Bankruptcy

Martin Wolf Is Making Sense
March 04, 2009

....as usual. Today's effort: This [the current approach], then, is loss-socialisation in action – it guarantees a public buffer to protect creditors. This could end up giving the government a controlling shareholding in some institutions: Citigroup, for example. But, say the quibblers, this is not nationalisation. What then are the pros and cons of this approach, compared with taking institutions over outright? Douglas Elliott of the Brookings Institution analyses this question in an intriguing paper. Part of the answer, he suggests, is that it is unclear whether banks are insolvent.

A Few Deep Breaths On The Aig-goldman Conspiracy
March 03, 2009

A few important addenda to my earlier item about the links between Goldman and AIG, which the Times editorial page took up today. First, a thoughtful item from Portfolio's Felix Salmon casting doubt on the theory that the AIG bailout was conceived as a Goldman bailout: I do think that Geithner should be asked about the firms threatened by an AIG collapse, however, and I do think that he should reply in detail.

Some Tentative Good News In The Credit Markets
February 12, 2009

The Wall Street Journal put the bits and pieces together today. Key passage: A key barometer for financial-sector health -- the London interbank offered rate -- soared in the fall after Lehman Brothers Holdings Inc. filed for bankruptcy, because banks quit lending to one another. On Wednesday, the three-month dollar Libor inched up to 1.23% on disappointment about the Treasury Department's financial-stability plan, but has been easing since the start of the year and is down sharply since its peak of 4.82% on Oct.

Some Tentative Good News In The Credit Markets
February 12, 2009

The Wall Street Journal put the bits and pieces together today. Key passage: A key barometer for financial-sector health -- the London interbank offered rate -- soared in the fall after Lehman Brothers Holdings Inc. filed for bankruptcy, because banks quit lending to one another. On Wednesday, the three-month dollar Libor inched up to 1.23% on disappointment about the Treasury Department's financial-stability plan, but has been easing since the start of the year and is down sharply since its peak of 4.82% on Oct.

The Old Banks Are Busted, Why Not Create New Ones?
February 06, 2009

Stanford economist Paul Romer unveils an innovative credit-crisis fix in today's Journal: The government has $350 billion in Troubled Asset Relief Program (TARP) funds that it can use to encourage new bank lending. If this money is directed to newly created good banks with pristine balance sheets, it could support $3.5 trillion in new lending with a modest 9-to-1 leverage. Right out of the gate, the newly created banks could do what the Fed has already been doing -- buying pools of loans originated by existing banks that meet high underwriting standards.

The Old Banks Are Busted, Why Not Create New Ones?
February 06, 2009

Stanford economist Paul Romer unveils an innovative credit-crisis fix in today's Journal: The government has $350 billion in Troubled Asset Relief Program (TARP) funds that it can use to encourage new bank lending. If this money is directed to newly created good banks with pristine balance sheets, it could support $3.5 trillion in new lending with a modest 9-to-1 leverage. Right out of the gate, the newly created banks could do what the Fed has already been doing -- buying pools of loans originated by existing banks that meet high underwriting standards.

Don't We Want To Overpay For The Toxic Assets?
February 02, 2009

The Times has an interesting piece about how one goes about valuing the "toxic" mortgage-backed securities a lot of banks are sitting on, which makes a point you often hear about the risks involved: Determining the right price for these assets is crucial to success. Placing too low a value would force institutions selling and others holding similar investments to register crushing losses that could deplete their capital and make it harder for them to increase lending.

Don't We Want To Overpay For The Toxic Assets?
February 02, 2009

The Times has an interesting piece about how one goes about valuing the "toxic" mortgage-backed securities a lot of banks are sitting on, which makes a point you often hear about the risks involved: Determining the right price for these assets is crucial to success. Placing too low a value would force institutions selling and others holding similar investments to register crushing losses that could deplete their capital and make it harder for them to increase lending.

Bush To Detroit: Don't Drop Dead
December 19, 2008

As you've probably heard by now, President Bush announced this morning that he wasn't going to let the domestic auto industry collapse. At least not on his watch. And while it'll probably take a day or two to sort out the details, and what they mean, here's the gist of it: Bush is authorizing the Treasury Department to loan Chrysler and General Motors $17.4 billion. (Ford has said it doesn't need money right now.) The money will come from the Wall Street rescue fund, or what's left of it, and it comes with a number of strings attached.

What's Black And White And Completely Over?
December 14, 2008

There's been a mini-debate going on over the last weeks in adjoining space about whether the national government should revive (from the New Deal era) the Federal Writers Project, an element of the Works Progress Administration that lasted from 1935 until the war. The F.W.P. employed 6,000 writers--some good, some mediocre, some abysmally bad--on standards I do not know. I do know some of the work, that in local history, quite useful.

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