Is it any surprise that Wall Street went a bit off the deep end with the (admittedly barmy, but that’s a separate issue) Blanche Lincoln proposal to spin off derivatives desks? Derivatives, which are now deeply integrated in how dealer banks devise customer transactions and how they manage their own risks, are a large proportion […]
Read more...An article by Gillian Tett in the Financial Times, “Trading volumes retreat with investor trust,” contends that the notably low trading activity of late is a sign of deeper changes in financial markets: The most pernicious issue hanging over the system right now is a loss of confidence – not merely in the idea that the […]
Read more...This post first appeared on July 11, 2007 Readers of this blog know that I have been concerned about the state of the credit markets for some time. We’ve had (until the last month or so), rampant liquidity feeding asset bubbles in virtually every asset class except the dollar and the yen, tight risk spreads […]
Read more...There are a lot of bad things you can say about Fannie and Freddie: that they were part of the oversubsidization of housing in America, that they’ve had an overlarge side business of funneling cash to friendly politicians, that some of their “innovative” practices, like requiring the use of the electronic mortgage registration system, MERS, […]
Read more...Even in this TARP and Fed supported, “heads I win, tails you lose” of the banking industry, the “you live by the sword, you die by the sword” element has not been entirely removed. Witness the schadenfreude-gratifying distress at JP Morgan’s commodities unit, headed by Blythe Masters (a supersaleswoman who has already gotten a fair […]
Read more...Readers may recall that the Federal Reserve created three vehicles to hold dodgy assets it obtained via the Bear and AIG bailouts, namely Maiden Lane (for Bear), Maiden Lane II (for AIG residential mortgage backed securities) and Maiden Lane III (for CDOs the Fed bought as part of taking out AIG credit default swap counterparties […]
Read more...Augmenting Ed’s recent links re Tom Adams, regular readers will remember Yves got a magazine cover and write-up in Calcalist. Now Tom Adams, another contributor to “Naked Capitalism”, (and ECONned helper, Magnetar sleuth, etc etc), has got a writeup by Calcalist. The main article is here, and it’s all in Hebrew, which Google Translate struggles […]
Read more...This post first appeared on March 14, 2007 One of today’s lessons is to have greater courage in my convictions. In a number of earlier posts (such as “The Rising Tide of Liquidity,” part 2 and part 3 of the same, “Where Has the (Perception of) Risk Gone“) I pointed to how toppy the markets […]
Read more...Joint post by Richard Smith and Tom Adams, a securities lawyer The fabulous Fab has entered his solo response to the SEC’s complaint. It provides an interesting glimpse into what are certainly complex legal strategies by Tourre, Goldman and the SEC. The list of his stated defenses are at the bottom. First, the response may […]
Read more...Back to this thing to try to work out what it’s driving at. Yves wrote: I have serious trouble with its bottom line: We document that the shadow banking system became severely strained during the financial crisis because, like traditional banks, shadow banks conduct credit, maturity, and liquidity transformation, but unlike traditional financial intermediaries, they […]
Read more...Tonight I am initiating summer reruns, a replay of posts I particularly liked from 2007, 2008, and early 2009 (the blog started in late December 2006). This selection represents roughly the top 1% of the pieces written then. I picked this window because it overlaps with the crisis (although the replays of posts from the […]
Read more...By Tom Adams, an attorney and former monoline executive and Yves Smith A common fallacy is to assume that situations are polar: win/lose, black/white, hot/cold, heads/tails. But more often, given A, “not A” is not the opposite of A. Conventional wisdom in the financial media is that the settlement announced by the SEC over its […]
Read more...Simon Johnson deserves tons of kudos for pointing out that the US is in the hands of financial oligarchs, via his celebrated Atlantic article, “The Quiet Coup.” But having recognized a clear and present danger, he seems peculiarly willing to confuse non-solutions with meaningful measures. In an article at Project Syndicate, he incorrectly celebrates a […]
Read more...When I was in the UK earlier this year, I saw a very senior financial regulator speak. In the Q&A session, someone asked him to comment on US financial reform. His reply was tantamount to “Wake me when it’s over,” and it was clear his expectations were low. One source of frustration is that the […]
Read more...Although it was unclear how the high concept behind the Volcker rule would translate into legislation, we had doubts from the get-go. The idea is sound: firms that are ultimately playing with government money should be involved only in socially valuable transaction intermediation and fundraising (and all major dealers around the world are backstopped, pretenses […]
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