Transcripts

"Commentary"- Fun with Financial Funds

SUSIE GHARIB: And tonight's commentator has some thoughts on money, but not your money or my money or even his money. Here's Allan Sloan, Wall Street editor for "Newsweek."

ALLAN SLOAN, WALL STREET EDITOR, NEWSWEEK: We keep hearing that money is tight these days and that the Fed is likely to cut short-term rates next year. Well, let me tell you something. The people who talk about money being tight must live in a different world than mine. From where I sit, I see so much money sloshing around we're absolutely awash in liquidity.

I'm not talking about my own money, alas. I'm talking about the money pouring into hedge funds and private equity funds, which then have to lend it out or buy something with it in order to get a shot at earning big fees. Earlier this month, Ford Motor, which is burning money like SUVs guzzle gas, raised $5 billion by selling convertible securities, not to be confused with convertible cars. It started out trying to sell only three billion, but there was such demand that it sold five. Hedge funds piled into this stuff even though Ford is pledging most of its assets for huge secured loans. Those are up to $18.5 billion from the original $15 billion. The converts rank behind those loans, which makes it pretty risky. Hedge funds are making enormous loans. Others are buying junk bonds to finance leveraged buyouts being done by private equity funds. No matter what the statistics say, money sure doesn't seem tight. If anything, it's probably too loose, at least on Wall Street and especially when it comes to bonuses. I'm Allan Sloan.