Bailouts

  • 13 Nov 2008 at 2:31 PM

Silence On Gold Not So Golden

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The British have this particular way about “discretion,” or what might in some circles be called discretion. That is to say, they keep their dirt quiet, at least as long as it takes The Sun to dig it up and scream it to the world. At that point they revel in gossiping about the sleaze, comforted in the knowledge that they, themselves, remain blameless in the sleazy and revolting business of trafficking in innuendo and rumor. It’s a symbiotic cultural arrangement, really. The readers can indulge themselves in faux outrage, all the while eating up the slop like it was their first meal in a week, and the Sun is handsomely paid for its willingness to dispense with the pleasantries of English decorum.
The Bank of England, for example, is reluctant to disclose recipients of its emergency largess. The idea is to avoid creating panic. At least in times of uncertainty, the revelation that Bank X accepted funds from the Bank of England, could (in theory) cause a run on the bank.
Apparently, that’s not going to fly in the United States.

Members of Congress, taxpayers and investors urged the Federal Reserve to provide details of almost $2 trillion in emergency loans and the collateral it has accepted to protect against losses.
At least five Republican members of Congress yesterday called for the Fed to disclose which financial institutions are borrowing taxpayer money and what troubled assets the central bank is accepting as collateral. More than 300 more investors and taxpayers also pressed for more disclosure in e-mails and interviews with Bloomberg News.

Lawmakers, Investors Ask Fed for Lending Disclosure [Bloomberg]

  • 31 Oct 2008 at 6:24 AM

DealBreaker Before Dawn: We Don’t Need No Stinkin’ Bailout

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Barclehs, ever the strange emo child of finance, has decided to go it alone, and will tell the UK to take its bailout money and go pound salt. Taking bailout money is so conformist, yeah. They want nothing to do with it. Cool emo kids take their not quite $12 billion from the much cooler capital sources, like Qatar (that’s Kay-Tur to you, pal), Abu Dhabi and such.
Of course, the decision has nothing to do with the UK executive bonus restrictions that come with taking bailout money. Making decisions based on bonus payouts is conformist. The 14% on preferred shares Barclehs will have to shell out to keep their adoptive parents from taking away the guitar and forcing a trip to Supercuts looks to us like an expensive expense (see what we did there?) to existing shareholders for the luxury of keeping senior bonus pools intact. Take that you UK financial authority conformists!
Barclays to Raise $11.8 Billion From Investor Group [Bloomberg]

  • 29 Oct 2008 at 12:25 PM

So Safe, You Can Sleep Soundly At Night

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How’d you like to be an investor in only the second (and third) money market fund to “break the buck.” Yes, we decided we’d pass too.
The Reserve Fund, “the nation’s oldest money market fund” has gone mostly-quiet for the many investors who’s cash is anything but forthcoming, at least since it “broke the buck.” A lawsuit lingers, allegations of tip-offs to large investors allowing them to get their money out before the crisis are floating around. We are sympathetic. To a point.
There is a reason these funds yield greater returns than other “cash or cash equivalent” instruments. Much of the financial consumer population has gotten quite complacent about the term “cash or cash equivalent.” This, coupled with the deep rooted certainty that Americans are entitled to ever higher riskless returns, and enough sob stories might just cause you to forget that you are investing in a risky instrument. Seriously, folks. The Reserve Fund is in trouble because it had substantial holdings in Lehman debt. Oops.
It was only a matter of time before another money market fund broke the buck. You knew it could happen. It had once already. At the risk of going all Taleb on you, just because there hasn’t been a collapse in recent memory, doesn’t mean that one isn’t right around the corner.
In the end, it is the free lunch that is most expensive.
reserve.png
Reserve Fund’s Investors Still Await Their Cash [CNBC]

  • 20 Oct 2008 at 12:13 PM

I See What You Did There

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Remember, not too long ago, how much noise Congresscritters were making about “rewarding irresponsible investment bankers”? Well, CNBC has come full circle today. After The Beard was prodded after bailing out state and local governments, since we are in the bailout mood, you just knew that CNBC was going to ask why we are rewarding all those irresponsible state governments with bailouts.
Ah, the symmetry runs strong with that one.

