Tuesday, August 21, 2007
Bloomberg says: Wall Street is in a financial panic and won't fund any mortgage bonds, even AAA rated bonds backed by prime home loans. Even the Fed's decision to cut the discount rate that it charges banks failed to revive demand. The market is unwinding because no one wants to own A1/P1 asset-backed commercial paper. That's just crazy. If it's backed by subprime, all right. If it's backed by junk, get out. But if it's backed by high-quality receivables from Macy's, that market should be functioning and that market has stopped functioning. Illustration: Wall Street During the Panic of 1884 Schell & Logan. Engraving: Harper's Weekly; May 24, 1884. Wall Street looking west toward Trinity Church past the statue of George Washington on the steps of the Sub-Treasury building on May 14, 1884 when a brief panic was caused by the sudden failure of the Grant and Wood Bank. Despite a flurry of unusual activity the Panic was not serious and business soon returned to normal.