Bailouts

  • This is a graph of "Bank Total Risk" as measured by "6-Months Rolling Risk Measures." You could have questions about these measures, which are a combination of (1) stock market measures (basically the vol of a bank's stock) and (2) balance sheet measures like Z-scores. So you could ask yourself "does this reflect the bank's risk-taking, or the market's perception of the bank's risk, and are those meaningfully different things to measure?" ANYWAY. Up is riskier.

    News

    Don’t Rely On Rating Agencies To Tell You Who Will Get A Bailout

    A thing I sometimes enjoy is reading research papers examining questions like: if you are a bank, and you are likely to be bailed out, do you take more risks than a bank all on its lonesome, and once you’ve been bailed out, what then? We’ve looked at a BIS paper on international banks, which […]

    / Aug 21, 2012 at 12:09 PM
  • Banks, News

    Bailed-Out Banks Were, Are, Will Always Be Riskier Than Non-Bailed-Out Banks

    The banking system is a machine to transform risk: people put their money into a bunch of risk-free-ish-or-so-they-think banks, and those banks lend that money to risky businesses, and the banks make money on their ability to price that risk appropriately and/or on their ability to get a government bailout when they price it inappropriately. […]

    / Aug 1, 2012 at 10:00 AM
  • News

    And Now, Spanish CDS

    Did you think you could avoid it? So the deal is this. Spain has some banks, and those banks have some loans, and those loans have some problems. And so Spain wants to bail out its banks via a thing called the Frob, which is perhaps more confidence-inspiring in Spanish than it is in English? […]

    / Jun 11, 2012 at 12:03 PM
  • I just like the Erechtheion. That's all.

    News

    This Is Really Only The “Second” Greek Bailout?

    If you’re into Greece you’ve probably already read all about it and if you’re not I can’t make you. But in brief: Greece is fixed and we will NEVER HEAR ABOUT ANY PROBLEMS EVER AGAIN. In less brief:
    (1) Some folks stayed up all night and produced a statement.
    (2) Greece’s private creditors will be offered the long-anticipated opportunity to voluntarily exchange their old bonds for new bonds, which will for the most part be the same as the old bonds except for minor differences including but not limited to a greatly extended maturity (to 2042), a 53.5% reduced face amount, and a 3.6% blended interest rate.
    (3) If they don’t voluntarily exchange, which they will because – hilariously – they’ve already taken accounting writedowns (and also because I guess it’s better than a disorderly default), private holders will get CAC’ed, which may or may not be as bad as it sounds, but in any case at least CDS will pay out, unless it doesn’t.
    (4) Also the public sector will do various helpful, confusing things.
    (5) In exchange for this, Greece will enact horrible austerity, and because no one believes that Greece will actually do that, there will be escrow accounts and what Reuters ominously calls “permanent surveillance by an increased European presence on the ground.”
    (6) Everyone is pretty sure we’ll be doing this again in six months and, look, just fair warning, I will not be writing about it then, because feh.

    We haven’t had a serious international bankruptcy, which this pretty much is, since I started paying attention to the financial markets, two months ago, so I mostly think about insolvency from a US bankruptcy law perspective. One thing that happens in bankruptcy is that, like, really really roughly speaking, the creditors stop being creditors and become the owners. This isn’t always the case but the basic playbook of US bankruptcy law is:

    / Feb 21, 2012 at 2:38 PM
  • News

    Jerks To Get Paid More Than Nice People

    No, not your comp, though probably that too. The Times and the Journal check in today on the state of play in Greece and it’s kind of how you might expect. From the Times: For months now, Greece has desperately been trying to persuade its private-sector creditors that it is in their interest to exchange […]

    / Jan 10, 2012 at 7:16 PM
  • News

    Unpitted Olives Likely To Blame For Congressman Dennis Kucinich’s Crankiness Surrounding The Wall Street Bailouts

    As some of you may remember, back in fall 2008, Congressman Dennis Kucinich was not at all happy about the idea of bailing out Wall Street. “Let Wall Street bailout Wall Street,” he screeched. “The bailout bill is the dumbest thing I’ve ever seen,” he said. “Is this the United States Congress or the Board […]

    / Jan 26, 2011 at 5:05 PM
  • News

    FYI, Citigroup Didn’t Actually Want That Bailout

    Proving yet again that in this country, we don’t let banks fail even if they want to.

    / Jan 14, 2011 at 10:36 AM
  • News

    Irish Parliament Okays EU/IMF Bailout Package, Fake Irishman Weighs In On Crisis

    Reuters reports that Ireland’s parliament has approved the 85 billion euro bailout, by a vote of 81 to 75. In related news, one Canadian posing as a Irish citizen recently offered his two cents on the situation, noting that there are four causes of Ireland’s current predicament. They are: 1) ‘greed, greed and more greed’ […]

    / Dec 15, 2010 at 10:20 AM
  • News

    PIMCO Got A Nice $7.1 Billion From The Fed

    Making it one of the largest borrowers of the Fed’s Term Asset-Backed-Securities Loan Facility. This calls for a mid-afternoon conga line.

    / Dec 1, 2010 at 1:45 PM
  • News

    Federal Reserve Releases Bailout Details

    As promised. If you’re looking for some lunchtime reading material, check them out here. Do feel free to share your favorite passages with the group.

    / Dec 1, 2010 at 12:02 PM
  • News

    Ireland Might Get A Little Money To Tide Itself Over, If Country Can Swallow Its Pride

    The Journal reports that “European finance ministers working on an international aid package for Ireland want the U.K. to make bilateral loans to Dublin as part of a larger aid package that could total up to €100 billion ($136 billion) and include credit from the euro zone and International Mo