Minyanville Wed 2010-09-29 09:08 EDT

Excerpt From "Traders, Guns & Money" (Part 3)

Satyajit Das

Minyanville Professor Satyajit Das' book "Traders Guns & Money" is a wickedly comic exposé of the culture games and pure deceptions played out every day in trading rooms around the world. And played out with other people's money. Das is an international expert on financial derivatives and has more than 30 years of experience in the financial markets. Having worked on both the sell side and buy side for such banks as the Commonwealth Bank of Australia Citicorp Investment Bank Merrill Lynch and the TNT Group he now acts as a consultant advising banks and corporations and presenting

excerpts; gun; Minyanville; money; Part 3; Traders.

Sat 2010-09-11 23:31 EDT

Excerpt From "Traders, Guns & Money" (Part 1)

Satyajit Das

Minyanville Professor Satyajit Das' "Traders, Guns & Money" is a wickedly comic exposé of the culture, games, and pure deceptions played out every day in trading rooms around the world. And played out with other people's money. Das is an international expert on financial derivatives and has more than 30 years of experience in the financial markets. Having worked on both the sell side and buy side for such banks as the Commonwealth Bank of Australia, Citicorp Investment Bank, Merrill Lynch, and the TNT Group, he now acts as a consultant advising banks and corporations and presenting seminars on derivatives throughout the world...

excerpts; gun; money; Part 1; Traders.

Thu 2010-08-26 09:03 EDT

Why Doesn't the United States Have a European-Style Welfare State? | The Weatherhead Center for International Affairs

Alesina, Alberto, Edward L. Glaeser, and Bruce Sacerdote

European countries are much more generous to the poor relative to the US level of generosity. Economic models suggest that redistribution is a function of the variance and skewness of the pre--tax income distribution, the volatility of income (perhaps because of trade shocks), the social costs of taxation and the expected income mobility of the median voter. None of these factors appear to explain the differences between the US and Europe. Instead, the differences appear to be the result of racial heterogeneity in the US and American political institutions. Racial animosity in the US makes redistribution to the poor, who are disproportionately black, unappealing to many voters. American political institutions limited the growth of a socialist party, and more generally limited the political power of the poor. [2001 Brookings Papers on Economic Activity; pdf downloaded]

European-Style Welfare State; internal affairs; United States; Weatherhead Center.

Thu 2010-08-19 16:04 EDT

The AIG Bailout Scandal

William Greider

The government's $182 billion bailout of insurance giant AIG should be seen as the Rosetta Stone for understanding the financial crisis and its costly aftermath. The story of American International Group explains the larger catastrophe not because this was the biggest corporate bailout in history but because AIG's collapse and subsequent rescue involved nearly all the critical elements, including delusion and deception. These financial dealings are monstrously complicated, but this account focuses on something mere mortals can understand--moral confusion in high places, and the failure of governing institutions to fulfill their obligations to the public. Three governmental investigative bodies have now pored through the AIG wreckage and turned up disturbing facts--the House Committee on Oversight and Reform; the Financial Crisis Inquiry Commission, which will make its report at year's end; and the Congressional Oversight Panel (COP), which issued its report on AIG in June. The five-member COP, chaired by Harvard professor Elizabeth Warren, has produced the most devastating and comprehensive account so far. Unanimously adopted by its bipartisan members, it provides alarming insights that should be fodder for the larger debate many citizens long to hear--why Washington rushed to forgive the very interests that produced this mess, while innocent others were made to suffer the consequences. The Congressional panel's critique helps explain why bankers and their Washington allies do not want Elizabeth Warren to chair the new Consumer Financial Protection Bureau...

AIG bailout scandal.

Jesse's Café Américain Mon 2010-08-16 16:09 EDT

Chris Whalen: Nothing Has Changed Because It's The Fraud and Corruption, Stupid

Jesse

...The dirty little secret of the Dodd-Frank legislation is that by failing to curtail the worst abuses of the OTC market in structured assets and derivatives, a financial ghetto that even today remains virtually unregulated, the Congress and the Fed are effectively even encouraging securities firms to act as de facto exchanges and thereby commit financial fraud. Allowing securities firms to originate complex structured securities without requiring SEC registration is a vast loophole that Senator Christopher Dodd (D-CT) and Rep. Barney Frank (D-MA) deliberately left open for their campaign contributors on Wall Street. But it must be noted these same firms have a captive, client relationship with the Fed and other regulators as well, thus a love triangle may be the most apt metaphor...a recent key supervisory officer appointment by the Federal Reserve Bank of New York (FRBNY)...choice of Sarah Dahlgren as Head of Supervision...Ms Dahlgren has been at the center of many of the Federal Reserve's most embarrassing failures in the area of bank supervision and in particular with respect to the failure of American International Group (AIG)...

change because; Chris Whalen; corruption; fraud; Jesse's Café Américain; Stupid.