  • 23 Sep 2008 at 9:06 AM

(Prematurely) Grading The Bailout

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In the wake of the worst single day performance on the Euro stage in recent memory for the Dollar, you might sit up and take notice. Of course, an injection of $700 billion is going to impact the dollar however you do it, so I say ignore the European foreign exchange nerds all together. Still, some are tempted to read this as a mandate on the bailout and (by extension) those doing the bailing.
I guess we should expect to see certain congressional democrats, fresh from the scrapyard holding shards of their favorite legislative wreck skyward in hopes the heavenly bailout magnet will pick them up, citing with authority the nuances of global foreign exchange to belittle Hank and his brethren in the hopes the might get some scraps that will keep their mouths busy with chewing.
That’s not to say we turn our nose up at changes designed to increase transparency, make the bailout financially painful enough to try and encourage firms to use it as a last resort, rather than a wheelbarrow of money for the taking, allow the Treasury to keep warrants in the bailees (not to be confused with the Baileys, Hank, take it easy). But when we start slipping into stimulus programs (which tend to be pretty useless even when you just write checks to taxpayers), price controls on executive pay, and the kitchen sink, well, someone should point to yesterday’s market performance and note that, while index futures seem to have the market set for a flat open this morning, the clock is ticking.
All this presupposes that Hank knows what he is doing, and that throwing cash at the problem will fix it. It seems pretty clear that, in order to do any good, the Treasury is going to have to buy assets at significantly overvalued prices. Perhaps, in fact, this is why transparency is still an issue. If, as the UK has been prone to do in similar circumstances, purchases or borrowings are shielded, there isn’t any new pricing data to trigger mark-to-market write-downs. Hmmmmm.
Will it help? That, I think, is far from certain. Time will tell. And you can always short the indexes (for now).

  • 22 Sep 2008 at 2:25 PM

Where Does the Line for “Ultra-rich” Start and Do I Qualify?

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Congress has no right to give the White House and its Secretary of the Treasury the power to transfer the people’s money to the richest bankers in the country. Vote No to the Bailout legislation. The Bailout legislation is being rammed through Congress in a matter of days. This is an illegal power grab by the White House and their richest friends on Wall Street. The Legislation allows the Treasury Department to appoint the same bankers who created the crisis to administer and dictate the use of trillions of our tax dollars. It is also one of the biggest transfers of wealth from working families to the ultra-rich in the history of the United States.
Congress should help families stay in their homes. Wealthy executives should be forced to disgorge their obscene profits, fees and bonuses that made them ultra-rich while they ran the economy into the ground.

I suppose it was only a matter of time, wasn’t it?
VoteNoBailout.org

  • 22 Sep 2008 at 8:04 AM

Bailout Blues

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It probably isn’t surprising that Wall Street initially focused on the figure rather than the text of The Bailout Plan (it being so large and broad in scope that proper noun capitals seem appropriate here). $700 billion looks almost comfortably close to the $1 trillion that everyone seems to think represents the amount of toxic mortgage garbage on the balance sheets of your favorite brand-name investment banks (or their acquirers). In addition, there isn’t much more to look at. For such a massive plan, the succinct prose managed to fit into less than three full pages. Don’t worry though, democratic legislators started working to correct that oversight immediately. Already efforts to “insulate Main Street from Wall Street” and enact “an economic recovery package that creates jobs and returns growth to our economy,” (Pelosi) as well as something that “helps folks cope with rising prices, and sparks job creation” (Obama) are afoot.
Looking a little deeper at the original proposal, some questions do emerge, and certainly with all the weekend coverage, I expect we are not the first to ask them here.
Much More After The Jumptm

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