naked capitalism

River says:

RE: ‘The G-20 Communique Of November 15th’…Great catch Yves! This communique is much more than the usual ‘progress was made’ variety and is surprising in it’s direct wording and tone. At least, surprising to me.

The wording is not clear but I think we should prepare for some type of currency controls.

‘Recent experience has taught us that there may need to be a greater role for the active management of international financial flows by governments.

Designing the new traffic rules for international finance, as it were, will take considerable time and thought. We have asked our ministers of finance to establish a high-level working group that will convene as soon as practically feasible to seek wider input, and craft a framework for discussion among heads of governments.’

The subject of protectionist tendencies and the need to avoid same in the same paragraph that the Great Depression is mentioned is surprising.

‘The weeks and months ahead will be trying times for economic policy makers everywhere, as they try to contain the fallout for output and employment. Raising trade barriers against imports will be a temptation, especially when currencies fluctuate so much. But the experience with the Great Depression teaches us that this is the surest way to magnify the costs of the crisis, and to spread it to other countries.’

Also, China gets a pat on the back for spending on infrastructure, encouraging consumers, etc.

World Bank will expand it’s own series of alphabet soup lending facilities.

G7 nations will continue current swap lines and open more if necessary.

a says:

Here’s another good one, about a well-known hedge fund (which masquerades as an educational institution to benefit from non-profit status) suffering large losses:

(Bloomberg) “Harvard’s $36.9 Billion Fund May Suffer ‘Unprecendented Losses,’ Faust Says.”

Chris says:

Might be useful for these more theoretical types like Rodrik and Eichengreen etc. to get involved in a dialogue with economists from what used to be called the Third World — not only ones pre-selected for their agreement.

It might help counter the still pervasive condescension and patronizing view from the top of the wreckage financial orthodoxy has made of US finance and economy, “do they really know what they’re doing”, and help improve foreign relations.

The Telegraph published this piece from Stiglitz this morning. It shows a bit more insight into this kind of issue, as well as what is contributing to this new Bretton Woods stuff that’s going on.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3425000/Financial-crisis-Europes-leaders-can-seize-this-opportunity-to-fill-the-leadership-gap.html

Viv says:

An addition for your links Yves?

There’s no one as Irish as Barack O’bama!

http://www.youtube.com/watch?v=Z0xFWbarrsc

Independent Accountant says:

YS:
There’s an old Polish story. The old Pole says to his grandchild, “Communist, capitalist, fascist. It all makes no difference. When the Germans and the Russians get together to talk, it’s bad for us”. That’s the way I feel about Paulson and Bernanke.

Been there says:

@ “Shoot the Messenger”

“…The guy who got 133 into the bill, Representative Spencer Bachus (R-Alabama), the ranking minority member of the House Banking Committee, told me he wasn’t trying to politicize accounting. ‘It just says, “Study it,”‘ he told me. “It doesn’t say [to do] a study to repeal it. It doesn’t say [to do] a study to suspend it…”

I would normally say this was a reasonable proposition (if only it hadn’t been uttered from the lips of a politician). However, the discussion should have been held years ago- BEFORE the adoption of SFAS 133. I’ve always been of the opinion that 133 is not as practical as historical cost standards for auditors to verify. Once you get beyond verifying the values of securities traded on a market exchange, there’s just too much room for monkey business in coming up with a FMV for other assets not listed on exchanges. Verifying historical cost seems to be more of a science(trace the item back to what was paid- cancelled check or charge on Bank statement) while the FASB adoption SFAS 133 moved the auditing profession in the direction of being more like an art(Let’s see, whadda we think this is worth?).

Having said that, I’m truly conflicted on this issue because SFAS 133, if followed properly, does seem to provide to provide important additional information. In theory, 133 made a great deal of sense. However, in practice (human nature being what it is) we can see it was not followed appropriately. The various CDO values blessed by the auditors, over the past few years, turned out to be highly inflated (probably due mostly to misrepresentations of risk associated with these instruments).

ps- I seem to recall the Baucus was one of the hardliner holdouts to the Treasury’s initial bailout bill. Wonder where he’s coming from on this.

Anonymous says:

Reading in succession (1) Waldman’s post, (2) Lewis’ article and (3) your post on Fannie should be required for anyone involved in regulating our financial system. It is so painfully obvious that the point of the system (as it is now constructed) is to transfer the risks to the shareholders and keep all (and I really mean, ALL) the profits at the executive level. Of course, this is not just a concern with financial companies. The system doesn’t work. Incentives are clearly not aligned. Who could still argue this point? Shareholders (even the big boys like CalPERS) are clearly not able to police the foxes in the henhouse. This is a MARKET FAILURE, and the voting public should not tolerate it any longer.

Ostrich says:

Here’s a question on the AIG deal. As I get it from the Norris blog and today’s NYT article, the identified use of cash is:

Swaps deal — $70 bil to cover the questionable securities at par, divided between lost collateral and purchase at present market.

Securities lending deal — $23 bil to take the stuff off AIG books, plus whatever has been paid out to the other side already.

Assuming that doesn’t add up to 150 bil, what’s the rest for?

lineup32 says:

Botton line we are getting a smaller ecomony with all the debt overhang, excess inventory of housing and other related assets that were overproduced plus we woun’t be needing a few extra million workers except health and gov’t. Oh my!

michael says:

Fantastic article from Michael Lewis.

Thanks so much for the link, Yves!