- The End of the Financial World as We Know It
- How to Repair a Broken Financial World
- The Spread of the Credit Crisis: View from a Stock Correlation Network
- Who is Going to Bail Out the FED?
- As Funds Leverage Up, Fears of Reckoning Rise
- Don't buy Wall Street's latest con
Here are 15 reminders of how happy talk misled us a decade ago
- Timothy Geithner in 2007
Timothy Geithner, president of the Federal Reserve Bank of New York, said in an interview that the torrent of money flowing into hedge funds has coincided with a troubling erosion in lending practices.
Mr. Geithner, who has been deeply involved in the effort, said in the interview that regulators want to make sure that major U.S. banks and brokerage firms "can comfortably manage" a shock to the system, such as a big hedge-fund failure.
Recently in finance Category
I am missing IBD 100 (Investors Business Daily) data for the following dates:
2008-06-23 2008-05-19 2008-03-17 2007-09-10 2006-12-18
If you have any of these dates, I'd appreciate getting it. Thanks.
A perennial financial skeptic explains how he was taken in by Madoff's Ponzi scheme in Fooled by Ponzi (and Madoff): How Bernard Madoff Made Off with My Money.
A Reference Guide to the U.S. Rescue Efforts
A 60+ page PDF to help track the US government efforts at financial rescue.
Argument for unwinding all the credit default swaps and closing the market.
There are three possible defences for treating the CDS market as a going concern: its support for capital raising, its utility for price discovery and its role as a risk-management tool. All have melted like so many Lehman deal cubes in waste incinerators.
Consider capital raising. Writers of protection in the CDS market must now hold increasing amounts of cash as margin against the probability of default for the "reference entities" or borrowers they bet on. This has led to the sale of tens of billions, if not hundreds of billions, of dollars, euros and pounds worth of securities to raise that cash.
That leads to the value of such swaps for price discovery. Bad joke. Price discovery is a useful economic function; that is the rationale for commodities markets. But CDS are derivative instruments, whose price is "discovered" these days as a function of equity volatility, since buying equity puts is one way to dynamically hedge the illiquid legacy books.
Risk management with CDS was largely about what the bankers called "reg cap arb" (regulatory capital arbitrage), or making big spreads and bonuses by scamming the regulators whose employers, the taxpayers, now have the bill.
Der Untergang (The Downfall: Hitler and the End of the Third Reich) recast as a financial crisis at an investment bank headed by Adolf Hitler. The reconstructed plot and dialogue, supported by subtitles, are brilliant and hilarious.
- The Spiral - Part I - Those Vultures
- The Spiral - Part II - Managing Directors Everywhere
- The Spiral - Part III - On Stage
- The Spiral - Part IV - Liquidation
- The Spiral - Part V - The Board
- The Spiral - Part VI - Crescendo Partners
- The Spiral - Part VII - The Kitchen
- The Spiral - Part VIII - Jet A
- The Spiral - Part IX - Paulson
Of course, there is practically a cottage industry built on parodies of Der Untergang. Here is a one-off video also inspired by the current financial crisis.
No problem. I'll just refinance my adjustable rate mortgage and then I'll be fine.
Real estate only goes UP! My broker told me it only goes UP! I can't believe I am going to have to sell my house before I can flip it for a profit! That bimbo said I could always refinance before the rates went up!
At the apex of any theological system, of course, is its doctrine of God. In the new theology this celestial pinnacle is occupied by The Market, which I capitalize to signify both the mystery that enshrouds it and the reverence it inspires in business folk. Different faiths have, of course, different views of the divine attributes. In Christianity, God has sometimes been defined as omnipotent (possessing all power), omniscient (having all knowledge), and omnipresent (existing everywhere). Most Christian theologies, it is true, hedge a bit. They teach that these qualities of the divinity are indeed there, but are hidden from human eyes both by human sin and by the transcendence of the divine itself. In "light inaccessible" they are, as the old hymn puts it, "hid from our eyes." Likewise, although The Market, we are assured, possesses these divine attributes, they are not always completely evident to mortals but must be trusted and affirmed by faith. "Further along," as another old gospel song says, "we'll understand why."
Those who want to understand the mechanism [of classic debt-deflation bust at work] might ponder Irving Fisher's comment in 1933: When it comes to booms gone bust, "over-investment and over-speculation are often important; but they would have far less serious results were they not conducted with borrowed money."
By mid-September, however, the outlook was much grimmer. On Monday, September 15th, Lehman Brothers, another Wall Street investment bank that had made bad bets on subprime mortgage securities, filed for bankruptcy protection, after Bernanke, Paulson, and the bank's senior executives failed to find a way to save it or to sell it to a healthier firm. During the next forty-eight hours, the Dow Jones Industrial Average fell nearly four hundred points; Bank of America announced its purchase of Merrill Lynch; and American International Group, the country's biggest insurance company, began talks with the New York Fed about a possible rescue. Goldman Sachs and Morgan Stanley, the two wealthiest investment banks on Wall Street, were also in trouble. Their stock prices tumbled as rumors circulated that they were having difficulty borrowing money. "Both Goldman and Morgan were having a run on the bank," a senior Wall Street executive told me. "People started withdrawing their balances. Counterparties started insisting that they post more collateral."