Thursday, September 18, 2008

Positive developments

Well, I said this couldn't go on much longer, and it didn't even last a day. News that the government is considering some sort of RTC type solution for the subprime crisis sent bank stocks sharply higher. Gold gave up all its gains as people began to reassess their fear that bank failures were going to be massive. The VIX has dropped back to 34, and 10-year Treasury yields have jumped 11 bps. That leaves the VIX/10-yr ratio at 9.8, substantially below its high this morning. There will be plenty to worry about in coming days, though, since creating another RTC won't be the work of one day, and the details will likely be in flux for awhile. But it does look like the worst of the panic is behind us.

1 comment:

Tom said...

This is a solution?

Okay, maybe it will transfer all the costs of failure to the tax payer. I guess that's a good thing for the thieves in banking and on Wall Street.

My guess is that the sheer magnitude of this problem will make this new criminal assault on the tax payer impractical.

As to the end of of the crisis: this is not just a banking crisis. That we can count on, IMHO.