Fascinating virtual “interview” with Walter Bagehot, Editor of Economist from 1861 until 1877.  Gilbert creatively aligned pertient questions for the current sub-prime situation, with quotes from Bagehot’s book, “Lombard Street,” published in 1873. Bloomberg.com: News Bagehot Had Credit-Crunch Answers 130 Years Ago: Mark Gilbert By Mark Gilbert Oct. 4 (Bloomberg) — Walter Bagehot, an economist and author writing in the 19th century, had the answers to the current credit crunch. In 1866, the U.K. money markets were in turmoil. The collapse of a private bank called Overend & Co. threatened to destroy the fragile trust underpinning the credit system. The … Continue reading “If the banks are bad, … will … become worse if the government … encourages them”

The true extent and impact of losses associated with the sub-prime crisis are now beginning to emerge for the forst time.  UBS are cutting 1,500 positions to recoup $3.4Bn in losses, and Citi coming in at $1.3Bn. BBC NEWS | Business | Banks detail US mortgage losses Swiss bank UBS was worst hit, forced to write down 4bn Swiss francs ($3.4bn; £1.67bn) of losses due to its exposure to US sub-prime bad debt. UBS said it would now cut 1,500 jobs and make extensive management changes. US giant Citigroup said its sub-prime losses would total $1.3bn, in addition to $2.6bn … Continue reading Credit Crunch watch: the real story begins to emerge

Some insightful remarks about the state of Canadian financial markets, and the impacts of the sub prime mortgage effects on world. My take on the three points: some FI’s are having trouble with market funding some banks are raising significantly higher liquidity, through debt at historically higher rates differentials above government bonds and the kicker … banks are reputedly going to repatriate mortgages back into their balance sheets. This is a strange grouping of facts. This suggests to me that the mortgage securitisation market is drying up, and that banks will have to self fund their mortgage growth, and at … Continue reading Signs of credit tightening in Canada

A move that takes us back to the 80’s, with B of E bailing out a British Bank.  Can’t help but feel this is one of several across the world to come.  There was one earlier in Germany. Northern Rock is bailed out by Bank of England – Times Online In a rare move, the Bank of England agreed to throw the bank a lifeline and become the “lender of last resort”, effectively agreeing the first bailout of a British bank since money markets went into crisis over the summer. Continue reading Bank of England bails out Northern Rock

Online Banking Report takes on a tough topic, and does an exemplary job.  There is a lot of mystery and unknown about credit reports, not to mention its not the most exciting topic.  This report (44 pages) does a good job of sorting through the customer view, detailing why people are interested in them, including security, and identity theft protection, as well as the market size, and the individual providers. The report then goes on to explore the opportunity for FI’s to offer credit reports as a value add service, which includes helping people understand the intrinsic value of such … Continue reading OBR | “Credit Monitoring Services; The robust business case … “

This comment summarises the current situation reason for market panic quite well.  How and why anyone is willing to invest billions with no knowledge of the underlying investment is frightening. Canadian Banks & Insurance One reason for the sudden nervousness about the securities is that in many cases the holders don’t know what kinds of debt they have. Given the surprises in the U.S. subprime market, investors are panicking and they don’t want to own asset-backed commercial paper any more. However some of the biggest investors in the market are the banks. Analysts say that gives them a major incentive … Continue reading Sub-Prime woes defined

As expected Banks are tightening their lending standards.  Its ironic because those that suffer are not impacted by the sub-prime matter.  Their personal circumstances have not changed one iota.  This change is purely a reflection of tighter money markets, which drives up Banks capital costs, and then the risk assessment and pricing groups re-calibrating their yields. Loan standards tighten | csmonitor.com Since the beginning of the month, lenders have tightened their standards. They are now very reluctant to make high-risk loans to individuals with spotty credit records. They’re also requiring higher down payments, meaning that home buyers need to have … Continue reading Lending standards tighten for everyone