Posts by Charles R. Morris

Last week’s announcements of first half results from Fannie Mae and Freddie Mac exposed the dire straits they are in. By its own rosy fair-value accounting, Freddie is already insolvent. Fannie is in better shape, but a string of heavy losses may have left it fatally weakened. Since both anticipate falling house [...]

Both Fannie Mae and Freddie Mac , which have been almost single-handedly keeping the U.S. home mortgage markets afloat, announced their first half-year results last week. If they were cancer patients, the doctors would transferring Freddie into hospice care. Fannie is probably terminal as well, but is in better shape and might have [...]

Financial markets have finally internalized the brutal fact that house prices still have a long way to fall. The full-year price drop in 2007 was 8.5 percent. From January through April of this year, the most recent data available, prices fell by another 8.2 percent — a remarkable rate of acceleration.
Can they fall further? Unfortunately, [...]

Lehman Brothers, Inc., released its second quarter earnings last week, reporting a loss of $2.8 billion ($4.1 billion before taxes). The losses were caused by writedowns and failed hedges on the same kind of toxic mortgage and leveraged-loan securities that have been wreaking havoc on bank earnings throughout the world.
Lehman is one the storied [...]

Warren Buffet calls credit derivatives “financial weapons of mass destruction.” When his company, Berkshire-Hathaway, Inc., took over an insurance company in 2002, it took him four years to unwind its portfolio of credit derivatives — at a cost of $400 million. Buffet didn’t entirely follow his own advice, however, because in the first quarter this [...]

Wall Street has suffered two sharp downturns in the first two trading days of June. It’s a disappointment after all the cheering for the market’s positive performance in May.
Monday’s worries were mostly about the financials, especially the struggles at Lehman Bros. and Wachovia. The shocker on Tuesday was General Motors’ announcement that double-digit declines in [...]

Bloggers from the left and the right are attacking both of the likely presidential candidates, Sens. John McCain (R-Ariz,) and Barack Obama (D-Ill.), for their complacency in the face of American “deindustrialization.”
The anger is fueled, in part, by the absurd expansion of “Wall Street” over the past decade – the investment banks and hedge funds [...]

The press release announcing the Federal Reserve Bank’s latest interest rate reduction on April 30 had the ominous sentence, “uncertainty about the inflation outlook remains high.” That is an unusual warning in a period of anemic growth. For anyone who can remember back 30 years, it stirs deep-seated fears.
Inflation is usually a by-product of overly [...]

It would be too much to say that champagne corks were popping on Wall Street last week, but there was an almost audible sigh of relief wafting through the trading rooms. While almost no one was prepared to say that the credit crunch was over, there was a palpable sense that the violent market turmoil [...]

If Federal Reserve Chairman Ben S. Bernanke was hoping that the rescue of Bear Stearns would calm financial markets, he is likely to be disappointed. Last week’s Senate hearings on the details of the rescue brought more of the gory details into the light. Investors might be tempted to phone their neighborhood dealer in gold [...]