By Richard Alford, a former New York Fed economist. Since then, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side.
The US has experienced numerous disasters both natural and man-made. Unfortunately, the authorities have not always availed themselves of the opportunity to learn from these episodes.
Read more...Yves here. One of the sources of risk in big and even moderately big banks that does not get the attention it deserves is information systems
Read more...Fears of an imminent Greek exit from the Eurozone have subsided, for now. This column attempts to measure the probability of a Greek exit, finding that the changing fortunes of Greek political parties, and the possibility of an early election, mean that the risk of a Greek exit may actually be quite high. It suggests that, despite investors’ efforts to measure political risk, a persistent sense of unease about the Eurozone’s future is set to continue into 2013 and that Eurozone financial assets will thus continue to embed significant risk premiums in the coming years.
Read more...American Banker has an article up that is astonishing in that it tells us that the main regulator of national banks, the OCC, has confirmed one of our ongoing complaints: that the controls at the biggest banks are inexcusably weak. The OCC is the last place you’d expect to hear this from; historically it’s been a major enabler of banks playing fast and loose with the rules. And the implication is that bank execs should be wearing orange jumpsuits rather than getting multi-million pay packages.
Read more...A new paper that analyzes the activities and effects of high frequency trading reaches some damning conclusions.
Read more...Two days ago, we said it was time to fire the SEC’s chief of enforcement Robert Khuzami, who has not provided the tough policing warranted by the biggest financial crisis in the agency’s history. We didn’t anticipate that the story of Khuzami’s negligence would blow so big so quickly. Today, the Financial Times reported that three separate whistleblowers charged that Deutsche Bank had mismarked up to $12 billion in exposures to make it look healthier in 2008 and 2009 than it was, yet the agency had not acted on these allegations. And had Deutsche carried its positions at the levels these former employees suggest was more accurate, Germany’s biggest bank may well have needed a bailout.
Read more...Most news reports on financial regulatory reform hew to a few storylines: banks pushing back in private and winning on diluting regulatory reform; banks attributing lousy profits to new regulations (with a notable lack of proof of this convenient blame-shifting); bank regulators demonstrating capture, corruption and incompetence (which even though true to a fair degree is played up by industry incumbents to support the notion that regulation is futile).
So it’s refreshing to see a contrasting storyline….
Read more...Like it or not, you in the not too distant future are going to have to submit to personal surveillance to get many types of insurance and certain financial products. And that future is closer than you probably realize.
Read more...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):
Read more...Yves here. I’m giving this interview from OilPrice more of an intro than usual because I find it surreal.
Read more...Here we are, a mere nine days after Sandy, and what would ordinarily be a mere “sorta bad” winter storm is doing disproportionate harm by virtue of coming so close on the heels of the hurricane.
Read more...An important piece in the Financial Times by Manmohan Singh, a senior economist at the International Monetary Fund, describes persuasively how one of the central vehicles for reducing derivatives risk, that of having a central counterparty (CCP) and requiring dealers to trade with it rather than have a web of bi-lateral exposures, or rely on banks to act as clearers (making them too big to fail) has gone pear shaped. While the immediate reason for this outcome is the unwillingness of national banking regulators to cede powers to an international clearinghouse, Singh fingers an equally important cause: the reluctance to recognize that the underlying problem was and remains undercollateralized derivatives positions. His introduction to the mess:
Read more...Via e-mail, some updates from Michael Crimmins, a bank compliance expert and member of Occupy the SEC, on the continuing failure of the media to portray the real significance of the JP Morgan London Whale losses: that it revealed glaring deficiencies in internal controls that warrant prosecution of Jamie Dimon under Sarbanes Oxley.
Read more...A New York Times profile of Ina Drew, the former head of the JP Morgan Chief Investment Office, almost certainly produced high fives in the bank’s corporate communications office. This piece is the best sort of PR you can get: it treats the trading losses as yesterday’s news, of interest only as point of entre into the downfall of a heretofore unknown but once hugely successful and personally appealing trading manager.
Read more...In this speech,Robert Jenkins of the Bank of England blows apart the self-serving myths that ‘old guard’ bankers and their lobbyists have been peddling since the financial crisis ripped apart the global financial system in 2007.
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