Wed 2010-08-04 20:58 EDT

Knives Out for Elizabeth Warren >> naked capitalism

Yves Smith

It should come as no surprise that a financial services industry powerful enough to water down meaningful reform in the US and internationally (Basel III rules were weakened to allow, for instance, that mortgage servicing rights be included in regulatory capital calculations) would probably have its way in blocking the nomination of Elizabeth Warren as head of the new consumer finance protection agency. Let's face it: the plan to deep six the consumer watchdog was set when it was changed from being an independent body as originally proposed and instead moved into the Fed, the most bank friendly and arguably the least industry expert of the US bank regulators. It might have had a hope of being effective had it been housed at the FDIC, which does not like cleaning up bank messes and therefore is less prone to swallow industry BS than the other Federal bank overseers, but it is now clearly meant to be a mere election time talking point...

Elizabeth Warren; knives; naked capitalism.

naked capitalism Fri 2010-07-16 16:31 EDT

Debunking Michael Lewis' Subprime Short Hagiography

Lewis' tale is neat, plausible to a mass market audience fed a steady diet of subprime markets stupidity and greed, and incomplete in critical ways that render his account fundamentally misleading...The Big Short focuses on four clusters of subprime short sellers, all early to figure out this ``greatest trade ever'' and thus supposedly deserving of star treatment...The anchor is Steve Eisman...Lewis completely ignores the most vital player, the one who was on the other side of the subprime short bets...Who really was on the other side of the shorts' trades is the important question... ...these are the international equivalent of widows and orphans...Eisman is no noble outsider. He is a willing, knowing co-conspirator. Even worse, he and the other shorts Lewis lionizes didn't simply set off the global debt conflagration, they made the severity of the crisis vastly worse. So it wasn't just that these speculators were harmful, and Lewis gave them a free pass. He failed to clue in his readers that the actions of his chosen heroes drove the demand for the worst sort of mortgages and turned what would otherwise have been a ``contained'' problem into a systemic crisis. The subprime market would have died a much earlier, much less costly death absent the actions of the men Lewis celebrates. They didn't simply keep the market going well past its sell-by date, they were the moving force behind otherwise inexplicable, superheated demand for the very worst sort of mortgages...

Debunking Michael Lewis; naked capitalism; Subprime Short Hagiography.

New Economic Perspectives Fri 2010-07-02 17:26 EDT

Europe's Fiscal Dystopia: The ``New Austerity'' Road to Neoserfdom

Michael Hudson

Europe is committing fiscal suicide -- and will have little trouble finding allies at this weekend's G-20 meetings in Toronto. Despite the deepening Great Recession threatening to bring on outright depression, European Central Bank (ECB) president Jean-Claude Trichet and Prime Ministers from Britain's David Cameron to Greece's George Papandreou (president of the Socialist International) and Canada's host, Conservative Premier Stephen Harper, are calling for cutbacks in public spending...It is a self-destructive logic. Exacerbating the economic downturn will reduce tax revenues, making budget deficits even worse in a declining spiral. Latvia's experience shows that the response to economic shrinkage is emigration of skilled labor and capital flight...A half-century of failed IMF austerity plans imposed on hapless Third World debtors should have dispelled forever the idea that the way to prosperity is via austerity. The ground has been paved for this attitude by a generation of purging the academic curriculum of knowledge that there ever was an alternative economic philosophy to that sponsored by the rentier Counter-Enlightenment...

Europe's Fiscal Dystopia; Neoserfdom; new austerity; New Economic Perspectives; Road.

