Category Archives: Regulations and regulators

Satyajit Das: Grecian Derivative

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). In his “Ode on a Grecian Urn”, the English Romantic poet John Keats declared that “beauty is truth, truth beauty”. In derivatives, its seems transactions may be […]

Summer Rerun: Do-It-Yourself Dubious Accounting

This post first appeared on August 23, 2007 Part of the hangover that followed the dot-com bubble was rampant accounting fraud. Before then, accounting chicanery was virtually unheard of in Fortune 500 companies. It instead cropped up at high fliers with loose controls and/or overly aggressive cultures (remember Zzzz Best? Miniscribe?). But in 2002, it […]

Representatives Convey and Kaptur Call on Geithner, Fannie, FHFA to Stop Efforts to Pursue Strategic Defaulters

As we’ve noted on this blog, the Administration efforts to punish so-called strategic defaulters seem hopelessly misguided. First, it’s well nigh impossible to tell with simple screens who really could afford their house longer term (ie people who default suddenly, as opposed to wobble in and out of being current on their mortgage before folding, […]

How (Mis)Use of Client Assets Pumped Up Shadow Banking System

One of our regular contributors chatted with a reporter at a major financial media outlet who was frustrated that management was not willing to let him dig into open mysteries from the global financial crisis. Fortunately, the Financial Times takes a broader view, and Gillian Tett today focused on a recent IMF report that describes […]

The Fed’s Fallacious “QE Lite” Logic

The Fed seems to be exhibiting a pretty bad case of “if all you have is a hammer, every problem looks like a nail” syndrome, particularly when it has (or perhaps more accurately, had) other tools at its disposal. In case you somehow missed it, global markets got a bad case of deflation heebie jeebies […]

Steve Keen: Bank Profits a sign of economic sickness, not health

By Steve Keen, Associate Professor of Economics & Finance at the University of Western Sydney, and author of the book Debunking Economics, cross posted from Steve Keen’s Debt Deflation. The record $6 billion profit that the Commonwealth Bank is expected to announce today is a sign of an economy that has been taken over by […]

Summer Rerun: On What the Fed Hath Wrought (So Far)

This post first appeared on August 21, 2007 A gut-wrenching two weeks in the credit markets have been capped by unprecedented moves by central bankers. The ECB’s offer of an unlimited infusion to member banks the week before last was followed last Friday’ by the Fed’s discount rate cut, which included stern warnings that those […]

NYT Muffs Merrill/Magnetar Piece (Corrected and Updated)

By Yves Smith and Tom Adams, an attorney and former monoline executive Update and correction 4:45 PM: We owe an apology to readers and to Louise Story of the New York Times, for an apparent error in our analysis. We have been informed that, remarkably, there were two separate Pyxis vehicles which were issued in […]

Guest Post: European Banks – Distinguishing the Walking Wounded from the Living Dead

By Max Bruche. Assistant Professor of Economics, CEMFI and Gerard Llobet i Codina, Associate Professor of Economics, CEMFI. Originally posted at VoxEU Bank bailouts have been controversial from the outset, with some commentators saying that they reward banks for making risky loans. This column investigates the idea of an asset buyback in which a special […]

Guest Post: Why Clearinghouses Are a Maginot Line Against Systemic Risk

As discussed in ECONNED and on this blog, clearinghouses are not a solution to the systemic risk posed by credit default swaps, since there is no way to have a CDS counterparty post adequate margin and have the product be viable (to put it more simply, adequate margin make CDS uneconomic). So for CDS, the […]

“Technically Incompetent” NY Fed Examiner of Biggest Banks Pre Crisis Promoted for Blowing Up the Economy

We pointed out that reappointing Ben Bernanke as Federal Reserve chairman would be inconceivable in the private sector, since CEOs who preside over disasters are dismissed (captains have the good taste to go down with their ships). But of course, Bernanke is a failure only if you believe that the Fed’s official mandate – soundness […]

Goldman Tells FCIC 25% to 35% of Its Revenues Come From Derivatives

Is it any surprise that Wall Street went a bit off the deep end with the (admittedly barmy, but that’s a separate issue) Blanche Lincoln proposal to spin off derivatives desks? Derivatives, which are now deeply integrated in how dealer banks devise customer transactions and how they manage their own risks, are a large proportion […]

On Investor Distrust in the Markets

An article by Gillian Tett in the Financial Times, “Trading volumes retreat with investor trust,” contends that the notably low trading activity of late is a sign of deeper changes in financial markets: The most pernicious issue hanging over the system right now is a loss of confidence – not merely in the idea that the […]

Fannie and Freddie Continue to Rely on Foreclosure Mills Despite Evidence of Fraud

A good piece at Mother Jones, “Fannie and Freddie’s Foreclosure Barons” (hat tip Foghorn Leghorn) provides a window on a seamy big business: cut rate foreclosure processing machines that routinely ride roughshod over borrowers and the law. Unfortunately, space limitations prevent the story from going deeply into some critical issues. The piece does a good […]