Bailout

The uncollectable artwork

Posted on January 19, 2010
A Tool to Deceive and Slaughter is an artwork by Caleb Larsen, currently for sale on eBay. If it hasn't sold in the next couple of days -- the minimum bid is $2,500 -- it will go back on eBay. On the other hand, if it does sell, it will still go back on eBay...

The problem with peer-to-peer lending

Posted on January 19, 2010
Mark Gimein has an important story today about Prosper, which is required reading for anybody -- myself included -- who has some hope about peer-to-peer lending helping to disintermediate banks and get credit flowing again to individuals and small businesses.

Too-big-to-fail is here to stay

Posted on January 19, 2010
Andrew Ross Sorkin has a slightly odd column today, asking whether it's OK to have too-big-to-fail banks, and concluding -- well, not really coming to any conclusion at all, actually.

Why the Fed should regulate banks

Posted on January 18, 2010
George Cooper asks whether or not banks should be regulated by the central bank, noting drily that "America sees salvation in replicating the failed British banking experiment while Britain sees salvation in returning to the equally discredited American model"...

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How the NYT should construct its paywall

Posted on January 17, 2010
Gabriel Sherman says that the NYT is going to be putting up an FT-style paywall:

Counterparties

Posted on January 15, 2010
When a personal finance columnist gets hit with a 703.80% APR -- Moneywatch

Counterparties

Posted on January 15, 2010
Does Larry Summers return Paul Volcker's calls? -- WSJ

Don?t give money to Haiti

Posted on January 15, 2010
Between the Twitter campaigns and the telethons and the corporate donations and therecord sums raised through text messages, you can be sure that an enormous amount of cash is going to end up being raised to help Haiti. This is not necessarily a good thing.

The limits of microfinance

Posted on January 15, 2010
Richard Rosenberg has a good new paper -- short, clear, summarized here -- saying that the jury is very much still out on whether or not microfinance helps improve the incomes of the poor. But even if it doesn't help the poor out of poverty, it still does a great deal of good in terms of giving them tools to deal with poverty.

Do financial journalists routinely break the law?

Posted on January 15, 2010
Ben Sheffner makes the case today that it's illegal for journalists to convince or induce sources to leak information, if those sources are obliged not to do so. He pegs his article off the Gawker case, but notes that the WSJ, too, might be guilty of the same tort...

Will Dodd kill the CFPA?

Posted on January 15, 2010
Bloomberg has confirmed the WSJ report that Chris Dodd is seriously considering dropping the Consumer Financial Protection Agency from the Senate's financial-reform bill. This is hugely depressing news, since it's predicated on a complete fallacy:

The problem with banning floors on credit-card rates

Posted on January 15, 2010
On Tuesday, the Federal Reserve released its final rule governing credit card issuers. The whole thing can be downloaded here; it's a mere 1,155 pages long. And credit card consultant Timothy Kolk has found something rather worrying buried within it.

Big earners in banking

Posted on January 15, 2010
Let's be clear about this: JP Morgan's earnings today were very strong indeed. So why are the shares down? Simply because this is one of those instances where the interests of the bank and the interests of its shareholders are not perfectly aligned. Investor disappointment with the earnings is a function of the bank's loan loss reserves, which are now a whopping $32...

Quantifying the moral hazard trade

Posted on January 15, 2010
I've been having an interesting email discussion with Jim Surowiecki of the New Yorker about quantifying the moral hazard trade. If big banks have lower borrowing costs than small banks, he asks, why do we automatically attribute that to moral hazard (the idea that they're much more likely to get bailed out in extremis) rather than the simple fact that they're less likely to default? He also makes Jamie Dimon's point that since the debt of too-big-to-fail banks wasn't trading at risk-free rates, there can't have been a moral-hazard trade going on.

