Category Archives: Risk and risk management

Will the Expected End of QE Lead to a Bond Meltdown?

Yesterday, bonds fell sharply due to stronger-than-expected housing price and consumer confidence reports. That reflects the belief that the economy is mending, and as a result, the Fed will deliver on its promise to dial back and then end QE. Ten year Treasury yields rose to the 2.10%-2.11% level. Various commentators claim that rates will zoom higher either right over that point or at 2.25%. How worried should we be?

Is Jamie Dimon Really Out of the Woods With Shareholder Thumbs Down on Splitting CEO/Chairman Roles? (Updated)

There’s a surprising degree of blogosphere acceptance of JP Morgan’s messaging on the shareholder vote today regarding whether to split the CEO and Chairman roles, that this result was a vote of confidence in his prowess as CEO. Huh?

Global Warming: Halfway to a Mass Extinction Event?

By Gaius Pubius, a professional writer living on the West Coast. Follow him on Twitter @Gaius_Publius. Cross posted from AmericaBlog

We know that global warming will cause some crises, since the little warming we’ve experienced so far (0.8°C or so) is already a problem. But according to the Intergovernmental Panel on Climate Change (IPCC), the leading scientific organization studying this phenomenon, this is only the beginning. What’s the temperature we should stop at if we don’t want to cause another world-class extinction?

Bill Black: Brown-Vitter Will Not and Cannot Work but it is Criminogenic

Yves here. Like Black, I see Brown-Vitter as well-intended but seriously flawed.

Wolf Richter: When Flight Safety Gets Outsourced To China

Aircraft maintenance was a highly paid blue-collar job that required education, training, manual skills, and brains. It was one of the perfect American middle-class jobs with generous healthcare, retirement, and vacation benefits; and free flights! They were working for icons like Delta, American Airlines, Continental, TWA, or Pan Am. Icons indeed!

Mirabile Dictu! Someone (Bankruptcy Trustee Freeh) Finally Sues Jon Corzine Over MF Global

The great unwashed public might get to enjoy a bit of theater.

Richard Alford: Fed Policy – Old Wine in New Bottles

Yves here. This is an important post, in that it describes how the Fed, despite the unconventional look of some of its measures, is using more extreme variants of traditional policy approaches, and why that is not such a hot idea.

Sheila Bair Talks about Bank Greed, JP Morgan London Whale Hearings on Bill Moyers

Not surprisingly, Sheila Bair was appalled by the revelations from Carl Levin’s hearings on the JP Morgan London Whale losses. She discusses not only what it says about the bank, but about the state of regulation in the US.

The Cyprus File

It would be ironic if Cyprus, one the smallest countries in Europe with little over 1 million people and about 0.5% of the European Union (“EU”) economically, were to prove a key inflexion point in the crisis.

Senate “Whale” Report Reveals JP Morgan as a Lying, Scheming Rogue Trader (Quelle Surprise!)

There is so much grist in the just-released Senate Permanent Subcommittee report on the JP Morgan London Whale trades that the initial reports are merely high level summaries, which is understandable. Even with the admirable job done by the committee in documenting its findings and recommendations, it will take some doing to pull out the critical observations and convey them to the public. Plus the hearings tomorrow should provide good theater and further hooks for commentary.

But some critical findings emerge, quickly. We here at NC were particularly harsh critics of JP Morgan’s conduct, and disappointed in the media’s failure to understand that the information JP Morgan presented as it bobbed and weaved showed glaring deficiencies in risk controls. Yet the failings described in the report are even worse than we imagined.

David Dayen: Out of Control – New Report Exposes JPMorgan Chase as Mostly a Criminal Enterprise

There’s been an unlikely yet welcome resurgence of chatter about breaking up the nation’s largest and most powerful banks. Bloomberg’s story quantifying the too big to fail subsidy grabbed some eyeballs (and there’s an upcoming GAO report on the subsidy that will do the same). Sherrod Brown announced an unlikely pairing with David Vitter working on legislation on the subject. Dallas Fed President Richard Fisher is going to give a big speech on Friday on breaking up the banks… at CPAC, the largest conservative political conference of the year.

Cathy O’Neil: Black Scholes and the normal distribution

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

There have been lots of comments and confusion, especially in this post, over what people in finance do or do not assume about how the markets work. I wanted to dispel some myths (at the risk of creating more).

The Growing IT Mess at Big Banks

There is a very useful and accessible article at BBC (hat tip Richard Smith) on the information technology hairballs and baked-in level of future problems at major banks. The article was prompted by widespread problems at NatWest this week in accessing accounts.