"CDS Market Reaction to Geithner Plan
Here are today's CDS spread changes for the major U.S. banks:
BofA: 21 bps tighter
Citi: 27 bps tighter
Goldman: 16 bps tighter
JPMorgan: 5 bps tighter
Merrill: 18 bps tighter
Morgan Stanley: 16 bps tighter
Wachovia: 13 bps tighter
Wells Fargo: 10 bps tighter
Other U.S. financials:
Berkshire Hathaway: 28 bps tighter
AMEX: 13 bps tighter
Capital One: 16 bps tighter
Clearly the CDS market thinks the banks will be willing to sell their troubled assets under the Geithner plan. I probably agree.
Me:
Don said...
The TAs will be become liquid, priced, and sold, now that the government has entered the TA business.
Going forward, the problems will be:
1) Large losses to taxpayers
2) A GAO report of some kind saying that the government's actions caused the price of the TAs to rise
3) The subsidies turning out to be very large ( even if some of it is recovered )
4) Pimco et al making good money, but taxpayers not so much
5) The appearance of collusion or favoritism of some kind
6) Complaints that congress was circumvented ( whether fair or not )
I hope it works.
Don the libertarian Democrat
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