I just finished reading Gregory Zuckerman’s new book The Greatest Trade Ever: The behind the scenes story of how John Paulson defied Wall Street and made financial history. The story is about how JP, a relatively staid merger expert, became intensely bearish on the housing market in 2004. He took a $2 billion in assets …
First of all, kudos to McClatchy’s news service for running a slew of articles critical of Goldman Sachs during this financial crisis. The firm displays a disastrous combination of connectedness and high prestige on the one hand, and unconscionable financial practices on the other. They are not at all alone, or even the worst, but …
The current state of the economy, mostly financial, and I’m feeling pretty bleak about it. I’m looking at a few indicators, and I’m not particularly impressed with what I see.
One of the more interesting question post-meltdown (do we even still call it that? we really need a name for the ‘financial events of 2007-2008′) is whether structured finance is, for all intents and purposes, dead. Structured finance is the general term that includes the securitization of debt. These vehicles go by names like Asset-backed …
Congress is starting to ask questions about the ways Goldman Sachs measures risk, considering their supposed switch from an investment bank to a bank holding company. And they should. Plus, I think I was wrong about GS paying its profit-makers.
Two ways to regulate futures markets are by regulating the organizations that comprise the financial markets, or by regulating the financial activities in which any organization participates. This is an attempt to think about these differences.
How can it be that the NYT reports that JP Morgan is 110% awesome: “The strong showing may put to rest some worries that the bank was allowed to pay back its $25 billion taxpayer investment too early, after it passed the Treasury Department’s stress test in May.” But the Wall Street Journal can report …
Oh Yes, it’s their ‘trading prowess’, their ability to “embrace risks that its rivals feared to take and, for the most part, manage those risks better than its rivals dreamed possible.” Don’t pay attention to those last few sentences, though. The $13 billion government subsidy via the bailout of AIG, and the $28 billion in …
I complained last week that Duncan Watts’ editorial was an argument without much substance, effectively an argument based on deep knowledge of networks but shallow knowledge of markets. At the end of last week, James K. Galbraith testified for the Subcommittee on Domestic Monetary Policy and Technology. And it was pretty awesome. First, it was …
I’ve read a few times the editorial by my former colleague Duncan Watts, and despite some interesting discussion, I can’t help thinking that this is a guy who knows a lot about networks and not so much about financial markets. The article is about the problem of size and complexity in financial services organizations. Watts …
From the CBO’s June update on TARP funds (that’s a .pdf): The market value of outstanding warrants held by the Treasury is around $6 billion, CBO estimates.14 Of the total, about $1 billion is from warrants issued by the 10 banks that recently repaid their TARP funds. However, those calculations are sensitive to the assumptions …
Looks like Goldman Sachs is going to be making record bonus payments on the year. Let’s take a stroll, shall we?: Under then-head Jon Corzine (the soon-to-be-ex-governor of NJ), Goldman fucked over LTCM when they were going bankrupt in the late-1990s. From Roger Lowenstein’s When Genius Failed: “In Greenwich, Goldman’s sleuths, who had the run …
This article doesn’t make clear enough the fact that ALL major Wall Street banks continue to have billions of dollars of federal assistance. Set the pay for giving money to AIG but not for Goldman Sachs, despite the fact that the money went directly from AIG to Goldman Sachs. Goldman Sachs books profits because their …
This week, we find out that 10 banks are returning TARP money. Or more specifically, 10 banks are repaying $68.3 billion in federal bailout money. This does not mean that these banks are freeing themselves from the yoke of government (only, says the snark in me, it allows them to pay themselves obscene amounts of …
The financial crisis has made it appear as though futures markets have been humming along famously and unproblematically until the past few years, when credit default swaps and esoteric derivatives made the otherwise functional system toxic. And this may be. But let’s not pretend that futures markets were always just hedging mechanisms with an added …
I’m working on a piece that tackles more directly the sociological causes of the financial crisis. Here is a marker in the sand, my overall assessment. Short, probably cryptic, but what I believe is going on. Yes, I think every section needs elaboration. It will eventually be about abstract finance: The financial crisis was driven …
So here’s my guess as to endgame for the ‘bad bank’ plan: 1. Banks, backed by the federal reserve, will buy some of the crummier so-called toxic assets – CDO’s backed by (worthless) mortgages, (wildly overinflated) lease agreements, (defaulted) credit card debt, and other juicy bits. 2. They’ll pair these assets with something looking a …
This kind of article, a straight-reporting job on how tough it is to live in NYC on half a mill a year, reminds me of why New York sucks. The dirty driving reality of this town is that we are all supposed to be shocked and outraged, but we’re supposed to envy them too. And …
It goes without saying that we should at minimum subtract $3-4 billion from anything that B of A will receive from TARP. A 1- or 3-year across-the-board cap on finance salaries wouldn’t be terrible, frankly, and even if it creates hardship for employees, it will be temporary. And it is reasonable. We can argue about …
So, Citibank. Let’s roll the tape: I would say that there’s about an 80% chance that Citibank will not survive the next 12 months. Currently, there is a plan to break up the banking business and the brokerage business (that is, to merge Smith Barney with Morgan Stanley). Their CEO noted, “We believe there is …