The bank tax emerges

Posted on January 14, 2010
Jackie Calmes has the broad outlines of the new bank tax, and I like the way it looks: essentially, it's a 0.15% tax on bank liabilities excluding deposits (which already come with an FDIC fee attached). It would be paid by roughly 50 firms, including GE Capital, and would raise something on the order of $90 billion over 10 years...

Counterparties

Posted on January 14, 2010
Why wasn't Pandit at the FCIC hearings? Is the real reason that he's about to get fired? -- The Deal

John Paulson?s high-risk hubris

Posted on January 14, 2010
Malcom Gladwell is no particular expert on financial markets. But he has said, according to Moe Tkacik, that of all the people he has interviewed, he most identifies with Nassim Nicholas Taleb -- in a 7,800-word profile which explains just how hard it is to invest in markets when your strategy involves losing money every day and waiting for a tail event.

When banks refuse to modify mortgages

Posted on January 14, 2010
Paul Kiel has an important story today on something I was not aware of at all: banks converting trial loan modifications into... trial loan modifications. This violates the government's guidelines, but it seems that the likes of Chase and Wells Fargo are doing anything they can to avoid doing what is clearly envisaged in the government plan: transform all trial modifications to permanent modifications if the trial-mod payments are made in full and on time for three months.

The bank tax is just an increase in cost of funds

Posted on January 14, 2010
Here's one more way to look at the new bank tax, courtesy of the equity analysts at Oppenheimer & Co: it basically has the same effect on the banks hit by it as would a 15bp rise in the Fed funds rate. And much like an increase in Fed funds, it'll simply end up getting passed through to customers in the form of higher loan rates...

Crisis chart of the day: The correlation between severity and probability

Posted on January 14, 2010
The World Economic Forum has released its annual Global Risks report, which kicks off with this chart:

JP Morgan still financing mountaintop removal mining

Posted on January 14, 2010
In the wake of the publication of an extremely high-impact article in Science magazine which says that mountaintop removal mining has enormous environmental impacts which can't possibly be mitigated, the campaign against JP Morgan Chase's financing of such activity is heating up again:

The very real moral-hazard trade

Posted on January 14, 2010
Ezra Klein takes Jamie Dimon at face value when Dimon told the FCIC yesterday that the market didn't consider bank debt to be risk-free, and that therefore there wasn't a moral hazard too-big-to-fail trade.

Why the bank tax is necessary

Posted on January 14, 2010
Tim Fernholz links to the official government factsheet on the bank tax, which gives a lot more detail on how it's structured. One thing that jumped out at me is that something along these lines is actually required by law:

Counterparties

Posted on January 13, 2010
RBS executives who have never earned more than £1m have this year been told they'll be pocketing over £5m -- BBC

Those weak sovereign credits

Posted on January 13, 2010
Is there any sovereign credit which looks remotely attractive these days? I feel like a bit of a heel talking about fiscal distress even as the attention of the world is rightly concentrated on much more pressing real distress in Haiti. But the drumbeat is getting hard to ignore.

Goldman?s conflicts

Posted on January 13, 2010
Andrew Ross Sorkin has got his hands on what looks for all the world like a pro-forma piece of legal CYA out of Goldman Sachs, and is trying to turn it into a story:

Lehman liquidation datapoint of the day

Posted on January 13, 2010
Linda Sandler reports:

The too-big-to-fail tax

Posted on January 13, 2010
Barry Ritholtz knows what he'd like to see in terms of a new bank tax, and I like the way he's thinking:

The Sith Lord revealed!

Posted on January 13, 2010
Thousands of people have wondered over the years who on earth Overstock CEO Patrick Byrne was talking about when he started muttering darklyabout a "Sith Lord" orchestrating a devious conspiracy of short-sellers. Well, Max Abelson has finally found out who it is, from Byrne's lieutenant Judd Bagley:

Counterparties

Posted on January 12, 2010
Mark your calendars for Nov 25, 2018! That's when we'll finally find out what AIG wants to keep secret about its CDSs. -- Reuters

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