Category Archives: Moral hazard

Volcker: Little Evidence Financial Innovation Has Helped Economy

Tall Paul is my hero. I would go further than he did in a speech in Sussex. The case can made that financial innovation of the OTC derivatives variety, which has mushroomed from 1992 onward, has been at best a wealth transfer device from the real economy to the financial economy, and has probably exacted […]

Guest Post: Woman Who Invented Credit Default Swaps is One of the Key Architects of Carbon Derivatives, Which Would Be at the Very CENTER of Cap and Trade

As I have previously shown, speculative derivatives (especially credit default swaps or “CDS”) are a primary cause of the economic crisis. They were largely responsible for bringing down Bear Stearns, AIG (and see this), WaMu and other mammoth corporations. According to top experts, risky derivatives were not only largely responsible for bringing down the American […]

Guest Post: Questions for Bernanke’s Senate Confirmation Hearing

The Senate Banking Committee will be chatting with Ben Bernanke this Thursday to vote on his reappointment. Demand that the Committee ask the following questions for our esteemed Esteemed Chairman (and contact your own Senators also and demand that they find out the answers to the following questions). If you are a Senate aide, please […]

Housing Rescue Operations a Boon to Mortgage Fraudsters

It is really a shame to see what has happened to the FHA. Prior to the subprime bubble, the FHA has a good record with providing low down payment loans to borrowers. Before readers scoff, it had a simple secret: it screened borrowers. And the old-fashioned process was sufficiently time-consuming that the prospective homeowners also […]

Goldman/AIG Conspiracy Theories: There’s a Reason They Won’t Go Away

Note: this post is by Thomas Adams, at Paykin Krieg and Adams, LLP, and a former managing director at Ambac and FGIC, with some minor additions by yours truly. This is a significant piece of some puzzles he, some other experts who prefer to remain anonymous, and I have been pushing on for several months. […]

“It’s Beginning to Look a Lot More Riskless”

Enjoy!

GM’s phony taxpayer repayment

By Edward Harrison of Credit Writedowns This comes via Deal Book at the New York Times. The company’s chief executive, Fritz Henderson, called the repayment plan “a personal commitment.” The Obama administration, wardens of the 60 percent taxpayer stake in the company, declared itself “encouraged” by the news. Many commentators followed suit. But in the […]

Guest Post: Senator Dodd has Introduced a Sweeping Financial Reform Bill. Please Help Me Figure Out If Its Good or Bad, and What Its Missing

By George Washington of Washington’s Blog. A source on the Hill sent me the following summary of Senator Dodd’s proposed financial reform bill. My source notes: The summary leaves out Sections 1201-1204, which contain serious changes to the Federal Reserve bank structures, transparency elements, and restrictions on 13(3). Comments and observations are always welcome. Dodd […]

Einhorn: First, Let’s Kill All the Credit Default Swaps

David Einhorn, who enjoys his considerable reputation for hard-fought battles against firms with shaky finances and dubious accounting (Allied Capital and Lehman), has taken aim at a new and equally deserving target: credit default swaps. In an interesting bit of synchronicity, Einhorn’s comments in a letter to investors overlap to a considerable degree with a […]

Guest Post: Galbraith Says Administration’s Sole Goal is to Restore System of 5 or 10 Years Ago, But Confidence Won’t be Restored Unless Fraud Which Caused the Crash is Investigated

By George Washington of Washington’s Blog. As I have repeatedly written, the largest U.S. banks have repeatedly gone bankrupt due to wild speculation which was blessed by the Fed, and then the government covered up their bankruptcy. Indeed, the New York Times writes today about one of the too big to fails: Over the past […]

Guest Post: Breaking Up The Too Big to Fails Will NOT Harm America’s Ability to Compete with Foreign Banks

By George Washington of Washington’s Blog. Preface: Please read to the end to see the humorous quote. I have previously debunked numerous false arguments used to defend the too big to fails. See this and this. But the apologists for the TBTFs are now arguing that breaking up the beached whales … er, giant banks […]

Guest Post: Conservatives and Liberals Agree: Proposed Bank Oversight Bill Will Make Things Worse

By George Washington of Washington’s Blog. When a liberal labor leader and a conservative financial policy analyst unite against something, you know that something is really bad (actually, I don’t believe in the whole false left-right dichotomy; I think its Americans versus those trying to steal our wallets and our rights, but that’s another story). […]

GMAC has been nationalized

By Edward Harrison of Credit Writedowns Yves is going to be in a light posting mode, so I will be posting some links and a few posts for your reading pleasure. The first one is an update to some thoughts that Yves had on GMAC on the 27th. By the way, where is Jesse? I […]

Guest Post: Government Is Trying to Make Bailouts for the Giant Banks PERMANENT

By George Washington of Washington’s Blog. On September 25th, I wrote: Paul Volcker and senior Harvard economist Jeffrey Miron both testified to Congress this week that the government is trying to make bailouts for the giant banks permanent. Writing Wednesday in The Hill, Congressman Brad Sherman pointed out that : In my opinion, Geithner’s proposal […]