One of the impediments to getting to the bottom of the financial crisis is some of the most destructive behavior involved complex instruments like collateralized debt obligations and credit default swaps. It isn’t simply that these “innovations” had terms and features that differ from familiar investments like stocks and bonds, but the way those instruments […]
Read more...By Joshua Rosner, a managing director of an independent financial services research firm who writes for New Deal 2.0 In Geithner’s AIG testimony before the House Oversight Committee, the Secretary again tried to sell the notion that ‘if we didn’t act then, millions more would have lost their jobs and thousands of factories would have […]
Read more...If anyone had any doubts as to whether the Federal Reserve should assume the role of systemic risk regulator, a comment in the Financial Times by Board of Governors member Kevin Warsh, based on a speech he is to give later today, puts the matter firmly to rest. No matter how logically positioned a central […]
Read more...As readers may know, the financial reforms proposed by the Obama administration barely deserve the name. The late-in-the-game efforts to rebrand the effort by putting Paul Volcker in the forefront and patch up one of the gaping holes, that the government is backstopping risky trading businesses (Goldman Sachs has issued FDIC guaranteed bonds) illustrates the […]
Read more...The New York Times writes tonight about strategic defaults on mortgages, and argues that enough mortgages are deeply enough under water to induce solvent borrowers to think about walking away: New research suggests that when a home’s value falls below 75 percent of the amount owed on the mortgage, the owner starts to think hard […]
Read more...Just as we suspected, the “Volcker Rule” proposed by the Administration fails to acknowledge the new facts on the ground: that the crisis took place in the capital markets, and that some of the major participants were funded by deposits was incidental. Half of the balance sheet of major dealers comes from repos, and a […]
Read more...The current issue of Institutional Risk Analytics discusses an issue that is a tad arcane for many readers, but more important than it seems on the surface. The 2005 bankruptcy law changes, among other things, provided that that derivative transactions were exempt from bankruptcy provisions, meaning that creditors have to put in their claims against […]
Read more...We’ve argued that the “Volcker Rule,” which would limit “proprietary trading” by banks, is in theory a very good idea, but the proposal put forward by Volcker/Team Obama goes wide of the mark by defining any customer trade as not being part of proprietary trading. That’s a spurious distinction; large-scale position-taking well beyond what was […]
Read more...The folks at Goldman, and Blankfein in particular, really do not get it. From Times Online: Goldman Sachs, the world’s richest investment bank, could be about to pay its chief executive a bumper bonus of up to $100 million in defiance of moves by President Obama to take action against such payouts. Bankers in Davos […]
Read more...Ambrose Evans-Pritchard today has his usual type of offering: extreme, but nevertheless based on a valid observation, on his favorite hobbyhorse, the EMU. His key observation comes at the end: EMU architects were warned in the early 1990s that monetary union would prove unworkable as constructed. They scoffed, sure that any crisis could be exploited […]
Read more...You have to love it. If the allegations prove true, it provides further evidence that the banksters cannot contain themselves. Here they get their bacon saved by the TARP (which was way too cheaply priced relative to the risk involved) and a host of hidden subsidies and supports. Yet the employees cannot stand to let […]
Read more...Paul Volcker has an op-ed in the New York Times that made my stomach sink. I had considerable hopes for Volcker’s involvement in financial reform; he’s one of the few regulators with the stature (literally and figuratively) who can say things to bankers, the media, and government officials that are unpalatable yet need to be […]
Read more...Reader John D sent a link to an Atlantic Monthly story that appeared in its December issue, “Did Christianity Cause the Crash?”. Although this piece is arguably dated, I though it was worthy of consideration. It makes an argument I haven’t seen made elsewhere; a quick search of the blogs to which I subscribe confirms […]
Read more...We have a President who, in his displays of pique against banksters, can work himself up to calling them “fat cats”. But immediately after that, um, display, he met with bank CEOs (well, the ones that didn’t stand him up) and was conciliatory, when the right move would be to show some steel. And when, […]
Read more...Is the modern version of “Beware of Greeks bearing gifts” “Beware of ‘reform’ proposals that bankers favor”? The fact that banksters seem to be bowing to the inevitable, that they will have to submit to some changes in how they do business, should be a step in the right direction. But their inability to accept […]
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