Posts filed under “Credit”

Greeks Say ‘Oxi’ to Lemon Socialism

What do Greece, Ireland and the U.S.have in common?

Each experienced what was termed at the time a “new financial era” that produced an enormous expansion of its finance sector. This led to an intoxicating combination of aggressive lending, leverage and recklessness. In each case, the era ended in a financial crisis; perhaps most important, each crisis ended with a bailout of lenders, bondholders and bankers.

This hat trick of bank bailouts hasn’t gone unnoticed in Greece. Yanis Varoufakis, who just resigned as finance minister of Greece, might be a provocateur, but he is apparently no fool. Earlier Monday, in a blog post, he said “the Greek ‘bailouts’ were exercises whose purpose was intentionally to transfer private losses onto the shoulders of the weakest Greeks, before being transferred to other European taxpayers.”

This astute (albeit little known) insight has been echoed by a small number of insightful analysts. My favorite of these is Steve Randy Waldman. His take on the Greek bailouts includes an in-depth discussion of the 2010 assistance program as “largely a bailout of European banks, initiated to prevent a wider banking crisis.”

Alas, bailing out banks as a way to fix a financial crisis is standard operating procedure. What was called the “Mexican bailout of 1982” was, in fact, a bailout of the U.S. banks that made improvident loans to Mexico (as well as to Brazil and Argentina) that had gone bad.

As if to prove all parties were unwilling to learn from their experiences, a repeat of almost the exact same errors with the same players — bankers, Latin American borrowers and the U.S. — unfolded in 1994. The emerging market crises in 1997 weren’t identical, but displayed similar themes of leverage, recklessness and loans gone bad.


Continues here: Greeks Stand Up to ‘Lemon Socialism’




Category: Bailouts, Credit

The Trouble with Macro

Markets around the world start the week bracing for trouble as Greece spirals further into crisis. Can the country avoid a full-blown default? Will there be a Grexit? Will it stay in the euro zone and keep the single currency? It all looks like an unknowable gamble. Which leads us to this question: How big a challenge is it…Read More

Category: Credit, Hedge Funds, Investing, Really, really bad calls


Category: Credit, Think Tank

Mortgage Borrowing among Most Creditworthy Abates

Just Released: Mortgage Borrowing among Most Creditworthy Abates Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw Liberty Street Economics May 12, 2015       Today’s release of the New York Fed’s Quarterly Report on Household Debt and Credit for the first quarter of 2015 reports a flattening in household debt balances. The slow growth…Read More

Category: Credit, Real Estate, Think Tank

Liquidity Mismatch Helps Predict Bank Failure and Distress

Category: Credit, Think Tank

Are the Borrowing Costs of Large Financial Firms Unusual?

Category: Credit, Think Tank

Bond Tantrum or Schnitzel Tantrum

Bond Tantrum or Schnitzel Tantrum David R. Kotok Cumberland Advisors, May 14, 2015       “tan’trum, n. [earlier form tantarum suggests pseudo-L. coinage on tantara.] a violent, willful outburst of annoyance, rage, etc.; a fit of bad temper.”  Source:  Webster’s Deluxe Unabridged Second Edition. Tantara is the Roman word for the blast of a horn…Read More

Category: Credit, Fixed Income/Interest Rates, Think Tank

Flawed Math on Student Loans

Category: Credit, Think Tank

Category: Credit, Think Tank

Interest Rates Aren’t Going Anywhere . . .

Source: BAML, Fiscal Times     I have been fairly agnostic on several issues related to where interest rates are heading. It has never been my job to forecast where the 10-year yield will be in six months. Not predicting and not caring are two very different things, however. Rates matter a great deal — to investors, to the economy…Read More

Category: Credit, Federal Reserve, Fixed Income/Interest Rates, Psychology, Really, really bad calls, Taxes and Policy