Yesterday the US Fed cut interest rates to an all-time low of 0% – 0.25%. Once again, Wall Street celebrated with a major rally, even though the move had more symbolic than practical purpose. It made it appear that the authorities were “doing something”, even though the evidence of previous rate cuts indicates they have […]
Chemicals and the Economy
AIG becomes a “zombie” company
2 months ago the blog raised 5 key questions about the $700bn US bailout. Yesterday’s news about additional government funding for insurance giant AIG confirms its concerns. Originally, the US Treasury had insisted it would only support “healthy” firms. Now, this fiction has been abandoned. After AIG announced its 4th straight quarterly loss ($24.5bn), its […]
“Fundamental reassessment of the value of virtually every asset”
“Our normal customers have no orders to place with us, and our credit department won’t let us sell to others who might want to buy”. The blog was given this plain-spoken assessment of current chemical market conditions by one of the majors yesterday. Coincidentally, US Fed Governor Kevin Warsh was making one of his rare […]
A fistful of dollars
The US Federal Reserve used just to manage monetary policy for the 12 ‘districts’ of the USA. But now, it is going global. First, it opened unlimited “swap lines” with other G7 countries through the European Central Bank, the Bank of England and the Bank of Japan, as well as the Swiss National Bank. Then, […]
‘Financial panic’ over? Fed lends direct to companies
The US Federal Reserve is now bypassing the banking system, and dealing directly with major corporate borrowers. These have been cut off from many sources of credit, as banks hoarded their cash. The impact has been immediate, with 1500 transactions already done for a record $67bn – 10 times last week’s daily level. This should […]
And then there were none
20 years of investment banking as an independent activity came to an end on Wall Street last night. Bear Stearns was the first to go in March, rescued by JPMorgan. Last week Lehman failed, and Merrill Lynch sold itself to Bank of America. Now the two remaining survivors, Morgan Stanley and Goldman Sachs, have thrown […]
AIG rescued
‘A disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance,’ according to the US Federal Reserve last night. As a result, the US government now owns 79.9% of the nation’s largest insurer, in return for […]
Lehman goes bust, Merrill rescued
The blog has never liked disaster movies, but it was quite a weekend for those who do. First, there was the hurricane hitting Houston and Texas. I used to live in Houston, and watching the pictures of the damage, could recognise familiar places washed away, or burnt down. The blog’s sympathy goes to all those […]
$514bn and counting
There seems no end to the losses being revealed by the world’s major banks. The total has now reached $514bn. 110 banks and investment firms have now posted writedowns. CitiGroup, the largest US bank, tops the list with $55.1bn of losses, closely followed by Merrill Lynch with $51.8bn. Then comes UBS of Switzerland with $44.2bn. […]
US banks tighten corporate/consumer lending
Tighter lending standards, and higher spreads for borrowers, are continuing to create headwinds for the US economy. As far back as January, senior loan officers at major US banks were reporting that they were tightening mortgage lending standards. Yesterday, the latest quarterly US Federal Reserve survey showed that 60% of banks have now tightened their […]
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