Objects in My Calendar Are Closer than They Appear...
Joshua Micah Marshall Is Very Unhappy with the Los Angeles Times

Naked Capitalism Wants to Insure Himself Against Gillian Tett Having a Bus Accident

She is indeed one of the reasons why Jeff Sachs once called the Financial Times "the real newspaper--the best newspaper in the world":

naked capitalism: Explaining Last Week's Credit Seize Up: If the Financial Times' Gillian Tett were hit by a bus, I'd be in a lot of trouble. With all due respect to her colleagues, she is the best source of financial news.

Today, in "Structured investment vehicles’ role in crisis," Tett probes what went wrong in the credit markets last week.... [T]he commercial paper market, a short-term (typically under 90 day) market for corporate IOUs dried up. As these IOUs mature, they are often rolled... rather than repaid.... However... a new product called asset backed commercial paper is a major culprit in last week's crisis. Hungry for earnings, banks borrowed short and lent long by putting proceeds of their commercial paper issuance into structured investment vehicles that invested in, duh, structured credits (CDOs, anyone?).... German bank IKB had one of these vehicles that had some subprime holdings. Some counterpaties had gotten stringent about asset quality.... The sub tried to draw down the line of credit with its parent. IKB did not have sufficient cash.... The fact that one ABCP player was proven to have inadequate backup facilities ratcheted up the concern about counterparties up to a full blown panic. As Tett explains:

So early this month some European banks – and a few US institutions as well – quietly started trying to raise new credit lines themselves. That, however, triggered additional alarm.... Consequently, by the middle of last week, some banks started shutting credit lines to a sweeping list of institutions. “Commercial paper is now being funded on an overnight basis. The banks will not roll paper for three months.”... [T]he problems – perhaps ironically – were extreme in US markets, since SIVs typically raise a large proportion of their finance in dollars....

Policymakers hope that some of this panic will dissipate this week following the massive emergency injections of liquidity by the ECB and US Federal Reserve. And indeed, by the end of last week, borrowing rates were stabilising..... However, nobody close to this sector expects to see a quick solution soon. Commercial paper interest rates have not yet fallen, irrespective of central banks’ actions. In New York on Friday, they closed at their highest level for six years. There is deep uncertainty about what the central banks will do next – making ABCP players even more reluctant to start issuing and trading again. “Nobody is going to handle commercial paper if they think the Fed could be about to cut rates or do some thing else completely unexpected overnight,” explains one...

However, the third, most pernicious problem is that it is becoming clear central banks cannot resolve the biggest problem – a lack of clarity about valuations in structured credit markets and the almost complete loss of confidence that is infecting even the biggest and most diversified of conduit-type programmes.