Credit Market Chaos

March 2008

As Margin Calls Mount, Carlyle Holds 'Crisis Talks'

newser | Washington Post | Mar 10, 08 12:40 PM CDT

The Carlyle Group is holding emergency talks with lenders to try to save its drowning Carlyle Capital division, the Washington Post reports. Creditors have decided that Carlyle’s portfolio of traditionally safe mortgage-backed securities holdings isn’t good enough in the current market, and they're demanding $400 million more in collateral. Some have declared Carlyle Capital in default and may have sold $5 billion in assets. More »
Fed Pumps Money Into Reeling Banks

newser | Bloomberg | Mar 7, 08 12:02 PM CST

The Federal Reserve will lend more money to banks in March in a bid to ease the worsening credit crisis, Bloomberg reports. By dramatically increasing the funds available in two upcoming auctions—from $30 billion to $50 billion—the Fed hopes to convince banks to loosen up and lend more. More »

February 2008

AIG Posts $5.2B Loss on Writedown

newser | Wall Street Journal | Feb 28, 08 5:49 PM CST

Today's after-hours bad news from the credit-crunch front comes from insurer AIG, which reported a fourth-quarter loss of $5.29 billion after taking an $11 billion writedown on mortgage-related insurance contracts, the Wall Street Journal reports. The loss amounts to $2.08 per share; American International Group turned a profit of $1.31 in the fourth quarter of 2006. More »
Fannie Mae Loses Billions in Q4

newser | Wall Street Journal | Feb 27, 08 10:48 AM CST

Fannie Mae reported huge fourth-quarter losses today, painting an ugly picture both of the economy and the mortgage giant's own future. The company lost $3.56 billion—triple what analysts expected, Bloomberg reports. Derivatives were the big culprit, accounting for $3.33 billion in losses, but the company also reported spikes in late payments and delinquencies. More »
Buffett Offers to Save Municipal Lenders

newser | Bloomberg | Feb 12, 08 2:39 PM CST

Warren Buffett rode to the rescue today, though the color of his horse is in question. The Sage of Omaha offered to reinsure $800 billion worth of municipal bonds, resolving “in one stroke of a pen” the jitters plaguing the municipal debt market. But his plan is also a bid to gain one-third of the debt-insurance market, and one insurer has already rejected him, Bloomberg reports. More »
Credit Crunch May Worsen Fast

newser | Wall Street Journal | Feb 11, 08 2:45 PM CST

The worst of the credit crunch may not be over, bankers and analysts warn. Low-rated corporate loans have recently been plunging in value, which could lead to banks rushing to dump the loans at low prices, reports the Wall Street Journal . As a result, investors may back off securities backed by loans, bonds, and even commercial real estate. More »
Will That Be Cash or Cash?

newser | New York Times | Feb 5, 08 9:20 AM CST

The collapsing housing market, shaky employment security, and uncertain economic outlook are changing Americans' buying habits: They’re paying with cash. Plastic has become synonymous with debt, helping revive the pay-as-you-go mentality, reports the New York Times . The change could have a major impact on an economy, and a culture, based on consumer credit. More »

January 2008

Bank of England Governor Gets 2nd Term

newser | Reuters | Jan 30, 08 9:40 AM CST

Mervyn King has won a second term as governor of the Bank of England, the Fed's British counterpart, ending months of speculation about his future. Reuters reports that King will serve at the head of the UK central bank for another five years despite the City's fury at his handling of the credit crisis and the meltdown of Northern Rock. Several reports had suggested Gordon Brown and Alistair Darling were considering another candidate. More »
Sallie Mae Drops $900M Lawsuit

newser | Washington Post | Jan 29, 08 9:31 AM CST

Beleaguered student loan provider Sallie Mae yesterday dropped its $900 million lawsuit against the onetime suitors who bailed on a $25.3 billion buyout after the credit crunch caused would-be investors to walk away, reports the Washington Post . By agreeing not to seek the penalty from investment firm JC Flowers and several partners, Sallie Mae secured $31 billion in financing. More »
Spain Socialists Face Suddenly Tough Election

newser | Economist | Jan 25, 08 6:16 PM CST

The Socialist Zapatero government is facing an unexpected hitch in its re-election plans: a downtrodden Spanish economy. The vote March 9 is the first in a big nation in the wake of the world credit crunch, the Economist reports, and it will test the political fallout of a burst housing bubble. The PM’s party is slowly dropping in the polls and now leads the opposition People's Party by only 2 percentage points. More »
BoA Writes Down $5.28B; 4Q Net Income Drops 95%

