More Credit Fall-Out

I don't have a lot of time today, but here's some round-up of the ongoing credit crisis - which, I think, it really an economic crisis because while Alan Greenspan might think the worst is over, I suspect he's talking strictly of liquidity issues. The impact on consumers and, therefore, business has got to last for years, unless lenders go back to the same risky behaviors that got us here in the first place, and that would be tragic, simply compounding the impact farther down the line.

• Deutsche Bank's investment bank unit is expecting "a third-quarter pre-tax loss of up to €350m (£242m), after €2.2bn of charges relating to leveraged loans, structured credit products and trading," according to the Financial Times. That's about $493 million in loss and almost $3.1 billion in charges in US dollars, according to the XE.com conversion calculator.


• The same article said that Merrill Lynch's fixed income trading practice will see a loss of $1.5 billion in the third quarter. The company has sacked the heads of fixed-income trading and structured credit products. Sounds like scapegoating to me - the company got greedy, didn't exercise oversight and prudence, and now wants to blame someone.


• Bears Sterns is cutting its workforce by another 310 jobs.


• The European Central Bank is keeping its interest rate at 4 percent, while the Bank of England is staying at 5.75 percent. Although I'm far from an expert in high finance and economics, I'd wonder if this might influence the Fed to not go for another rate drop, the expectation of which, according to analysts, is fueling the renewed optimism (notice I'm not saying strength) in the U.S. stock market. If so, a surprise could spell an unpleasant drop in the the DOW and NASDAQ by November.


• According to another FT story (love that paper), a McKinsey Global Institute study suggests that "[g]lobal financial markets face a permanent shift in power from traditional money managers to opaque groups such as petro-dollar investors, Asian central banks, hedge funds and private equity groups." Their holdings apparently represent 5 percent of the world's financial assets. If current trends continue, that could become three-quarters the size of the global pension markets. That's influence and power among people who are out of the reach of global regulation.

The big story, I think is the last one. There are seismic shifts in business as usual. The entire global financial structure is undergoing a restructuring in reasonable assumptions and perceptions. That is going to affect how every company has to consider its financing options, which means reconsidering its business.