The Wall Street Journal reports that Dutch bank Rabobank has filed a suit alleging that Merrill Lynch engaged in teh same type of behavior as Goldman did with John Paulson, namely, devising a CDO on behalf of a hedge fund who was using it to take a short position, and not disclosing that fact to […]
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Read more...We received a copy of the document via e-mail and assume this is being leaked broadly (which begs the question of whether this was by happenstance or deliberate. The proximity to the filing of the suit suggests the latter). Richard Smith published it on ScribD: Abacus-2007-AC1-INDICATIVE TERMS Update 8:15 PM: Several items jump out. First […]
Read more...Oooh, things are starting to get interesting. A number of journalists and commentators (yours truly included) have taken issue with the fact that some dealers (most notably Goldman and DeutscheBank) had programs of heavily subprime synthetic collateralized debt obligations which they used to take short positions. Needless to say, the firms have been presumed to […]
Read more...Bloomberg reports that Senate Agriculture Committee Chairman Blanche Lincoln is expected to table a proposal to require commercial banks to separate their derivatives operations from their commercial banking activities. The intent is to prevent banks from using cheap deposits to subsidize risky derivatives businesses, and thus eliminate the government backstopping of these activities. This “no […]
Read more...By Tom Adams, an attorney and former monoline executive; Andrew Dittmer, a mathematician who has worked for a hedge fund; Richard Smith, a UK-based capital markets IT consultant, and Yves Smith As described in ECONNED and in later reports by ProPublica, a Chicago-based hedge fund, Magnetar Capital, entered into a program of sponsoring subprime-based CDOs […]
Read more...By Tom Adams, an attorney and former monoline executive One of the ongoing myths of the financial crisis is that investor demand was what motivated the creation of so many bad securities. Banks, journalists and academics have all described the period prior to the crisis as a period of “insatiable investor demand” for things like […]
Read more...Magnetar 1) A neutron star with an intense magnetic field, capable of emitting toxic radiation across galaxies 2) A hedge fund, the single market player most responsible for the severity of the 2008 financial crisis, through the toxic instruments it created Rahm Emanuel 1) White House Chief of Staff 2) Politician selected by Magnetar’s CEO […]
Read more...By Satyajit Das, a risk consultant and author of Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives Zygmunt Bauman (2007) Liquid Times: Living in an Age of Uncertainty; Polity Press, Cambridge Zygmunt Bauman (2010) Living on Borrowed Times; Polity Press, Cambridge Alex Preda (2009) Framing Finance: The Boundaries of Markets […]
Read more...By Marshall Auerback, a fund manager and investment strategist who writes for New Deal 2.0. Over the last thirty years, we have steadily moved from a bank lending credit system, to one in which capital markets have become the primary form of credit intermediation. Unfortunately, our regulatory apparatus has not kept up. The result has […]
Read more...It seems the wheels are coming off the European experiment. Yesterday, we had a huge meltdown in Greek bonds. Media reports suggest that a recent article in German daily Frankfurter Rundschau are what triggered the latest selloffs in Greek sovereign debt (See the Telegraph’s account here; hat tip Swedish Lex). This article leaked portions of […]
Read more...Things are suddenly getting very interesting… Readers may have taken note that the Treasury has launched a son of HAMP, its ineffective program to get banks to provide undertake mortgage modifications, called 2MP. As far as I can tell, 2MP is a farce. It is simply another back door way to recapitalize troubled banks. Mike […]
Read more...Perversely, what prompted me to read Lawrence Kotlikoff’s new book, Jimmy Stewart is Dead, was a review that described his proposal as forcing all banking to become mutual funds. That seemed both radical and naive, but coming from a well known economist, I thought it would be interesting to see if he could make a credible case.
Read more...By Gonzalo Lira, a novelist and filmmaker (and economist) currently living in Chile In 1982, many of the banks hit by the Latin American debt crisis were effectively insolvent. Paul Volcker, as the then-Chairman of the Federal Reserve—charged with overseeing the banking system—effectively cast a blind eye on this banking insolvency. Volcker’s reasoning seems to […]
Read more...Even though I have read a number of accounts of the horrorshow of Jefferson County’s sewer financing fiasco, every time I go through a new one that it reasonably detailed, it still instills the same sense of rage. Rage not simply at the pervasive corruption – that’s bad enough – but that this predatory style […]
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