He’s the chief executive officer of money manager Fortress Investment Group LLC. Edens and his partners became instant billionaires when the company, which manages $34.3 billion in private equity and hedge fund holdings, went public in 2007. The Montana-born Edens, who ski-raced in high school, could have paid for the gondola himself.
Nick Rowe explains why the “buy American” provision of the economic recovery package “will not shift demand towards domestic goods”
Whitney argues that the real problem is that banks are disinclined to lend – and that simply removing these assets from their balance sheets will not change that fact
What Meredith is saying here is right:
Writedowns from structured securities and illiquid assets is only one challenge related to the commercial banks. A challenge of equal importance is rising defaults from on balance sheet loans. Due to the pro-cyclical nature of loss reserving, banks are required to build reserves when their earnings power is weakest.
But loans are assets on the balance sheet and if you’re expecting a rise in defaults, you can write those down too. It’s not very different from writing down structured securities. In high level, it’s the same, but maybe the practice of doing so is different.
via FT Alphaville » Blog Archive » Why Meredith Whitney thinks a “bad bank” is a bad idea.
I’m not sure how the term to “fail” here is defined but I can agree that PE firms may be in trouble.
Banks fail when there are issues with capital sources or there are liquidity issues. PE firms have more or less stable capital sources in the short term as long as their LPs honor capital calls, so there is a bit of difference here that we have to acknowledge.
If this were to come to pass, it’s a no-brainer to think the firm’s principals would be in the dole queue for bailout money.
via naked capitalism: Taleb Foresees Private Equity Firm Failures If Stock Market Falls.
The Hedge Fund Transparency Act, sponsored by Senator Carl Levin, a Michigan Democrat, and Charles Grassley, an Iowa Republican, would require hedge funds to register with the SEC, file an annual disclosure form, comply with SEC record-keeping standards and cooperate with SEC investigations.
via naked capitalism: Senate Wants SEC to Regulate Hedge Funds.
Nial Ferguson is also quoted as saying that the crisis was the result of stupidity by many. I think its beyond naive to assume that players are not as rational as you think, and that greed might have been a motive in their actions.
“I was happy when Lehman went bust,” explaining how he had shorted the company and literally danced when he heard the news.
via Nassim Taleb: ‘I Was Happy Lehman Went Bust’ – DealBook Blog – NYTimes.com.
This is linked to the discussion about “who will be the policeman” topic I linked to yesterday.
“Global integration” is more important than ever, he said. “We can’t divorce.”
This is a very important (at least in my mind) distinction. When you hear of people say that you can’t cure a mess that was caused by leverage by throwing more leverage at it.
Another (and I would argue, better) view is that we’ve had a collapse in the shadow banking system and we need to put up temporary supports to help us ease into it.
Solving a “balance sheet recession” (eg. one started by deteriorating assets sitting on IB balance sheets), is all about slowing the deleveraging process. That at least is the view of Morgan Stanley’s interest rate strategy team.
via FT Alphaville » Blog Archive » How to solve a ‘balance sheet recession’.
Congressional Budget Office Director Doug Elmendorf’ testimony before the US’ Budget Committee throws up an interesting tidbit:
via FT Alphaville » Blog Archive » Multiplier datapoint du jour.
The “Mystery of the Dollar” was the topic, but to the high-powered experts and officials at a lunch at the Hotel National, it was not entirely surprising that the United States currency has proven resilient despite the nation’s low savings, extensive borrowing from abroad and struggling economy. After all, what’s the alternative?
via The Currency That Just Won’t Quit – DealBook Blog – NYTimes.com.