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Where's the toxic waste?
Banks are paying back TARP money and claiming they're the picture of health. So what happened to all those toxic assets that were clogging their arteries a few months back? Senior Editor Paddy Hirsch explains.
Derivatives
Credit default swaps? They're complicated -- and scary! The receipt you get when you pre-order your Thanksgiving turkey? Not so much. But they have a lot in common: They're both derivatives. Senior Editor Paddy Hirsch explains.
Bonds, notes and bills
So much government debt! But what's the difference between the Treasury's bills, notes and bonds? Senior Editor Paddy Hirsch explains.
Inflation
Most economists agree that inflation of about 2% or 3% annually is a natural function of a growing economy. But people are worried government stimulus measures could spark much higher inflation. Senior Editor Paddy Hirsch explains
High-frequency trading
High-frequency trading is creating a ruckus on Wall Street. Marketplace Senior Editor Paddy Hirsch explains what high-frequency trading is and why some people are up in arms about it.
Factoring
Many small businesses get the cash they need to operate and expand from so-called factors. One of the biggest factors in the business is CIT, and with CIT on the ropes, small businesses are worried. Senior Editor Paddy Hirsch explains what factoring is, and how it works.
Financial alchemy
Many asset-backed securities have been downgraded from AAA recently. But at least one issuer has miraculously repackaged a downgraded deal to make some of its bonds worth a AAA rating again. Senior Editor Paddy Hirsch explains.
Where's the toxic waste?
Banks are paying back TARP money and claiming they're the picture of health. So what happened to all those toxic assets that were clogging their arteries a few months back? Senior Editor Paddy Hirsch explains.
Dark pools
Dark pools are exchanges where people trade stocks anonymously. Senior Editor Paddy Hirsch explains how they work, and why the SEC is considering regulating them.
The 'repo' market
Senior Editor Paddy Hirsch explains why the repurchase (or repo) market is a vital part of the financial system, and why the government is considering changes to it.
Meet Cap 'n Trade
Cap and Trade is the linchpin of the government's effort to curb carbon emissions. Senior Editor Paddy Hirsch explains how the cap and trade model works.
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Comments
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From Ogden, UT, 08/25/2009
Nice work. A great source of information. Thanks
From Columbus, OH, 07/27/2009
Padd
Paddy Old Lad!
Another great presentation!What really great work you do!
Astonished and interested!What a
great education you are providing me.
Cheers to you old bean!
Bob Braithwaite
great education you are providing me!
Cheers to you old bean
07/16/2009
Forgive me on my memory of current events, but werent the mark to market rules recently changed so the banks can value the 'fat' at their perceived fair value?
Also, doesn't the amount of fat on the books restrict lending, pressuring credit markets?
07/15/2009
Hi Steve
Yes, the truly toxic stuff is indeed non-performing. As such, it should be marked to market. And the market for the truly toxic stuff is probably zero. The problem is twofold. Firstly, some banks would argue that there is no real market for the toxic stuff - because no-one wants to buy it, there is no bid, which means marking it would be guesswork. Secondly, some banks are still kidding themselves that the securities might recover someday and be worth something. So they're saying they're going to hold the paper to maturity, meaning they don't have to mark to market. If they were honest abut it, they would be marked down, but marking them all down at once, to their real levels, well, that could break them.
07/15/2009
You draw the money as if it's there on the balance sheet "countering"the toxic stuff. But some that poured-out-gravy money was used for bonuses. Some was used to buy other banks. So drawing your picture as if it's all there to balance the toxic (and thus an excuse for banks not lending more) was not quite honest. I'm sure the bankers thank you but, Tsk tsk.
07/15/2009
this was fantastic - thanks so much!
07/15/2009
Paddy,
Your talent for explaining complex concepts is legendary. Any chance you could tackle the potential problems that a proposed Own-to-Rent plan (whereby once-homeowners get to stay in their homes but give up equity and rent from then on) would create for the housing market, securities holders, and banks?
From Amherst, MA, 07/13/2009
Fantastic. Very illuminating. Keep up the good work!
From FL, 07/13/2009
Regarding "Where is the toxic waste" aren't these assets in the "fat" section "non-performing"? And as such, aren't they already marked down dramatically?
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