Category Archives: Financial Crisis

When you have a hammer, all the world's a nail – network edition

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 […]

Valuation of Warrants

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 […]

Goldman Sachs is corrupt

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 […]

Shameful administration stance on finance pay

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 […]

Banks, TARP, Treasuries

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 rise of futures trading, part who knows what

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 […]

A framework for understanding the financial crisis

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 […]

prediction-o-rama, finance style

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 […]

Socialist recruitment

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 […]

Merrill Lynch

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 […]