Age of the Bailout. And everybody knows how bailouts work: the government steps in and makes whole any holders of fixed income instruments, be they bonds or deposits or even subordinated debt. That’s what happened with Bear … Continue reading →

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The Last Days of Morgan Stanley

Posted on October 9, 2008 by Felix

If Morgan Stanley was in distress back in mid-September, it’s much worse today, trading as low as $12.50 a share: that’s just 40% of its stated book value. For all the denials coming out of the bank, clearly the market … Continue reading →

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US Bank Nationalizations: One Step Closer

Posted on October 9, 2008 by Felix

Yesterday, Justin Fox detected a possibly important shift in emphasis from Hank Paulson. Did anybody else notice that when Hank Paulson was describing in his press conference today what the Emergency Economic Stabilization Act enables Treasury to do, the first … Continue reading →

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Can the TARP Work?

Posted on October 8, 2008 by Felix

I’ve got a piece at the main Portfolio.com site today called "Rolling Out the TARP", going into a bit of detail about whether and how this whole reverse-auction thing might work in practice. It’s based largely on a paper by … Continue reading →

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TED Breaks 400bp

Posted on October 8, 2008 by Felix

So much for unprecedented global coordinated rate cuts, not to mention a UK bank bailout which could reach a mind-boggling 500 billion pounds. TED’s at 403bp, European stocks are sharply lower across the board, and the US stock market, after … Continue reading →

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Ask Not What Your Country Can Do For You, Spanish Banknote Edition

Posted on October 7, 2008 by Felix

During WWII, plucky Londoners tore down their beautiful Victorian cast-iron railings, sending them off to be recycled into guns and tanks. Today, Spaniards are being asked to do something similar: Spanish officials were yesterday reported to be looking for ways … Continue reading →

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The Duplicitous Sheila Bair

Posted on October 6, 2008 by Felix

After Wachovia agreed to be bought by Wells Fargo on Friday, the FDIC’s Sheila Bair put out a press release saying that her agency "stands behind its previously announced agreement with Citigroup". Except, it wasn’t quite as simple as that. … Continue reading →

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Global Cardiac Arrest

Posted on October 6, 2008 by Felix

John Burbank of Passport Capital appeared at the Value Investing Congress this morning. I’m getting inured to scary prognoses at this point, but he managed to scare me by saying that GE, which is having difficulty rolling over its paper, … Continue reading →

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The Crisis Goes Global

Posted on October 6, 2008 by Felix

Europe’s woes are clearly the key driver for the big slump in global stock markets today: the credit crunch has moved decisively across the Atlantic, and has engulfed the other great home of leverage. But the biggest losers of all … Continue reading →

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So Much for the Bailout

Posted on October 3, 2008 by Felix

On Monday morning, it looked as though Congress was going to pass the bailout bill, and the S&P 500 opened at 1,204. Here we are on Friday afternoon, and Congress has indeed passed the bailout bill; the S&P closed the … Continue reading →

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Bailout Datapoint of the Day, AIG Edition

Posted on October 3, 2008 by Felix

Remember the $85 billion loan that the US government extended to AIG? It turns out the insurer really needed that much money after all: The firm tapped about $61 billion of the federal credit line after saying Sept. 16 it … Continue reading →

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Why the Bailout Bill Alone Won’t Solve the Credit Crisis

Posted on October 2, 2008 by Felix

I’m not surprised that three-month Libor ticked up again today, to 4.21%. TED’s now at 357bp (chart above), which is really bad, and it’s going up, not down. While the stock market has settled down after the chaos of Monday, … Continue reading →

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The Human Toll of the Credit Crisis

Posted on October 1, 2008 by Felix

If you check out Joe Nocera’s blog at the NYT, it’s accompanied by this smiling photograph: But scroll down a little, and you’ll see what the credit crisis has wrought: Legislators, pass the bailout bill! Our journalists can’t take much … Continue reading →

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Don’t Get Sanguine About This Bill

Posted on October 1, 2008 by Felix

After the lessons we learned on Monday, it’s a good idea to pay attention to people who say that the bailout bill is going to have difficulty getting passed in the House. And Andrew Leonard, today, says just that: The … Continue reading →

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The Quantum Physics of the Bailout

Posted on September 30, 2008 by Felix

Right now I feel as though we’re all, collectively, like Schrödinger’s cat before the box is opened, except that instead of two different outcomes there are dozens. Will we revert to ad-hoc, case-by-case responses requiring no legislative approval? Will the … Continue reading →

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Let the Flowers Bloom

Posted on September 29, 2008 by Felix

When the bailout as originally conceived was first announced, Pimco’s Bill Gross lost no time in putting himself forward as a steward of the $700 billion bailout fund. Assuming that no second vote succeeds and that the bailout in its … Continue reading →

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Looking for Hope

Posted on September 29, 2008 by Felix

Is democracy the winner here? Clearly, the people have spoken, through their elected representatives, and they’ve said no to the Paulson bailout plan. If that means a market crash, so be it. At 1,145, the S&P is now 27% off … Continue reading →

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