financial crisis

More of the so-called “mainstream press,” like the Sacramento Bee, are catching up to what we wrote here about Warren Buffett back on March 16. He supported the bailout because his investments benefited from the handouts.  read more »

The success of Treasury Secretary Geithner’s Public-Private Investment Partnership Program depends on getting private investors interested in buying junk bonds off the banks’ balance sheets. Now it seems that at least one hedge fund is giving the plan “two thumbs-down.”  read more »

The national conversation in the wake of President Obama's introduction of a mortgage relief plan has centered on "fairness" and the conditions to qualify for a mortgage modification. This misses the point. The effects of "innovative" mortgage products were felt far more broadly than the relationship between a single buyer (responsible or not) and his particular mortgage broker (despicable or not). To illustrate the point, meet Mrs. Conservative And Responsible Mortgage Neighbor ("Carmen" for short).  read more »

The Treasury this week disclosed details of their plan to pump $1 trillion into the financial system by removing “Legacy Assets” from the balance sheets of banks. Wading through the multitude of documents and documents, I’m reminded of a remark by Michael Milken in a conversation with Charlie Rose on October 27, 2008 “Complexity is not innovation.”  read more »

Treasury Secretary Tim Geithner is on the cover of the April 2009 issue of Bloomberg Markets magazine. In the lead article, “Man in the Middle,” the authors refer to his time at the New York Federal Reserve Bank (FRB) as “experience as a consensus builder.” This overlooks the fact that it was easy for him to get everyone to agree, to build group solidarity, when he simply gave the banks and broker-dealers everything they wanted.  read more »

Bloomberg.com reporters Mark Pittman and Bob Ivry are reporting a running total of the money the U.S. government has pledged and spent for bailouts and economic stimulus payments. The total disbursed through February 24, 2009 stands at $3.8 trillion; the total commitment is $11.6 trillion. The Federal Reserve is providing the largest share at $7.6 billion, followed by the U.S. Treasury $2.2 trillion and FDIC $1.6 trillion.  read more »

On Sunday March 15, 2009, American International Group, Inc. revealed the identities of some of the beneficiaries of about half of the nearly $180 billion the US government has committed ($173 billion actually paid out so far) to support the ailing international financial giant. As we now know, AIG sold credit default swaps (CDS) that paid off if the market value of some bonds fell.  read more »

A day or so after he was on CNBC, Warren Buffett went on Bloomberg Television and told them that he’ll continue to sell derivatives contracts. He’s getting deeper into investments that he has called “financial weapons of mass destruction.” Apparently he’s betting that there will not be a crash (which would require a payout) in corporate junk bonds, muni bonds or stock markets in the UK, Europe and Japan. Here’s the punch line: his stock is up 17.2% since he started talking!  read more »

Imagine the following scenario. John, Paul, Ringo and George are the only members of a society and each has amassed a pile of currency over his lifetime. John and Paul each have 100 utils, Ringo has 300 utils and George has 500 utils. All told, the size of the entire system is 1000 utils.  read more »

I hate to say “I told you so” but… I told you so. The holders of the credit default swaps (CDS) have more to gain from the failure of the borrower than from accepting payments.  read more »