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: […]
Read more...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 […]
Read more...Ooh, this might get ugly. The ECB rather firmly resisted the idea of releasing its recent stress test results on individual European banks. And with good reason: many observers suspect that some of the big German and French banks look less than robust. (And this is before we get to the obvious elephant in the […]
Read more...Today provided yet another example of how the best government money can buy works. The Senate majority leader Harry Reid suffered an embarrassing defeat when his effort to pass a motion for cloture, which would have stopped debate on the financial reform bill, failed due to two Democrat and one Republican defection among the votes […]
Read more...At first blush, Greece’s prime minister George Papandreou statement that he is looking into litigation against banks that worsened the country’s financial woes sounds like pandering to his electorate. From Bloomberg: Papandreou said the decision on whether to go after U.S. banks will be made after a Greek parliamentary investigation into the cause of the […]
Read more...In March, the EU announced plans to restrict the operations of private equity funds. This is far from surprising, since US and UK firms have exhibited a nasty propensity to lever up firms, pull out a lot in the way of special dividends, and too often overdo the cash extraction and leave a bankrupt hulk […]
Read more...A lot of people are still feeling very bruised by last Friday’s market actions (Felix Salmon went as far as ordering all retail investors to get out of the pool). A message from a reader with ample trading desk experience: BTW, hope you didn’t have any sell-stops yesterday, WTF was that?!?!? I covered my SPY […]
Read more...By Richard Smith, a London-based capital markets IT specialist Here’s someone with his head screwed on, back in April 2007, who proves singlehandedly that “hoocoodanode” was no defense for failing to anticipate the implosion of the shadow banking system (more on this prescient analyst in due course): For several years now, we have marvelled at […]
Read more...We’ll know in due course, now that an investigation is underway, why the equity markets in the US went into complete freefall for about twenty minutes, with the Dow dropping 998 points. Per Bloomberg: Larry Leibowitz, chief operating officer of NYSE Euronext, said trades sent to electronic networks fueled the drop. While the first half […]
Read more...But opacity, leverage, and moral hazard are not accidental byproducts of otherwise salutary innovations; they are the direct intent of the innovations. No one at the major capital markets firms was celebrated for creating markets to connect borrowers and savers transparently and with low risk. After all, efficient markets produce minimal profits. They were instead […]
Read more...In the various blogosphere efforts to dissect the Goldman Abacus transaction now in the SEC’s crosshairs, some commentators have characterized it as unusual, a “bespoke” CDO“, or “a very complicated deal…a supersynthetic CDO.” Effectively, the view is that Abacus is a multi-tranche variant on the single tranche CDO structure that was developed with corporate CDS, […]
Read more...Reader Hubert sent along this post, with permission, and the following note: My friend Erwin has published a book out of ten years of columns for the German paper “Die Welt”. He put an Intro in front of it where he lays out why Germany will go down the tubes as everybody else. It is […]
Read more...By Tom Adams, an attorney and former monoline executive The SEC’s complaint against Goldman Sachs on its Abacus 2007 AC1 transaction may have impact beyond just the facts in that particular deal. The case has touched off a firestorm of reaction across the globe now that a government enforcement agency has dared use words like […]
Read more...By Andrew Dittmer, a mathematician with hedge fund experience, and Richard Smith, a UK based capital markets IT consultant Readers of this blog are by now familiar with the incredible story of how a single hedge fund (Magnetar) managed to play a shockingly extensive role in inflating the housing bubble in 2006-2007. The story was […]
Read more...By Tom Adams, an attorney and former monoline executive, and Yves Smith One issue that continues to puzzle us, in looking at the sudden furor about seemingly duplicitous dealings by investment banks in the real estate related CDO business, is that the focus thus far has been primarily on the investment banks that packaged and […]
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