Free Republic

An effective and simple way to reduce the effect on the economy of the collapse of the collateralized debt obligation market would be to suspend mark-to-market accounting in determining the regulatory capital of financial institutions. ... Today the collapse in bank capital has led to a severe contraction of lending, in good part because mark-to-market accounting forced banks to write down and reclassify assets that are required reserves. This destabilized credit and increased the demand for capital by financial institutions in an uncertain environment. A 2008 study by economists at the New York Federal Reserve Bank found what may now...

Abu Dhabi may provide Dubai with a banking facility with which its leveraged neighbour would use to pay down its immediate debt obligations as part of potential "bail-out" plans being discussed between the emirates Details are hazy but Abu Dhabi could help support Dubai, which has embarked one of the biggest and most ambitious building programmes the world has ever seen, but sources close to the situation said an immediate cash facility to finance Dubai's $80bn debts was an option. Another was a sale-and-lease-back of some of Dubai's properties whereby Abu Dhabi would buy a share of some of Dubai's...

“Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient.” — Alan Greenspan in 2004 George Soros, the prominent financier, avoids using the financial contracts known as derivatives “because we don’t really understand how they work.” Felix G. Rohatyn, the investment banker who saved New York from financial catastrophe in the 1970s, described derivatives as potential “hydrogen bombs.” And Warren E. Buffett presciently observed five years ago that derivatives were “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially...

That parallel universes exist between conservatives and liberals cannot even be up for debate anymore, can it? Effective analogies – like common sense – evade Democrats like rabbit dinners elude Elmer Fudd. This is so painfully obvious, I feel like I’m arguing for the two-plus-two-equals-four lobby. Democrats never ever think ahead to the second step, almost always relying on naïve, child-like campaign stump band-aids to make our boo-boos all better. It’s like using a dynamite stick to warm a cold room, not thinking ahead to the big boom that is coming. An excellent measure of what differentiates those on...

Morgan Stanley lost close to a third of assets in its prime brokerage last week, amounting to hundreds of billions of dollars, as hedge funds fled after the collapse of Lehman Brothers and moved to rival banks. The losses, confirmed by several people familiar with the business, will deal a big blow to Morgan Stanley as its prime brokerage is one of its most profitable and successful businesses. The flight of cash and stock out of the division occurred as spreads in the credit default swap market ballooned, but has since slowed to a trickle, these people said. Morgan Stanley...

Any Questions?  Five years ago, Republicans proposed "the most significant regulatory overhaul in the housing finance industry [in a decade]." (Source: New York Times) Democrats on the House Financial Services Committee blocked efforts at fixing Fannie and Freddie. Rep. Barney Frank (D-MA) said, "Fannie Mae and Freddie Mac... are not facing any kind of financial crisis," At least 18 times since 2001 Democrats blocked efforts at overhauling Fannie and Freddie even as accounting scandals and executive ripoffs became public. Why? For starters, the top two recipients of Fannie and Freddie campaign donations were Democrat fatcats Chris Dodd ($165K) and Barack...

But even before Paulson could speak, lawmakers expressed unhappiness, criticism of the plan and - in the case of some conservative Republicans - outright opposition. "This massive bailout is not a solution. It is financial socialism and it's un-American," said Sen. Jim Bunning, R-Ky.

What’s a principled conservative to think of the Bush administration’s proposed $700 billion authority to allow the U.S. Treasury buy illiquid securities? On the one hand it would appear to be a necessary step to solve a systemic crisis in the U.S. banking system. On the other, it promises to be an enormous expansion of government power and commitment of taxpayer dollars. To arrive at a principled view on this intervention, we must answer three critical questions: Is it necessary? Will it work? And even then, is it morally justifiable? Unfortunately, we are thwarted at the outset. There’s simply no...

A good number of people in Congress, some devout socialists, want to get to the bottom of the implosion of Lehman Brothers, AIG and other financial companies, but not for the obvious reasons. House Speaker Nancy Pelosi has ordered a full-blown investigation that will include the testimony of Bush administration officials, the captains of finance and other punching bags. To run the show trials, she has assigned two of her favorite henchmen: Rep. Henry Waxman of California and Rep. Barney Frank of Massachusetts, whose culpability for the burgeoning crisis cannot be overstated. In 2003 and 2005, for example, Rep. Frank...

Wall Street falls again as $700bn bailout is delayed by political squabbling Barney Frank, chairman of the House Financial Services Committee Miles Costello and Leo Lewis in Tokyo Just after the collective sigh of relief was drawn following last week’s financial turmoil, a startling late plunge in the US stock market last night started a fresh wave of fears for banks, savers, pension holders and employees. It had appeared that a $700 billion (£378 billion) bailout of the banking system announced by the US Government on Friday had restored some stability. But the stock market euphoria generated by the plan...

Turn on this morning’s business programmes, and what do you see? In the middle of the worst financial crisis since 1974 - or is it 1929? -and share prices are soaring all round the world. As I write, the FTSE 100 is up 8%! Why? Seems the so-called financial ‘authorities’ have had enough. Despite bigger and bigger bailouts, the nationalisation of large chunks of the US financial system – and part of the UK’s too – and pumping more cash into the money markets than Croesus could count, they hadn’t been able to stem the tide. So the latest effort...

About Nancy Pelosi. She says the Democrats share absolutely none of the blame for the current financial goings-on. She's wrong. In fact, she's lying because she knows here statement to be untrue. I'm going to unload on this when I get back, but here's your primer: 1. Almost all of the financial problems we see today are based on bad mortgage lending. That would be lending money to people to buy homes who didn't qualify for a loan. 2. The Democrats, under Clinton, strengthened a government-created monster called the "Community Reinvestment Act." This law was then used by "activists" and...

A nuclear winter? Sep 18th 2008 From The Economist print edition The fallout from the bankruptcy of Lehman Brothers WHEN Warren Buffett said that derivatives were “financial weapons of mass destruction”, this was just the kind of crisis the investment seer had in mind. Part of the reason investors are so nervous about the health of financial companies is that they do not know how exposed they are to the derivatives market. It is doubly troubling that the collapse of Lehman Brothers and the near-collapse of American International Group (AIG) came before such useful reforms as a central clearing house...