Author Archive

  • Is the Fed Allowed to do This?
    , September 17th, 2008 at 12:37 am

    Megan McArdle wonders what legal right the Federal Reserve has to go in the insurance business:

    It’s probable that they don’t actually have the legal right to do anything like this. Their authority is this: who’s going to stop them? No one wants to take on responsibility for this mess themselves.

    Section 13-3 of the Federal Reserve Act gives them the authority. Assuming you read it very broadly:

    In unusual and exigent circumstances, the Board of Governors of the Federal Reserve System, by the affirmative vote of not less than five members, may authorize any Federal reserve bank, during such periods as the said board may determine, at rates established in accordance with the provisions of section 14, subdivision (d), of this Act, to discount for any individual, partnership, or corporation, notes, drafts, and bills of exchange when such notes, drafts, and bills of exchange are indorsed or otherwise secured to the satisfaction of the Federal Reserve bank: Provided, That before discounting any such note, draft, or bill of exchange for an individual, partnership, or corporation the Federal reserve bank shall obtain evidence that such individual, partnership, or corporation is unable to secure adequate credit accommodations from other banking institutions. All such discounts for individuals, partnerships, or corporations shall be subject to such limitations, restrictions, and regulations as the Board of Governors of the Federal Reserve System may prescribe.

    Glad that’s all clear now.

  • Colbert: My Portfolio Consisted Of Lehman, Merrill, AIG And Lil’ Shavers
    , September 16th, 2008 at 11:44 pm

  • How Times Have Changed
    , September 16th, 2008 at 10:35 pm

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    It was almost ten years ago that Time magazine ran a cover with Greenspan, Rubin and Summers called “The Committee to Save the World.” Let’s just say that I couldn’t imagine a similar cover running today with Bernanke, Paulson and Geithner.

  • The Black Swan Beats Up the Bear
    , September 16th, 2008 at 10:07 pm

    The oil boom of the 1970s was a great financial help to the Soviet Union. It helped fund their strategic acquisition, meaning Afghanistan, which didn’t go quite so well. Perhaps the invasion of Afghanistan was a sell signal for commodities since gold peaked a few days later.
    The invasion of Georgia may be playing the same roll. Money has poured out of Russia and oil has plunged over $50 a barrel. The Russian market plunged 17% today and the stock exchange was shut down.

    “It’s panic,” said Oleg Vorotnitsky, head of equity trading at Uralsib Financial Corp. in Moscow. “There are problems with liquidity on the market. People are having difficulties with refinancing their positions so they started selling. Concern about AIG” is adding to the panic, he said.
    The dollar-denominated RTS Index lost 11 percent to 1,131.12, marking a 55 percent retreat from its highest close of 2,487.92, on May 19. The gauge has fallen 51 percent so far this quarter, the worst performance of major world equities indexes.

  • AIG’s Move Today
    , September 16th, 2008 at 4:02 pm

    In today’s session, shares of AIG ranged from $1.25 to $5.24. Total volume was over 1.23 billion.
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  • The Fed Holds
    , September 16th, 2008 at 2:28 pm

    The central bank does nothing.

    The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.
    Strains in financial markets have increased significantly and labor markets have weakened further. Economic growth appears to have slowed recently, partly reflecting a softening of household spending. Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.
    Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.
    The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.
    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Ms. Cumming voted as the alternate for Timothy F. Geithner.

  • Growth Is the New Safe Haven
    , September 16th, 2008 at 1:07 pm

    Relatively speaking.
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  • 88 Years Ago Today
    , September 16th, 2008 at 12:16 pm

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    At 12:01, September 16, 1920, a horse cart packed with dynamite blew up outside 23 Wall Street, which was the headquarters of J.P. Morgan. Thirty-eight people were killed and 400 were injured. Pockmarks from the blast can still be seen on the building and the company has said that it will never been repaired. No one was ever charged.

  • Me on LEH in 2005:” I can’t put my finger on it, but I don’t see where all the growth comes from.”
    , September 16th, 2008 at 11:50 am

    At the end of 2005, I posted some thoughts for 2006 including a few stocks to sell immediately. One of the stocks I said to sell was Lehman Brothers:

    There’s something about Lehman Brothers (LEH) that I just don’t get. Every quarter they put up great numbers. I can’t put my finger on it, but I don’t see where all the growth comes from. How can they consistently do what others can’t? Maybe the company really is that good. Maybe not. Personally, I’m rooting for the yield curve.

  • Let’s Have a Commission
    , September 16th, 2008 at 11:38 am

    Good news! John McCain has a plan to fix the credit crisis, let’s form a commission!

    We need to set up a 9/11 Commission in order to get to the bottom of this and get it fixed, and act to clean up this corruption…They’ve violated the social contract that capitalism and the citizen have, and we can’t ever let this happen again. I’ll make sure it never happens again.

    Commissions are basically community organizers, but for nicer communities.