Como estrangular uma economia (versão Paulson)

[Paff]

And now for a word of wiseness (para quem tiver 55 minutos disponiveis)

http://video.google.com/videosearch?q=warren+buffet+interview&emb=0&aq=2&oq=warren+buffe#

Paff

[bluexip]

viva,

que belo tópico que aqui está. só agora o vim espreitar mas já valeu a pena o tempo ganho a lê-lo.

Bérrio, estou contigo liberalismo não significa ausência total do estado nem que o Estado seja preciso apenas para limpar a m**** nas crises.

no meio do sumo aqui deixado por vocês o meu cérebro de especulador parou ali numa frase tua, antes de prosseguir com o resto dos posts:

"
O Estado entra com injecções de capital. Em troca, pede acções preferênciais no mesmo valor. Isto torna a coisa mais "simples": não é o contribuinte a investir, é o contribuinte a servir de agente para uma troca - o dinheiro dos accionistas entra para dentro das contas (estes são, na prática eliminados).
"

que queres dizer? ok, o estado entra como "mão forte" num instituição e recebe por isso direitos/acções preferenciais enquanto a casa é limpa. isto leva a aumento do capital/acções disponiveis e causa diluição das posições dos accionistas. é isso que queres dizer com o dinheiro dos accionistas entrarem para dentro das contas/serem eliminados?

abraço,
bluexip

[jccgold]

Entao e as teorias liberais que o mercado equilibra-se a ele mesmo, e as intervencoes estatais sao sempre negativas onde é que andam esses liberais todos hoje em dia? 

[berrio]

Diluição, Blue.

Vamos a um exemplo simples, com dados de ontem. Imaginemos que o Deutsche Bank  patina (dúvido mesmo mesmo mesmo muito, mas é um banco enorme, serve para exemplo, e explicar o mito que anda circular de que "os bancos são grandes demais para salvar").

Tens 2 biliões de EUR de activo (nota: 12 zeros, trillion americano).
Tens 32 mil milhões em capital próprio, logo a "alavancagem de balanço" é de 62.5x.

Aquilo patina porque está insolvente (ou o Banco Central obriga o DB a abrir o jogo e vê isso), mas não tens de "cobrir" o activo todo. Fazes a seguinte operação:
Vês a capitalização bolsista (30 mil milhões de euros ao fecho de ontem). Ok, injectas esses 30 mil milhões de euros em cash, na conta de capital próprio. Mas, como não queres colocar o contribuinte em risco, tens de ter algo de igual valor em troca. Neste caso: acções preferênciais no valor de 100% do capital. Logo, os accionistas actuais são diluidos a 100%.

Ok, neste momento tens alavancagem contabilista de 32,25x. Se quiseres ir ainda mais longe, olhas para a dívida. Neste caso tens:
Total Long Term Debt     129 mil milhões   
Total Short Term Debt (papel comercial) 215 mil milhões
Total Debt     344 mil milhões

Ora papel comercial (short term debt) é unsecured. Injectas mais 215 mil milhões no balanço mas, outra vez como não queres colocar o contribuinte em risco, assumes os direitos desse papel comercial (o que implica explicar o verdadeiro significado de unsecured debt aos investidores, e assim, colocas um "prémio" sobre toda a unsecured debt no futuro, ou seja, torna-se mais dificil alavancar em papel comercial, a fonte actual de alavanca financeira).

Ok, então agora tens:
Capital próprio: 32 mil milhões + 30 mil milhões (share holders) + 215 mil milhões (unsecured junior debt holders) = 277 mil milhões
Activo: 2 biliões de euros
Alavancagem efectiva: 7.22x (perfeitamente saudável).

Expurgas os activos "tóxicos" para uma holding à parte (spin off para um "bad bank") e voilá! Tens um DB saudável, com quase um décimo da alavancagem pronto a vender. Não compravas? 

Jccgold:
ah mas ele equilibrasse a ele mesmo. Vê a Coreia do Sul para um exemplo. O mercado ajustou completamente, desalavancou a economia, e eliminou empresas não produtivas, e devolveu a economia ao seu estado saudável. E 3 anos depois estavam de novo a crescer e no mês passado foram "promovidos" a país desenvolvido! [mete Portugal a milhas, para ser honesto!]

