Bailout

The scandalous Lehman CME auction

Posted on April 14, 2010
It was one of the least transparent and most underpriced asset sales since the days of Russian privatizations. In the chaos of the immediate aftermath of the collapse of Lehman Brothers, the CME Group auctioned off Lehman's derivatives assets for less than half their value -- handing a $1...

The Greek debt spreadsheet

Posted on April 14, 2010
How fabulous is this spreadsheet? It allows you to take the official Greek assumptions of what's going to happen with respect to its fiscal situation over the next few years, and replace them with anything you like.

How loan servicers milk the foreclosure-prevention program

Posted on April 14, 2010
If there's one consistent villain in the tale of attempts to minimize home foreclosures, it's the loan servicers. They lose paperwork, they foreclose on homes they have no right to foreclose on, they accept borrowers into modification programs while trying to foreclose on them at the same time, they deny borrowers a modification even when they shouldn't, they're impossible to get ahold of, their communication with borrowers is atrocious, they claim to be owed vastly more money than they actually are owed, and so on and so forth...

Blanche Lincoln?s excellent and doomed derivatives proposals

Posted on April 14, 2010
There's a fair amount of confusion over the new derivatives legislation that Blanche Lincoln is planning to introduce tomorrow, and partly that's because a lot of DC journalists don't really grok the distinction between exchange clearing and exchange trading...

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Counterparties

Posted on April 13, 2010
Why taking risk isn't all that smart: Eric Falkenstein on the "mistaken syllogism at the bottom of portfolio theory" -- Falkenblog

Why the Greek recovery rate hasn?t fallen

Posted on April 13, 2010
Peter Boone and Simon Johnson have an interesting take on the EU's bailout of Greece: that it doesn't in fact bail out Greece's bondholders at all, since any reduced probability of default is more than made up for by an increase in bondholders' loss if and when there is a default.

What was Lehman doing with Hudson Castle?

Posted on April 13, 2010
There's one thing that newspapers can do and bloggers can't, and that's splash a big story all over the front page and just by doing so make it news. Newspapers like the NYT and WSJ have built up very good reputations over decades, and so if they tell you something then they're trusting you to trust them:

Questions answered on business blogging

Posted on April 13, 2010
I got an email this morning from a journalism student with a few questions; I thought if I was answering them I might as well do so on the blog, for anybody else interested.

Goldman reputation datapoint of the day

Posted on April 13, 2010
Roben Farzad, in his BusinessWeek cover story on Goldman Sachs, had to mention the reputation issue:

Linking would have prevented Sorkin?s errors

Posted on April 13, 2010
Joe Weisenthal is right to adjudicate the beef between Paul Krugman and Andrew Ross Sorkin in favor of Krugman, who clearly never said what Sorkin says he said. And that's not the only error in Sorkin's column. For instance:

Unsafe security

Posted on April 13, 2010
Matt Yglesias reacts to the tone-deaf military reaction to the horrific crushing-to-death of a 68-year-old woman by a five-ton military truck on Monday: The fact that people conducting a security operation on American soil can?t even react to accidentally killing an old lady by saying ?we?re sorry we killed that woman? rather than lets ?make sure the pedestrian didn?t run into the truck as it was moving? doesn?t inspire a ton of confidence...

Security theater online

Posted on April 13, 2010
Mark Pothier has a well-written and compelling write-up of a great paper by Cormac Herley of Microsoft, which demonstrates that most of the things we do on the instruction of various IT departments are a waste of time. My favorite datapoint is that fully 100% of certificate error warnings -- those roadblocks you get sometimes when you try to visit a secure website -- are false positives.

Counterparties

Posted on April 12, 2010
UK vulture-fund act becomes law -- Reuters

Vikram Pandit?s $350 glass of wine

Posted on April 12, 2010
Andrew Ross picks up on this anecdote from Roger Lowenstein's new book:

Adventures in financial literacy

Posted on April 12, 2010
This is one of the silliest things I've read in ages:

Ivory Coast?s bond exchange gets it exactly right

Posted on April 12, 2010
It's sheerest coincidence that the UK's new anti-vulture-funds law came into force just as the Ivory Coast was concluding its astonishingly successful debt swap. The Republic took all of its six defaulted Brady bonds, and swapped them for one brand-new $2...

The search for Basel III loopholes begins

Posted on April 12, 2010
Patrick Jenkins of the FT has two great articles today following the maneuvering around Basel III. The big-picture story is clear: banks around the world are ganging up to try to weaken and/or delay Basel III's implementation.

No time to worry about CalPERS

Posted on April 12, 2010
Well done to CalPERS for responding forcefully to a rather silly Stanford policy brief which gets very alarmist about California's pension liabilities. There are so many enormous and immediate fiscal problems facing California right now that it seems utterly pointless to put out a paper saying that the state should inject $200 billion into its pension funds -- especially when the logic of the paper is as confused as this:

The silver lining to synthetic CDOs

Posted on April 11, 2010
One of the more thought-provoking bits of the Shleifer paper on financial innovation is this part of the model:

How financial innovation causes crises

Posted on April 11, 2010
Nicola Gennaioli, Andrei Shleifer, and Robert Vishny have a great new paper out entitled "Financial Innovation and Financial Fragility".* It doesn't break a lot of new conceptual ground, but it's very thought-provoking, and it helps to codify in a formal way the serious problems with financial innovation...

Counterparties

Posted on April 10, 2010
The continued influence of Bob Rubin -- Politico

Why Greece won?t go Argentine

Posted on April 10, 2010
John Hempton of Bronte Capital sent me a pushback note in response to my post on Greece this morning:

Counterparties

Posted on April 09, 2010
US banks shrink their balance sheet at quarter-end -- WSJ

The Magnetar Trade

Posted on April 09, 2010
Back in July, ProPublica announced it was hiring my friend Jesse Eisinger as an investigative financial journalist, and ever since then a lot of people have been very interested in what he's been working on. Today, we find out, with the publication of a 6,600-word story on a hedge fund called Magnetar, co-written with Jake Bernstein.

Ben Baldanza defends charging for carry-ons

Posted on April 09, 2010
Blog comment of the day comes from Ben Baldanza, the CEO of Spirit Airlines, with a crystal-clear explanation of why his fees for carry-on baggage make a lot of sense. It's really worth reading the whole thing, but here's the gist:

Financial reform: The enforcement vacuum

Posted on April 09, 2010
Shahien Nasiripour is on a roll these days. Today he makes a great catch:

Greece won?t go Argentine

Posted on April 09, 2010
Landon Thomas today, in the lead story on NYTimes.com, comes out and uses the A-word with respect to Greece:

When Greece became an emerging market

Posted on April 08, 2010
In August 1999, JP Morgan released an expanded version of its EMBI+ emerging-market bond index.

Counterparties

Posted on April 08, 2010
The Goldman letter to shareholders -- GS

Does the crisis portend communism?

Posted on April 08, 2010
There have been many critiques of the financial system in the wake of the global crisis, blaming its structure for the severity of the problem. But it's taken until now for an old-school Marxist to come along and co-opt all of those critiques as a call to embrace communism...

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