Category Archives: Moral hazard

Ian Fraser: Stephen Hester, the Great Escape Artist

By Ian Fraser, a financial journalist who blogs at his web site and at qfinance. His Twitter is @ian_fraser. [An edited version of this article was published on pages 34-35 of the Sunday Herald on February 10th, 2013].

It has been described as the biggest banking felony in history … yet no-one has been prosecuted for the Libor fixing scandal. Ian Fraser looks at the RBS sacrificial lambs.

During Royal Bank of Scotland’s IT meltdown last summer, chief executive Stephen Hester referred to the risk “that you turn over rocks and find new things [that you have to clean up].” Last Wednesday, nearly five years on from the £45.5 billion taxpayer funded rescue of the Edinburgh based lender, a vast rock was hoisted aloft by three regulators. What lurked underneath was not a pleasant sight.

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Neil Barofsky: Geithner Doctrine Lives on in Libor Scandal

By Neil Barofsky, the former special inspector-general of the troubled asset relief programme and is currently a senior fellow at NYU School of Law. He is the author of ‘Bailout’. Cross posted from the Financial Times with permission

Now that Tim Geithner has resigned as US Treasury secretary, it is time to survey the damage wrought from four years of his approach to the financial crisis.

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Bill Black: Yglesias Pours the Geithner, Holder, Breuer (GHB) Banksters Immunity Doctrine in our Drinks

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City.

It’s early, but Salon has published on January 30, 2013 either the funniest or saddest column of the year to date: “Are Banks Too Big To Prosecute?”

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Cathy O’Neil: Why Nate Silver is Not Just Wrong, but Maliciously Wrong

By Cathy O’Neil, a data scientist. Cross posted from mathbabe

I just finished reading Nate Silver’s newish book, The Signal and the Noise: Why so many predictions fail – but some don’t. I have major problems with this book and what it claims to explain. In fact, I’m angry.

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Ian Fraser: HSBC’s $1.9 Billion Settlement Sets (Another) Dangerous Precedent

Yves here. One of the things that has too often gone missing in the many discussions of why massive scale money launderer HSBC was not prosecuted is the basis of the “doing that would be destabilizing” excuse. When a company is indicted (mind you, indicted, not convicted), pretty much all Federal and many (most?) state agencies are required to stop doing business with it, immediately. The effect of the loss of so much business, particularly for a large financial firm, is seen as a death knell.

Of course, that’s the point.

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Abigail Field: HousingWire Propaganda Part II – The Irresponsible Borrower Myth, Harry & Louise Style

By Abigail Field, a lawyer and writer. Cross posted from Reality Check

Showalter pushes the ‘it’s not the mod terms, it’s the bad borrower’ idea with far more than just a “Living Large” headline. He invents two couples, pitched as archetypes of good and evil, probably hoping to copy the policy-killing success of Harry and Louise. But this invocation of the irresponsible borrower myth is particularly egregious–both borrowers are trying to be responsible in the face of insolvency.

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Quelle Surprise! New York Fed Chair Dudley Confirms that TBTF Lives, Big Firms Still Can’t Be Resolved

The New York Fed’s William Dudley gave a surprisingly candid, meaning not positive, assessment of the state of the Too Big to Fail problem in a speech yesterday at the Clearing House’s Second Annual Business Meeting and Conference. From the text of his speech (hat tip Richard Smith):

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