Category Archives: Banking industry

The Financial Times Joins Fed Flattery Parade: “Fed makes $14bn profit on crisis loans”

I know it may be hard for most readers to believe this, but once upon a time, the New York Times really was a very good paper. I trace its demise to its decision to become a national newspaper, which took place in the later 1990s, instead of a New York city newspaper that set […]

Barney Frank Calls for Audit of Fed, Limits on Emergency Powers

Barney Frank is joining the “rein in the Fed” party, with a key distinction: he wants to steer clear of messing with the central bank’s independence in monetary affairs. Thus, the call for a Fed audit ex that activity is not surprising. However, a possible new front is that Frank also wants to place some […]

Lehman UK to Sue Parent for $100 Billion

Even if you don’t get a thrill from looking at spectacular car wrecks, one reason to take interest in the Lehman bankruptcy is that it may get at issues that regulators seem remarkable loath to address, namely, how did a company that reported positive net worth and not a single big firm equity analyst ever […]

Party Time! Wall Street Back to Its Old Highly Levered Ways

Bloomberg reports that Wall Street is back to its free-wheeling, high-levered ways. This is a classic example of moral hazard in action. Why worry about blowing up the bank when you know the taxpayer will bail you out? From Bloomberg (hat tip DoctoRx): Banks are increasing lending to buyers of high-yield company loans and mortgage […]

FSA’s Lord Turner Walks into Buzzsaw by Suggesting Finance Industry Needs to Shrink

Candor is clearly not a good quality in a regulator. Lord Turner, the chairman of the UK’s Financial Services Agency, had the temerity to challenge the notion that rule by the Masters of the Universe was a good idea. From the Financial Times: The head of the City of London watchdog says Britain’s “swollen” financial […]

Mirabile Dictu! Is It Becoming Respectable to Challenge the Finance Brain Drain?

A new and welcome front may be opening in the efforts to rein in an overly powerful and now explicitly state-backed financial services industry: challenging its claims that its activities are good for society. While the provision of credit is important to any economy beyond the barter stage, finance should be the handmaiden of commerce, […]

How Banks (and Companies) Diversify Their Way Into Incompetence

I read my first management book at the age of 11, not because it was a management book, but a best seller at the time, And it may have been imprinted by it more than I realized. The Peter Principle says that managers are promoted until they reach their level of incompetence. The classic example […]

Judge Rakoff is Not Buying What SEC and Bank of America Are Selling

Judge Jed Rakoff is illustrating what an independent judiciary should look like, and the fact that his actions are being depicted as “unusual” says how spineless many jurists have become. Sports fans may recall that Bank of America and the SEC came before the bench to approve a $33 million settlement of the failure to […]

Volcker Wants to Regulate Money Market Funds Like Banks

Paul Volcker clearly wasn’t kidding when he said the most important banking innovation in the last 30 years was the ATM. Although money market funds go back further than that, to the early 1970s, Tall Paul is not so keen about them either. This isn’t the first time he had gone after money funds, and […]

Banks Sitting on Bad Mortgages, And They Aren’t Getting Any Better

Fitch released an analysis that shows that mortgage cure rates, meaning the proportion of borrowers who manage to get current once they fall behind, have tanked. From the Wall Street Journal: The report from Fitch Ratings Ltd., a credit-rating firm, focuses on a plunge in the “cure rate” for mortgages that were packaged into securities. […]

Roubini On U Shaped Recovery: More Statesmanlike or Less Certain?

Nouriel Roubini verged on apocalyptic during the course of the crisis, and was proven largely right. Now that he has softened his stance, some have accused him of moderating his tone as a result of his much higher profile. While that’s possible, a couple of factors seem more likely. First and foremost, much of Roubini […]

Goldman Gives Preferred Clients Stock Trading Tips Early, Defends Practice

Ooh, so there is gambling in Casablanca! I’m shocked, shocked! An excellent bit of sleuthing comes at the Wall Street Journal, on how Goldman has for the last two years has had “trading huddles” that lead to ideas being presented to clients before analysts changed their grades on a stock. Proprietary traders also attend the […]

Guest Post: Review of Walter Bagehot’s Lombard Street

By Robert P. Baird of digital emunction When, back in March, the Bank of England announced that it was adopting a program of quantitative easing, The Economist reported the news with some trepidation. While recognizing that the threat of deflation was real and imminent, the magazine gave voice to the fear that “that the border […]

Quelle Surprise! Banking Industry Faring Worse Than Stress Test Assumptions

This blog is a card carrying hater of the stress test farce of earlier this year, The Treasury said from the start that the purpose of the stress tests was to restore confidence and show that the 19 banks tested, which hold 70% of the nation’s deposits, were well capitalized, and then said more or […]

Is Finance Inefficient or Too Efficient?

I have a good deal of respect for Gillian Tett, but I disagree with her analysis in a Financial Times piece today: A decade ago, it was fashionable for Western consultants, bankers and business people to decry Japan’s domestic service industry. For Japanese business sectors, ranging from milk production to financial broking, have long been […]