Mortgage Giants Need Dose of Reality

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 More…

Mortgage Giants in Critical Care

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 More…

The Continuous Housing Free Fall

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 More…

Wall St. Still Hasn’t Learned

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 More…

Financial Weapons of Mass Destruction

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 More…

The Other Subprime Loans

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 More…

U.S. Still a Manufacturing Super Power

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 More…

Fed Stirs Nightmares of Return to ’70s

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 More…

Is the Worst Over?

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 More…

Time to Buy Gold Bars?

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 More…