Bailout

Chart of the day: Greek bonds and CDS

Posted on February 25, 2010
Many thanks to the wonderful Stephen Culp for putting this pretty chart together for me. It shows pretty clearly, I think, that the narrative in today's NYT piece -- that CDS spreads gapped out, with a nasty effect on Greek bond spreads -- isn't really borne out by the facts...

CDS demonization watch, Greece edition

Posted on February 25, 2010
My CDS Demonization Watch has been on the back burner for a while: I thought that the caravan had moved on. But right now, the most-read story in the NYT business section, getting a lot of attention in the Twittersphere, is this one, headlined "Banks Bet Greece Defaults on Debt They Helped Hide"...

Pricing kindle nonfiction

Posted on February 25, 2010
Yves Smith, of Naked Capitalism, has sent me a note to tell me how unhappy she is about the kindle pricing of her new book, which has a cover price of $30, an Amazon price of $19.80, and a kindle price of $16.50. Her publisher, Palgrave, is part of Macmillan, which just won a fight to force Amazon to sell e-books at more than $10, but part of the fallout from that fight is that books which cost much more than that on the kindle often get one-star reviews on the basis of their pricing alone.

Has Corker killed the CFPA?

Posted on February 24, 2010
The single biggest question hanging over the future of financial reform in the US right now is what exactly is acceptable to Bob Corker in terms of a Consumer Financial Protection Agency. Bloggers on the left are pessimistic: Simon Johnson says that "the consumer protection agency is likely to be gutted as the price of bringing Senator Corker on board", while Tim Fernholz says that bringing Corker along could "cost the Democrats key provisions in the bill -- most notably, an independent Consumer Financial Protection Agency"...

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Housing: Still very shaky

Posted on February 24, 2010
I've been following the CoreLogic data on the number of underwater mortgages for over three years now, and it's undoubtedly the most reliable time series we have on that front. Which is why this is so scary:

Counterparties

Posted on February 24, 2010
Are your piles of platinum problematic? -- Dotgif

The systemic risk of the repo system

Posted on February 23, 2010
Tyler Cowen has a copy of Gary Gorton's new paper, and likes it. The excerpt he gives us raises a serious point about fragilities in the banking system: banks fund themselves in the repo market so much that they need about $12 trillion of collateral just to keep ticking over...

Counterparties

Posted on February 23, 2010
Lehman bankruptcy fees: $642 million -- 24/7

HSX goes real-money

Posted on February 23, 2010
Lauren Hatch mentions that the Hollywood Stock Exchange, which is to begin real-money trading on April 20, "has been just-for-fun since 1998". What she doesn't mention is that the company was sold to Cantor Fitzgerald with the express intention of turning it into a real-money exchange all the way back in 2001; it's taken nine years to get the requisite permissions.

Monoline datapoint of the day

Posted on February 23, 2010
Bloomberg reports:

Why Greece shouldn?t worry about its CDS

Posted on February 23, 2010
This isn't the first time that George Soros has wheeled out this particular argument against credit default swaps:

The UK government and vulture funds

Posted on February 23, 2010
The UK government has finally published -- in the waning days of the Brown government -- its take on vulture funds, and whether there should be legislation trying to ban their activities. It's not clear whether the report has the backing of the Conservatives, but it is clear that a lot of good-faith hard work has gone into it, and that it's not in any way a knee-jerk piece of populist financier-bashing, a la Maxine Waters.

Counterparties

Posted on February 22, 2010
Wajahat Ali vs Wells Fargo: An astonishing loan-mod tale -- McSweeney's

Goldman belittles Greece?s billions

Posted on February 22, 2010
Memo to Lucas van Praag and the rest of the Goldman Sachs communications machine: you are broadly considered to be out of touch, living large on Planet Billions while the rest of us struggle in one of the harshest economic environments of the post-war era...

Jed Rakoff, iconoclastic littérateur

Posted on February 22, 2010
Are you still working your way through that 10,600-word Paul Krugman profile in the New Yorker? If you haven't finished it yet, I strongly suggest you give up -- you're not going to learn much, beyond the names of his cats -- and go read Jed Rakoff's ruling in SEC vs Bank of America instead...

