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Goldman and Morgan Stanley get wise

Written by Reggie Middleton
Monday, 18 August 2008
From the Dealbreaker site: Morgan Stanley and Goldman Sachs are linking their lending to hedge funds to the market's assessment of the credit worthiness of the investment banks. Morgan Stanley will reportedly evaluate the amount of leverage it will supply to hedge funds based on the price of its own credit insurance pricing. Goldman is said to be linking its willingness to provide loans to hedge funds based on its bond prices.... The changes would limit the ability of hedge funds to borrow from either firm if borrowing by Morgan and Goldman became too expensive, indicating a lack of market confidence in the financial health of the firms. In one sense, this seems a practical response to volatility in the credit markets, reducing exposure to hedge fund leverage as credit markets for financial companies become unsettled. It does, however, create a self-serving dynamic for the investment banks. If hedge funds taking the view that the companies have become unstable push up CDS or bond yields on the firms, they may find themselves unable to borrow from the firms. In other words, it gives the hedge funds an incentive not to bet against Goldman and Morgan.... Well, I don't borrow from any of them so as far as I'm concerned it's open season. Remember that Bugs Bunny, Daffy Duck, Elmer Fudd skit? Duck Season, no Rabbit Season... Add this page to your favorite Social Bookmarking websites Set as favorite Bookmark Email This Hits: 1332 Trackback(0) TrackBack URI for this entry Comments (6) Subscribe to this comment's feed ... written by a b, August 18, 2008 Once again, spelling is your achilles' heel. It's "Duck season. Wabbit season... Fire." Elmer J. Fudd, Millionaire +0 ... written by cemekao, August 18, 2008 Reggie, While you raise a fair point, Goldman and Morgan Stanley also derive some income by lending. Would they be willing to give up that income simply because the hedgies are betting against them? I seriously doubt that. I compare this to a subprime borrower who refuses to do business with anyone but American Express. To such a person, i say "goodluck." After pulling out every trick, the last item in this dangerous game is a gun with only one bullet. This cannot end well. +0 ... written by Ed Ryan, August 19, 2008 Hum.... Can these Wall Street icons lend to these hedge funds while shorting the hedge funds holdings? Can these guys then tighten the screws to make their net positions profitable? Yes they can. But would not that be betting against their clients? Jessie Livermore would have. And Goldman does not have higher ethical standards than Jessie. But isn't there a J.P. Morgan to counteract Jessie? NO, no, no. The force is the fed and investment banks will cheat just like members of OPEC cheat. This is a game of survival, and every once in a while, the members will gather just like the TV show, and someone will be voted off. Lehman did not participate in the bailout of LTCM. Thus, they could be voted off. Washington Mutual is not one of the blessed 19, thus they could be voted off. Wachovia is not one of the blessed 19, thus they could be voted off. We are in the middle of the 'forces-that-be' desparately trying to save the Western Monetary System from total collapse, while individual players are trying to stay aflot. Some times, some players, are not willing to take a bullet for the greater good. Thus, we have increased volitility and no end in sight. But fear not, Rock On! We faced this is 1931 and survived! We will again! +0 ... written by Reggie Middleton, August 20, 2008 I wonder what Goldman and Morgan's stated reasons are for not relying on the major credit rating agencies' ratings for doling out credit to clients. Are the world's most prominent investment banks publicly stating that the ratings agencies are now "officially" full of sh1t? +2 ... written by Marc Authier, August 25, 2008 You can include politicians in the lot of full of sh1t too. GM, Ford and Chrysler are about to become Government Sponsored Entities. Like the number. 50 billions aid package paid by US citizens and the stupid suckers that finance the government. 50 billiion is about the GDP of Ukraine a country of 55 million people.As usual when big US corporations ask these things it's not socialism. It's only socialism if it is done in France or Europe. A " I want my own GSE status" should be started by every citizen. That way the rating agencues could give every citizen a triple A rating. +0 Stock Exchanges written by stock exchange, August 29, 2008 Video are also informative. these catoonic approach is great +1 Write comment Name Email Website Title Comment smaller \| bigger Subscribe via email (Registered users only) I have read and agree to the Terms of Usage. Write the displayed characters
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