newser | Wall Street Journal | Jan 22, 08 9:30 AM CST

Bank of America said today its net income plummeted 95% in the fourth quarter, and it wrote down $5.28 billion in collateralized debt obligation. Net income for the largest retail bank and credit-card issuer was $268 million, or 5 cents per share, compared to $5.26 billion, or $1.16 a share, last year. The company had previously estimated write-downs in excess of $3 billion, the Wall Street Journal reports. More »
For Hurting US Companies, World Supplies Band-Aid

newser | Wall Street Journal | Jan 16, 08 12:02 PM CST

The subprime collapse has US financial institutions in uncharted waters—asking for help from foreign investors and governments, the Wall Street Journal reports. Citigroup, Merrill Lynch, and Morgan Stanley all have recently sought bailouts, a dramatic switch from a tradition that saw US banks coming to the “rescue of nations and businesses across the world." More »
American Express Feels Credit Crunch

newser | Wall Street Journal | Jan 10, 08 7:33 PM CST

With consumer spending slowing and credit defaults on the rise, American Express said today it will take a fourth-quarter charge of $275 million to build up its charge-card reserves, the Wall Street Journal reports. The company, which cited housing turmoil as a contributing factor, also predicted earnings to come in lower than analysts' estimates. More »
In Turnabout, '07 Mess Hurt Brokers More

newser | New York Times | Jan 2, 08 6:03 PM CST

Ordinary investors did fairly well in 2007, but their brokers and other big financial players lost their shirts in the subprime collapse. How did that happen? The New York Times observes that “parallel markets” have developed in recent years, with stocks and bonds available to most, and specialized, acronym-heavy securities like CDOs, MBSs and SIVs available only to favored insiders. More »

December 2007

Americans Drive Cycle of Auto Debt

newser | Los Angeles Times | Dec 31, 07 9:25 AM CST

More and more Americans are entering a cycle of larger, longer, and far riskier auto loans, raising the possibility of a debt crisis similar to the one that has hit the housing market. The Los Angeles Times explores the increasing trend of trading in a used car for a new one—and rolling together old debt and new. More »
Goldman Sees Bigger Losses for Big Banks

newser | Wall Street Journal | Dec 27, 07 10:24 AM CST

Goldman Sachs has some bad news for Citigroup, Merrill Lynch, and JPMorgan Chase: An analyst predicts even bigger fourth-quarter writedowns for all three firms than they've already cottoned to, thanks to continued exposure to collateralized debt. The losses will be “significantly larger than investors are anticipating.” How large is that? Try a combined $33.6 billion, the Wall Street Journal reports. More »
Banks Face Simpler, Tougher Times

newser | Wall Street Journal | Dec 26, 07 3:03 PM CST

Investors waiting for the big banks to turn it around after 2007’s subprime debacle might be waiting a long time, the Wall Street Journal warns. The credit crunch has unraveled a complicated modern banking model that gave big firms nearly total balance sheet flexibility. “It was a different world,” said one analyst. Now, banks must “think real hard about their new business model.” More »
Brits Hatch Secret Plan to Bail Out Northern Rock

newser | Guardian (UK) | Dec 18, 07 2:05 PM CST

Worried that the state might be stuck nationalizing Northern Rock, Britain has worked up a contingency plan behind closed doors to divide the troubled bank among the country’s commercial banks. A private buyout is still preferable, the Guardian reports, but some now fear the main bidders will back out, leaving the government holding the bag. More »
Northern Rock Boss Quits as Fall Continues

newser | Financial Times (UK) | Dec 13, 07 7:54 AM CST

The CEO of collapsing British bank Northern Rock quit this morning without comment, reports the Financial Times . Adam Applegarth resigned last month but had pledged to stay on as CEO until the end of January to guide the struggling company through its upcoming sale. But investors are troubled by the slow speed of the transaction, with Applegarth taking the blame. More »
Morgan Stanley Warns of Recession

newser | Daily Telegraph (UK) | Dec 12, 07 6:11 PM CST

Morgan Stanley is warning that the US is headed to a recession, the Telegraph writes, indicating today that factors such as the continued housing slump and high cost of borrowing will lead to decreased demand and a “perfect storm” for consumers. A partial freeze on subprime mortgages and expected cuts in interest rates will only soften the blow. More »