Category Archives: Regulations and regulators

Satyajit Das: In the Matter of Lehman Brothers – Part 1: Breaking Up is Hard To Do

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)

In this two part paper, the issues regarding settlement of complex derivatives arrangement revealed by the failure of Lehman Brothers is outlined. Many of the failures affect new regulatory proposals such as the rapid resolution regimes under consideration. The First Part deals with terminating and settling derivative contracts.

A generation was once measured by where they were when an American President was assassinated in Dallas. A newer financial generation measure themselves by where they were when Lehman Brothers filed for bankruptcy protection on 15 September 2008.

The controversial failure of Lehman has become a pivotal point in ideological debates about markets, finance and the role of government. At a more mundane level, Lehman’s bankruptcy points to deeper problems in the “plumbing” of the financial system. The policy debate so far has largely ignored these unfashionable issues.

Moron from Scam Companies “Validated Carbon Credits” and “Baron Traders Limited ” Threatens This Blog

By Richard Smith

I posted this a few days ago, about the screechingly obvious fake Gibraltar company Validated Carbon Credits, a trading name of Baron Traders Ltd and its lying “CEO” James Richards. Two comments to the post have caught my eye:

It´s obvious your posting is not only slanderous but based on pure conjecture without any circumstantial evidence whatsoever. Why is it you don´t have a “contact us” link? Did you even bother contacting the company / individuals to try and establish some facts?

This was purportedly by a lady called Karen Johnson, who guilelessly provides an email address, bubblybosun@gmail.com, which, a quick Google reveals, is a handle used by none other than James Richards, the aforementioned lying CEO. Rather than dwell on that, or on the fact that “she” evidently doesn’t understand the meanings of the words “circumstantial evidence” and “slanderous”, I responded as follows:

Banks Jacking Up Fees to Retail Customers

It wasn’t hard to foresee that banks were going to start hitting retail customers with more fees. As we wrote when Bank of America tried introducing a $5 per month fee for debit card use:

Consumers should brace themselves for a brave new world of lots of bank fees. Bank of America is no doubt hoping that it will be a price leader and the other major banks will copy its move. Now that banks can borrow at pretty close to zero, cheap sources of funding, like interest-free checking accounts and float aren’t as valuable as they once were. When I lived in Australia, it was pretty much impossible to have a relationship with a bank and pay less than $25 a month for it. The US banks are moving in that direction.

The New York Times tells us that banks are in the process of imposing a host of new charges.

EFSF Fail: Forced to Buy Some of Its Own Bonds in Auction

Pretty much everyone who is not part of the problem has seen the EFSF as unlikely to work very well, and has regarded the idea of a levered EFSF with the sort of amusement and disdain reserved for bad taxidermy.

Validated Carbon Credits and Baron Traders Limited Have (Update: Briefly) Left the Building

The FT and a scammer respond to a Carbon Credits post at NC

The End of Loser Liberalism: An Interview with Dean Baker Part I

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Dean Baker is co-founder of the Center for Economic and Policy Research. He previously was a senior economist at the Economic Policy Institute and an assistant professor of economics at Bucknell University. He has a Ph.D. in economics from the University of Michigan. His latest book, The End of Loser Liberalism, has recently been released to download free of charge on the CEPR website.

Interview conducted by Philip Pilkington, a journalist and writer based in Dublin, Ireland.

Philip Pilkington: The overarching thesis of your book The End of Loser Liberalism is quite a provocative one. This isn’t just a book about economics as such. Instead, if I were to venture using a term that appears to be coming back in fashion, it’s a work of political economy. You write that the current political debate – wherein the left are seen as restricting and constraining the ‘free market’ while the right are seen as letting it free to work – is completely skewed. You write that liberals and progressives need to take a different line on this. Could you explain this basic premise in a little more detail, please?