Agora, ninguém disse que o efeito é simpático!
E, citando o bluexip:
" liberalismo não significa ausência total do estado nem que o Estado seja preciso apenas para limpar a m**** nas crises." [Neste momento estou a pensar porque é que não me lembrei desta ].

O Estado, com 20 anos de intervenção permitiu que a informação ficasse opaca (por omissão dos reguladores) e que o risco se externalizasse (por acção do banco central)! Partiu, agora se faz favor concerte. Se não o fizer, o mercado faz por ele, mas o mercado é como a história: é um juiz nada simpático e muito pouco permissivo.

[berrio]

News flash:
Acabou de haver um corte global de taxas de juro.

BCE, Banco de Inglaterra, Reserva Federal, Banco da Suiça, Banco do Canadá, cortaram todos ao mesmo tempo 0,50%.

A 65 million dollar question agora é: vão os americanos admitir finalmente quais os bancos insolventes?

[Paff]

Viva,

Fica uma solução alternativa do problema proposta há uns dias no WSJ por MARTIN FELDSTEIN.

A successful plan to stabilize the U.S. economy and prevent a deep global recession must do more than buy back impaired debt from financial institutions. It must address the fundamental cause of the crisis: the downward spiral of house prices that devastates household wealth and destroys the capital of financial institutions that hold mortgages and mortgage-backed securities.

The recently enacted financial rescue plan does nothing to stop this spiral. Credit will not flow and liquidity will not return to the banking system until financial institutions have confidence in the solvency and liquidity of other banks.

Because of the 20% fall in the price of homes since the bursting of the house-price bubble, there are now some 10 million homes with mortgages that exceed the value of the house. Residential mortgages are generally "no recourse" loans, meaning that if the homeowner stops making payments, the creditor can take the property but cannot take other assets or attach income. Individuals with loan-to-value ratios greater than 100% therefore have an incentive to default even if they can afford their monthly payments, and to rent an apartment or other house until house prices stop declining. When individuals default and creditors foreclose, the property is added to the stock of unsold homes. That depresses prices further, increasing the number and magnitude of negative equity houses.

The prospect of a downward spiral of house prices depresses the value of mortgage-backed securities and therefore the capital and liquidity of financial institutions. Experts say that an additional 10% to 15% decline in house prices is needed to get back to the prebubble level. That decline would double the number of homes with negative equity, raising the total to 40% of all homes with mortgages. The mortgages of five million homeowners would then exceed the value of their homes by 30% or more, which could prompt millions of defaults.

The process of default and foreclosure leading to price declines and further defaults could take house prices far below the long-term sustainable level. But even when prices seem low, prospective buyers will delay buying as long as they expect prices will continue to fall.

The financial rescue plan would bring back the confidence needed to revive the financial system only if the Treasury's asset purchases could eliminate the current impaired securities now held by the financial institutions, and if the remaining securities could be counted on to remain healthy. The legislation will do neither.

More than $700 billion is needed to buy all of the impaired securities. The impaired mortgage-backed securities reflect not only the negative-equity mortgages but also positive-equity mortgages with very high interest rates, adjustable rates, or negative amortization. Even if the government could purchase every troubled mortgage, the prospect of future price declines would contaminate the mortgage portfolios. As house prices fall, the value of mortgage-backed securities would fall further.

The impaired assets are not just mortgages but the complex derivatives based on those mortgages: the collateralized debt obligations, the various risk slices of those CDOs that, even if rated AAA, often have market prices close to 50% of their notional value. In addition, hundreds of billions of dollars of credit default swaps "guarantee" the value of mortgage-backed securities.

There are also important technical problems in using the $700 billion fund to buy impaired securities. The Treasury's preliminary idea was to use a "reverse auction," a method that works well when used to buy a single homogeneous security (like a firm buying back its own shares). But that is not feasible for buying the impaired securities, because of the enormous variety of underlying mortgages and of the almost limitless number of different derivatives based on those mortgages. The buyback will therefore involve a large number of arbitrary valuation decisions by the Treasury staff and their investment-banker advisers.

