Research Zeitgeist: AIG Bonus Scandal? Enough Already!
While politicians of all stripes, egged on by most of the media, were foaming at the mouth over the financially insignificant “AIG bonus scandal,” visitors to Research Recap during the last week were focused on meatier fare.
Our top post this week was based on a CreditSights analysis of the Flow of Funds report, once considered fodder for only the hungriest of economic analysts, but now the stuff of headlines. The worrisome implication is that the US is facing a massive cut in lending to US consumers and the corporate sector over a period of not months, but years.
In second place came another complex but important topic: the potential impact of mortgage cramdowns ordered by bankruptcy judges. While much of the mortgage industry has been strongly opposed to the legislation, the analysis finds that lenders (and hence holders of mortgage-backed securities) might fare better under a cramdown scenario than under foreclosure.
Also drawing interest: Jim Kaplan’s Guest post defending Moody’s for publishing a “Bottom Rung” of companies at highest risk of default. Of course, Kaplan’s Audit Integrity is in the business of identifying companies with high-risk corporate governance attributes, but his point is valid nonetheless. If only the rating agencies had been as vigilant about identifying high-risk debt derivatives.
There has been no shortage of horror stories about the misfortunes of many hedge funds, but another popular post from Aite found that as a group hedge funds have actually fared pretty well. Although there will undoubtedly be regulatory changes and adjustments to the business model, hedge funds are here to stay - though the sector is a prime example of past performance being no indication of future results.
Recent Reason for Reading Research Recap:
Apparently, the German government reformed its vehicle tax, which provided ample incentive for Germans to dump their clunkers and order new cars. Perhaps U.S. policymakers could take a page from the German playbook.
U.S. Automakers Race to the Bottom, (ResearchRecap, March 5, 2009)
Proposed bill would allow government to buy vehicles — at least eight years old — for recycled parts and grant owners vouchers toward more fuel-efficient N. American vehicles.
(Washington Post, March 19, 2009)
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