Ronald McDonald is a Safer Bet Than Uncle Sam

This past week saw a remarkable occurrence. The cost of insuring against a US default via credit derivatives hit record levels. It now costs more to insure against a US default on their debt than it does to insure against a default by McDonald’s. Ronald McDonald is deemed to be more trustworthy than Uncle Sam!

This is understandable in the light of the trillions of dollars in additional debt that Uncle Sam will soon be adding to its balance sheet. Yet the lemmings on Wall Street continue adding to their US dollar positions. Don’t be surprised to see a bailout down…

We Live In Interesting, Incompetent Times

Epics and Ongoing Busts in the Financial Sector

There may be a major hurricane battering the oil rigs and refineries in the Gulf of Mexico and Texas, but an even bigger one is crushing many of the key banking firms in America.

One is a natural disaster — you can’t blame people for Hurricane Ike unless they’re too stupid to heed storm warnings and get themselves and their families out of danger. But you can definitely blame people — specifically executives and regulators — for the man-made disaster currently engulfing investment banks and the financial sector as a whole.

Hundreds of billions of…

Buyout of Merrill and Bankruptcy of Lehman Heightens Worry of U.S. Credit Crisis Pain Still to Come

After a weekend in which the deepening U.S credit crisis sent one top investment bank to bankruptcy court and a second into the arms of a “White Knight” suitor, U.S. stocks yesterday (Monday) recorded their worst day since the 9/11 terrorists attacks seven years ago. Indeed, the Dow Jones Industrial Average plunged more than 504 points, its biggest one-day point decline since Sept. 17, 2001 – the day the markets reopened for trading after the attacks on New York and Washington.

Wall Street entered last weekend anticipating a government bailout of Lehman Brothers Holdings Inc. (LEH), but exited with Merrill Lynch…

ECB and BOE Inject Billions, Bank of China Cuts Rates as Central Banks Cope with Lehman Fallout

Central banks around the world, including the European Central Bank (ECB), the Bank of England (BOE) and the People’s Bank of China, scrambled yesterday (Monday) to shore up liquidity and protect domestic markets against the fallout from the collapse of Lehman Bros Holdings Inc. (LEH).

The Bank of England and the European Central Bank injected billions of dollars into global money markets and the Bank of China cut interest rates for the first time in six years and lowered capital reserve requirements for its smaller banks.

The ECB allotted roughly $43 billion (30 billion euros) in a one-day money-market auction that…

Lehman Brothers Raises Capital After $2.8 Billion Quarterly Loss

Lehman Brothers Holdings Inc. (LEH) was forced to raise fresh capital yesterday (Monday), evidence that the subprime-fueled credit crisis is still far from over.

“I am very disappointed in this quarter’s results,” Chairman and Chief Executive Officer Richard S. Fuld, Jr. said in a company statement released yesterday. “Notwithstanding the solid underlying performance of our client franchise, we had our first-ever quarterly loss as a public company.”

The fourth-largest U.S. investment bank announced it would raise $6 billion to offset an expected $2.8 billion loss in its fiscal second quarter. Lehman said it expects a loss of $5.14 per share in the period…