Dean Baker: The conventional view is that conservatives place a huge value on market outcomes. It is common for progressives or liberals to deride them as “market fundamentalists”, as though they worship the market as an end in itself. By contrast, liberals/progressives are supposedly prepared to use the hand of government to override market outcomes in order to promote goals like poverty reduction or equality. I argue in the book that this view is completely wrong, and worse that it plays into the hands of the right.

I argue that the right has quite deliberately structured markets in a way that have the effect of redistributing income upward. The upward redistribution of the last three decades did not just happen, it was engineered.

“FTAdviser” Tricked Into Lending the Good Name of the Financial Times to Carbon Credit Scammers

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Marshall Auerback: The Road to Serfdom

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By Marshall Auerback, a portfolio strategist and hedge fund manager. Cross posted from New Economic Perspectives.

The markets are again in free-fall and, once again, a lazy Mediterranean profligate is to blame. This time, it’s an Italian, rather than a Greek. No, not Silvio Berlusconi, but his fellow countryman, Mario Draghi, the new head of the increasingly spineless European Central Bank.

At least the Alice in Wonderland quality of the markets has finally dissipated. It was extraordinary to observe the euphoric reaction to the formation of the European Financial Stability Forum a few weeks ago, along with the “voluntary” 50% haircut on Greek debt (which has turned out to be as ‘voluntary’ as a bank teller opening up a vault and surrendering money to someone sticking a gun in his/her face).

Taleb: End Bonuses at Too Big to Fail Banks

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The fact that the New York Times is running as its lead op-ed a piece by Nassim Nicholas Taleb arguing against any bank bonuses points to a hardening sentiment among the elites against the banks.

EuroCrisis Spotlight Moves From Greece to Italy

http://www.telegraph.co.uk/finance/financialcrisis/8875444/France-cuts-frantically-as-Italy-nears-debt-spiral.html

Bank CEOs Lying When They Say They’ve Stopped Robosiging

Readers may recall that we posted on the credibility-straining claim by the former GMAC’s, now Ally’s CEO, that his bank was no longer engaging in robosigining.

Now in fairness, we might have a little clever use of terminology at work. Robosigning narrowly speaking, refers to the use of low paid staffers to execute documents used in court filings by the hundreds per day. This created a huge scandal when it broke because it was a flagrant violation of court procedures. Affidavits, for instance, are used in place of testimony and are required to be based on personal knowledge. A $12 an hour functionary churning out signatures clearly has not even read the paperwork, much the less has any knowledge of the various foreclosures he is pushing through the pipeline.

Ally and other major servicers now piously claim that these systematic abuses of legal procedures that date back to the 1677 Statute of Frauds were mere “sloppiness” or “paperwork errors” and they’ve cleaned up their act. Should we believe them?

While services like #5 Ally may well have dispensed with factory-style signing procedures. there is evidence on the ground that says that the banks have not made meaningful changes.

Is GMAC, Now Ally, Just Dishonest or Criminally Incompetent?

Here the major bank servicers are about to get a screaming bargain via a hoped-for multi-state-Federal mortgage settlement, and what is number five service Ally doing, but threatening to thumb its nose at the deal as being to hard on them.

Per Housing Wire, Ally CEO Michael Carpenter made some pretty cheeky statements on an investor conference call today:

Satyajit Das: Central Counter Party Tranquilliser Solutions

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)

This four part paper deals with a key element of derivative market reform – the CCP (Central Counter Party). The first part looked at the idea behind the CCP. This second part looked at the design of the CCP. The third part looked at the risk of the CCP itself and how that is managed. The last part looks at the market effects of the effects of the CCP on the market.

In the Renaissance, popes often annulled the marriages of Catholic monarchs. The annulment preserved, theoretically, both the authority of the Papacy and the sanctity of marriage. The CCP proposal is similar. It gives the impression that regulators and legislators are reasserting control over the wild beasts of finance. In reality, the proposal may not work or materially reduce the risks it is intended to address.