Because of the arbitrary pricing, many banks will choose not to sell some of their assets. Mark-to-market rules may force banks to write down the value of their remaining securities, further reducing their capital and subjecting them to margin calls that reduce their liquidity. Institutions that avoid marking their assets to market will simply cause a cloud of uncertainty about the value of their portfolio.

The features that Congress added to the initial Treasury plan do nothing to achieve sustained confidence in the financial institutions. They provide Congressional oversight, delay the use of funds, create partial government equity ownership in some firms and do other things to protect taxpayers. But they do not address falling home prices.

We need a firewall to break the downward spiral of house prices. Here's how it might work. The federal government would offer any homeowner with a mortgage an opportunity to replace 20% of the mortgage with a low-interest loan from the government, subject to a maximum of $80,000. This would be available to new buyers as well as those with mortgages. The interest on that loan would reflect the government's cost of funds and could be as low as 2%. The loan would not be secured by the house but would be a loan with full recourse, allowing the government to take other property or income in the unlikely event that the individual does not pay. It would by law be senior to other unsecured debt and not eligible for relief in bankruptcy.

The individual could repay the loan at any time or could refinance the remaining loan on more favorable terms as long as the principal did not increase. A 30-year amortization of the government loan would make the payments low, and a life-insurance policy would protect taxpayers if the borrower dies before the loan is repaid. If the homeowner chooses to accept the loan, creditors would have to accept the 20% mortgage repayment, reducing the monthly payments of principal and interest by 20%.

Consider a homeowner who has a mortgage equal to 90% of the value of his home. The 15% decline in the value of his house that may be needed to bring it back to its prebubble level would shift that homeowner into negative equity. Further price declines would make default attractive. But the 20% mortgage replacement loan would take the loan-to-value ratio to 72% from 90%, making it unlikely that prices would fall far enough to push him into negative equity. An interest saving that could be as large as $3,000 a year would provide a strong incentive to accept the mortgage-replacement loan, even if the individual thinks that he might temporarily have a moderate level of negative equity.

Although the total size of the mortgage-loan program might be as much as $1 trillion, this would not be comparable to other government spending or to a swap of government bonds for impaired assets. The government would instead have a fully offsetting claim on individuals who could be counted on to repay their low-interest government loans. The cash that the banks and other creditors would receive from the government to replace the existing mortgages would be available to finance new loans.

Mortgage-replacement loans cannot solve all the problems of the housing sector. Unlike the recent Frank-Dodd legislation, it does not provide help to those who now face foreclosure. Homeowners without mortgages would benefit only indirectly from the program because it would stop the decline in the value of their homes. But everyone would benefit from the overall economic effect of reviving the financial sector and the credit flows.

The recent financial recovery plan that Congress enacted will not rebuild lending and credit flows. That requires a program to stop a downward overshooting of house prices and the resulting mortgage defaults. The mortgage-replacement loan program may be the best way to achieve that.

Mr. Feldstein, chairman of the Council of Economic Advisers under President Reagan, is a professor at Harvard and a member of The Wall Street Journal's board of contributors.

[tiagodandre]

Money and Credit Markets Completely Frozen: What Needs To Be Done?

On Oct 7 Fed announced purchase of commercial paper, on Oct 8 there is a coordinated rate cut across the G7 (except Japan).
Latest G7 indicators show little sign of relief (October 10):
- TED spread (=3M LIBOR - T-bill) at record 452bp (around 15bp pre-crisis)
- 3m USD LIBOR-OIS at record 362bp (10bp pre-crisis)
- 3m EUR LIBOR-OIS at record 199bp (10bp pre-crisis)
- CDX investment grade CDS index at 194bp (45bp pre-crisis)
- iTraxx  invstment grade CDS index up to 126bp (from 40 pre-crisis)

IMF Global Financial Stability Report, Chapter 2: Causes of high interbank rates: Econometric models testing the impact of several factors such as Joint bank probability of distress, Repo spread, Market liquidity, Market volatility, Interest rate volatility, Forex swap, show that the main driving force since August 2007 is the Joint bank probability of distress in the U.S. (i.e. systemic risk component.) The role of the other variables is relatively small, but notably the repo spread began to show signs of stress in 2005 when housing prices started to turn.