Investment banking fee datapoint of the day

Posted on February 22, 2010
The outcome of this suit -- if it's ever made public -- is going to be very interesting. JP Morgan advised Consolidated Minerals when it received a series of takeover offers: as the adviser to the target company, it was pretty much guaranteed a fee, no matter who ended up buying the company...

The new world of credit cards: Still treacherous

Posted on February 22, 2010
Barbara Kiviat asks whether credit card companies "might be getting their groove back", and cites this chart:

ETFs start to underperform

Posted on February 21, 2010
Is this the beginning of the end of ETFs as an asset class? Ian Salisbury has an important story this weekend, saying that the average ETF underperformed its benchmark by 125bp in 2009, and even the monster SPY underperformed by 19bp. That's more than twice its total expense ratio.

FICO?s new businesses

Posted on February 20, 2010
The FICO people invited me to a press dinner on Thursday evening, where I learned quite a bit about their credit-scoring system -- including the fact that the "free" credit score being sleazily shilled by Ben Stein is not actually a FICO score at all, and therefore even more useless than I'd thought...

Counterparties

Posted on February 19, 2010
The top 400 taxpayers all earn at least $138m per year. Their average tax rate? 16.6% -- WSJ

The NYT?s blogs are set to be paywalled

Posted on February 19, 2010
Arthur Sulzberger, Janet Robinson, and Martin Nisenholtz of the NYT all took the opportunity of hosting today's PaidContent conference to talk at length about their paywall plans. Which makes it all the more surprising that their message was so garbled: when they weren't simply refusing to say anything at all, they were giving three conflicting answers to the same question.

Lessons from FT.com

Posted on February 19, 2010
Now that the NYT has decided to move to a metered paywall system, a lot of attention at the PaidContent conference -- at the TimesCenter, no less -- is being directed towards Rob Grimshaw. He's the managing director of FT.com, which has been a pioneer in the meter-model space.

Why Treasury shouldn?t regulate banks

Posted on February 19, 2010
Wow, Chris Dodd really doesn't want the Federal Reserve to be the main systemic-risk regulator -- to the degree that his latest proposal gives that job to the Treasury Secretary, of all people. This is not a good idea, as Karen Shaw Petrou says:

How JP Morgan treats its clients: scandalously and in bad faith

Posted on February 18, 2010
Judge Jed Rakoff's January 29 ruling in the case of Empresas Cablevisión vs JP Morgan Chase Bank has barely been reported, which is a shame, because it sheds some much-needed light on how banks like JP Morgan really operate -- and, for that matter, on the kinds of methods by which Carlos Slim has made his multi-billion-dollar fortune.

Adventures in Fedspeak

Posted on February 18, 2010
The news of the moment is that the Fed has raised the discount rate to 0.75%. So why does the headline announcing the fact read like this?

Cash on Delivery Aid

Posted on February 18, 2010
I like Nancy Birdsall's idea of "Cash on Delivery Aid" a lot. Instead of spending money on building schools or hiring teachers or any other means towards an educational end, just pay for outputs instead:

Why car tracking isn?t a privacy issue

Posted on February 18, 2010
Last week, weighing in on a miles-travelled tax, I said that "there really is something quite creepily Big Brotherish about trying to track every single vehicle in America". But then I heard from Bern Grush of Skymeter, and he's persuaded me that you don't actually need to make tracking information available in order to tax miles travelled.

Counterparties

Posted on February 17, 2010
JPMorgan holds $3 billion of ?model-uncertainty reserves? to cover mishaps caused by quants who have been too clever -- Economist

How the government fudges job statistics

Posted on February 17, 2010
In the Marketplace letters segment yesterday, Representative Peter DeFazio (D-Oregon) took issue with me saying that infrastructure investment is an extremely expensive way of creating jobs and "costs a good $200,000 per job". Just as well I didn't use the $1 million figure here, which I stand by, and which was fact-checked by the Atlantic!

High-cost, low-return bank capital

Posted on February 17, 2010
William Wild has a great little paper up, disputing the widely-accepted idea that the best form of regulatory capital, for banks, is common equity. It isn't, he explains: shareholders have a strong incentive to maximize leverage and risk. They don't make banks safer, they make them riskier.

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