Sloppy as the year was in so many years, 2007 broke down quite neatly when it came to the news about capital markets and banking. Early on, everyone’s idol was the hedge fund manager, stuffed with capital and compensation and ready to lend it out to corporations. Indeed, everything was going swimmingly in terms of liquidity.
Then came the second half of the year, and all that liquid seemed to freeze. After first attacking homeowners, the subprime mess assaulted lenders, investors, and much of Corporate America. Tellingly, the complex securitization schemes that kept the real-estate boom afloat began to come under intense scrutiny in 2007.
To be sure, early in the year, as a kind of harbinger of things to come, we reported on the ways banks had lobbied to weaken their securitization controls. We also sounded alarms about the threat that hedge funds might represent to corporate management, looked closely at lenders to see what made them tick, and probed the surge in stock buybacks. Here’s a look back at the most riveting stories of the year in capital markets and banking.
Saving Banks: How the Mortgage Bailout Strains Accounting
Efforts to contain damage from the subprime mortgage meltdown are stretching accounting safeguards put in place after Enron.
Hedge funds often push company management around. But they may not be as tough as they seem.
• A Short History of Hedge Funds
From Aristotle to Amaranth, the funds have lured investors with dreams of heady profits and terrified them with nightmares of risk.
• Subprime Securitization: How Much Spillover?
Experts debate the amount of the threat that problems with high-interest debt for homeowners present in other credit-related areas.
Feds Soften Structured-Finance Stance
For corporate clients of banks, the move represents a relaxation of a regime of scrutiny that regulators had recommended in 2004.
• Only the Strong Shall Thrive
Financially sound companies find gold in credit mayhem even as weaker players fear the game is up.
• Land of Opportunity
Can foreign banks succeed where U.S. megabanks failed to tread?
• Are Buybacks Really a Bargain?
How deliberately deflating earnings might be helping some companies boost their share price.
Six banking executives discuss their concerns about the credit crunch and its ever-widening implications.
FASB Rule Spawns a Second Bottom Line
The new standard kicks minority-interest equity out of the mezzanine, changing what makes up net income.