Category Archives: Derivatives

Debunking Goldman’s FCIC Testimony on AIG and Real Estate Shorts

The Financial Crisis Inquiry Commission grilled Goldman chief operating officer Jonathan Cohn and CFO David Viniar this week, with today’s session focusing on AIG, and in particular, whether Goldman’s collateral calls were abusive and damaged the insurer. Readers know that I have perilous little sympathy for Goldman. However, it is important that investigations focus on […]

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Time to Investigate Blankfein and Paulson (More AIG Shenanigans Edition)

The New York Times has unearthed a damning tidbit about the bailout of AIG: When the government began rescuing it from collapse in the fall of 2008 with what has become a $182 billion lifeline, A.I.G. was required to forfeit its right to sue several banks — including Goldman, Société Générale, Deutsche Bank and Merrill […]

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Richard Smith: Did We Wind Up With Any Reform of the Shadow Banking System?

By Richard Smith, a London-based capital markets IT consultant In my last post, “Tracking the Rabbit through the Anaconda” , I mocked Geithner a bit and promised you all a spot of moaning about what’s missing from the financial reform bill. Well, the anaconda has now had the time it needed to produce its offering. […]

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Misnamed Financial Services “Reform” Bill Passes, Systemic Risk is Alive and Well

I want the word “reform” back. Between health care “reform” and financial services “reform,” Obama, his operatives, and media cheerleaders are trying to depict both initiatives as being far more salutary and far-reaching than they are. This abuse of language is yet another case of the Obama Adminsitration using branding to cover up substantive shortcomings. […]

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Tom Adams: Face to Face With Polished Wall Street Psychopathy (SEC Says that ICP Stole from My Old Company Edition)

By Tom Adams, an attorney and former monoline executive When the financial crisis hit, I was in the direct line of fire. My company blew up very early in the crisis, giving me the dubious opportunity to see how bad things were going to get long before most of the rest of the world, including […]

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Geithner Yet Again Misrepresents TARP “Performance”

The problem with propaganda is that it is generally effective. Utter the Big Lie often enough and most people will come to believe it. The Obama Administration has engaged in persistent misrepresentation of the outcome of the TARP equity injections, which is a manifestation of its early decision to reconstitute as much as possible, the […]

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Mirabile Dictu! The Fed Criticizes Wall Street Pay Practices

The normally bank-friendly Fed fired an unexpected shot across the industry’s bow today, taking issue with its failure to take sufficiently tough measures to curb undue risk-taking. Per the Washington Post: The Federal Reserve has completed an initial review of compensation policies at 28 large banks it oversees and has been giving them confidential feedback […]

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Why is No One Willing to Say Wall Street is Overpaid?

The New York Times yesterday featured an article by Yale economist Robert Shiller in which he discussed how financial reform had fallen short of addressing the conditions that caused the crisis. He focused on the failure to implement effective pay reform at the large financial firms that too big or otherwise too crucial to fail: […]

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The New Republic Lays on Hot and Heavy JP Morgan PR

I recoiled on the first reading of Noam Schrieber’s “The Breakup,” an account of the recently-cooled relationship between JP Morgan and the White House at The New Republic this week. And I don’t like it much better upon a second perusal. So much of the piece is devoted to uncritical recitation of pure JP Morgan […]

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SEC Investigates Magnetar, Sponsor of CDO Program That Pumped Up the Subprime Bubble

Readers of this blog may know that we broke story in our book ECONNED of the role that the hedge fund Magnetar played in increasing the severity of the subprime bubble through its program of hybrid CDOs (meaning composed of actual tranches of subprime bonds plus credit default swaps). To recap: Magnetar embarked on an […]

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BP to Create $20 Billion Fund for Leak Damage

Note the fund is to be established over two years, through a combination of dividend cuts and reduction in spending. Moreover, a planned dividend payment for June 21 is being halted, which would appear to be a meaningful concession. From Bloomberg: Svanberg and Chief Executive Officer Tony Hayward agreed to set aside $20 billion over […]

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Satyajit Das: The Year of Wishful Thinking

By Satyajit Das, a risk consultant and author of Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2010, FT-Prentice Hall). A year of wishful thinking … The period from March 2009 was the year of wishful thinking. Central banks cut interest rates and governments opened their cheque […]

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New York Times Runs Yet Another Banking Industry Propaganda Piece

I know the headline above verges on “dog bites man” but the New York Times story, “In Louisville, View of Banks’ Role in the Everyday” is pure financial services industry PR masquerading as Norman Rockwellesque treacle. I know Fridays in the summer are usually slow news days, and the Grey Lady might occasionally have to […]

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Goldman: No SEC Settlement Imminent

Bloomberg notes that Goldman’s president Gary Cohn has stated that the firm is not close to a settlement of the SEC’s fraud case against it for one of its Abacus CDOs. Note that this is contrary to rumor and speculation as recent as last week and suggests talks are pretty close to dead. The SEC […]

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SEC Investigation of Goldman Trading Against Its Clients Widens

The latest shoe to drop on the Goldman front is the report on Wednesday that the SEC was investigating yet another one of its synthetic CDOs, this one a $2 billion confection called Hudson. It isn’t clear whether the SEC will file charges, but this one has the potential to be particularly damaging in the […]

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