Roubini: To do:

1)  To reduce the counterparty risk in the money markets a triage between insolvent banks that need to be shut down and a recapitalization of solvent banks is necessary together with massive injections of liquidity in non-banks and the corporate sector;

2) Commercial paper facility was recommended here first and it is a useful first step. Consider expanding to small businesses as well.

3) a generalized temporary blanket guarantee of all deposits is now necessary both in the US and in Europe;

4) amend flawed $700 bn TARP legislation: a) allow for direct government injection of public capital in banks in the form of preferred shared matched by private capital contributions by current shareholders (via suspension of all dividend payments and matching Tier 1 capital provided by private shareholders); b) implement a clear plan to reduce the face value of mortgages for distressed home owners and avoid a tsunami of foreclosures; c) do a rapid and radical triage between solvent banks and insolvent banks that need to be rapidly closed;

5) give a boost to aggregate demand to ensure that an unavoidable two-year recession does not become a decade long stagnation: a) immediately spend in infrastructures and in new green technologies;b)  increase unemployment benefits; c) federal block grants should be given to state and local government to boost their infrastructure spending (roads, sewer systems, etc.).


--> $300 bn of public works is more effective and productive than spending $700 bn to buy toxic assets.
Oct 8: ECB provides unlimited liquidity (full allotment) at the fixed rate of currently 3.75%

Oct 8 FT Alphaville: European credit markets shrug off global rate cut: "It does not do anything to change the price of money, it is the availability of money (that is the problem). Rate cuts at this stage are like pushing on a string." 

Levy Institute: simple way to reduce counterparty risk in banking system: like in an exchange-traded system, the Fed should act as counterparty of last resort to unclog the short-term money markets and by guaranteeing all interbank liabilities.
Oct 7 move by the US Fed to intervene in the commercial paper market and buy up paper boosted corporate CDS, particularly for those companies believed to be most reliant on CP. GE Capital Corp was one example its CDS was tighter by 113 bp at 517bp yesterday.

RGE: Interbank rates in Hong Kong and Singapore also shot up, leading their monetary authorities to inject liquidity and expand the allowable collateral.  Australia and Japan continued to inject liquidity into the domestic markets – over $20bn in a day.

cont.: The central banks of several oil exporters are trying to avoid a sharp contraction of credit growth, now that foreign roll-over credit is not available.  The Russian government has stepped in to provide another $50bn to its corporate and financial borrowers whose external financing is maturing and it is encouraging bank consolidation.  So far, the UAE's new liquidity facility has done little to ease interbank rates, with Eibor above 4% ahead of the Eid Holiday, likely because the banks are unwilling to avail themselves of the conditions.  And other GCC countries, led by Kuwait, are reportedly loaning directly to the banking sector.

Money-market rates climbed worldwide as banks hoarded cash on speculation the seizure in credit markets is deepening and may prompt more financial institutions to collapse. The squeeze is in many cases just as severe for Emerging Markets contries. The Reserve Bank of India reduced its so-called cash reserve ratio to 8.5 percent from 9 percent effective Oct. 11, according to a statement in Mumbai

Oct 10, 2008

http://www.rgemonitor.com/

[berrio]

Sem comentários 

Bloomberg:

U.S. stock exchanges may seek to impose a temporary ban on short sales for individual stocks that plunge as regulators seek to rein in short-selling.

The New York Stock Exchange and Nasdaq Stock Market may file their proposal with the Securities and Exchange Commission as soon as today, said three people who have seen a draft of the rule. Under the plan, a stock that closes down more than 20 percent would be protected from short sellers for the following three days, the people said.

NYSE Euronext Chief Executive Officer Duncan Niederauer and Nasdaq CEO Robert Greifeld have met with SEC officials in the past month to discuss the proposal. A final rule might change as regulators weigh other alternatives. The so-called circuit breaker against betting a stock will decline would add to rules the SEC imposed since September to restrict speculators who may have exacerbated the plunge in stock prices.

``I can appreciate the regulators trying to support the markets,'' said Ron Geffner, a former SEC lawyer who now represents hedge funds at the New York-based law firm Sadis & Goldberg LLP. ``I am surprised after several iterations with little to no benefit that they continue to go back to the same dry well. It's hard to play a game when the rules change week to week. This is just another reason for people to stay on the sidelines.''