The Federal Reserve announced changes to its emergency lending window for financial institutions today.  The changes extend the repayment period for the loans and the duration of the program among others.  The lending window allows banks to borrow from the Fed for short periods of time while putting up securities (such as mortgage backed securities, etc.) as collateral for the loan.  Banks have used this lending window to allev

A great quote in the New York Times by way of Naked Capitalism from one of my favorite authors, pundits, quants Nassim Taleb about those trying to make predictions in the current market:

Citigroup chairman Win Bishcoff said that housing prices in the US and Britain could fall for another two years before leveling off.  It sounds nice, but it’s wrong.  House prices are going to continue falling for long than two years - especially in highly-speculative areas like California, Florida and Nevada.  The reason?  Option ARM and Alt-A loan resets that start to kick-in in earnest around 2010.  See below graph.

The big question after IndyMac (and Fannie and Freddie for that matter) is who’s next in the great bank failure flameout of 2008?  There’s plenty to speculate and the stock market is putting the hurt on those that look like the weaklings of the pack.  The biggest ones hurting?  Regional banks who bet big on mortgages and don’t have the massive capital reserves (or ability to raise it quickly).