Credit Writedowns Thu 2010-06-03 17:56 EDT

Guest Post: The 2004 Fed Transcripts: A Methodical, Diabolical Destruction of America's "Wealth"

Frederick Sheehan

The Federal Reserve releases transcripts of the Federal Open Market Committee (FOMC) meetings with a five-year lag (as required by law, the Fed would like to burn them). Transcripts for 2004 meetings were released on April 30, 2010...FOMC transcripts in 2004 confirm the Fed was afraid of markets...The FOMC seemed most concerned that higher rates might interfere with the carry trade. In the sad tale of The Financialization of the United States, the carry trade deserves a chapter...By 2004, the carry trade was a mammoth enterprise of hedge funds and banks. The too-big-to-fail banks were, by now, leveraging their own internally managed hedge funds, managing their own proprietary trading desks, and also lending to highly leveraged hedge funds. Leverage, and, the belief that access to rising levels of credit would never end, pushed up asset values on bank balance sheets -- whether real estate, bonds, stocks, or private-equity. This increased the banks' lending capacity which encouraged banks to lend more...Markets believed asset prices would only go up for many silly reasons. Belief in the Greenspan Put may have been the silliest but also the most influential...Federal Reserve Governor Donald Kohn...told his confreres that Federal Reserve policy was to distort asset prices. He also said this was deliberate and desirable. In other words, distorted asset prices were not an unfortunate consequence of such-and-such Fed policy. The Fed's goal was to distort asset prices...Consumer spending exceeded consumer income...This strategy of fixing asset prices at an artificially high rate to fool the American people into spending money they did not have was diabolical...The manipulation of markets and of the American people has grown worse under Bernanke's chairmanship...

2004 Fed Transcripts; America's; credit writedowns; Diabolical Destruction; Guest Post; Method; wealth.

Mon 2010-05-24 15:16 EDT

World Order, Failed States, and Terrorism: Part 1: The Failed-State Cancer

Henry C K Liu

...Failed and collapsed states are a structural trait of the contemporary international system, and not a temporary dysfunction of the Westphalian world order of sovereign states. Failed states are not always weak states. They are sometimes strong states that have voluntarily forfeited basic state functions as a matter of ideology, or allowed them to be usurped by special-interest groups. Strong failed states are states that possess powerful military/police power for advancing the narrow economic interests of a small class of citizens while sacrificing a significant segment of the population as failed market victims. In the US, socio-economic Darwinism is celebrated as indispensable for the survival of the economy in the market place, while scientific theories of evolution are challenged by Creationism in public schools. Those who believe God created man apparently do not believe he created all men as equals...World order, then, is the network of economic and strategic pressures that both holds a system together and constrains its members to act in acceptable ways through commonly accepted rules and institutions. When those rules and institutions are set by a hegemon or an empire, failed-state status will be defined by those rules and institutions. When the rules of balance of power are dominant, state failure is a different phenomenon...

failed state; Failed-State Cancer; Part 1; terror; World ordering.

Mon 2010-05-24 10:11 EDT

Hussman Funds - Weekly Market Comment: Don't Mess with Aunt Minnie - May 24, 2010

John P. Hussman

...Last week, we observed an Aunt Minnie featuring a collapse in market internals that has historically been associated with sharply negative market implications....Treasury Secretary Eddie Haskell/Timothy Geithner has scheduled a trip to Europe this week to urge European leaders "to pay better attention to potential market reactions to policy moves, and to accelerate the European rescue program." This promises to be a fiasco. What could European leaders possibly find more arrogant than to be lectured on bailout policy - not simply by the U.S., but specifically by a one-trick pony bureaucrat whose chief trick is the ability to smoothly talk the language of prudence while simultaneously pillaging the fiscal stability of an entire nation for the benefit of bondholders who made bad loans?...Providing Greece (and possibly some of its neighbors) a graceful exit from the Euro requires greater courage but lower ultimate cost - particularly to the citizens of Greece itself - than a policy of forcing heavy austerity, dislocations, and internal deflation within Greece. The effect of austerity policies will be to damage the revenue side of the Grecian economy enough to leave the deficits little changed in any event. One would like to go back a decade in time and choose different policies that would have allowed Greece to maintain the Maastricht deficit limitations, but it is far too late to push a full-grown genie back into an itty-bitty bottle...

2010; 24; Aunt Minnie; Hussman Funds; Mess; weekly market comments.

The Money Game Fri 2010-05-21 13:30 EDT

Sorry, We're Not Weimar Or Zimbabwe, And Gold Is Never Going To Be A Currency Again

Gold is hotter than ever...As an asset class gold has outperformed just about everything over the last 10 year period. It's been an impressive run. But is it all justified? Bear with me for a bit while I take a long-term macro look at gold as an asset class...the fiat currency system is here to stay (or at least some form of it). The odds of reverting back to a purely gold based system is next to zero in my opinion. The truth is, the gold standard as a currency system is a barbarous relic. It is a currency system that worked well in the old world economy, but simply does not have the flexibility to meet the demands of the growing global economy. The global economy has become too complex and too intertwined to be constrained by the gold standard. The fiat currency system is a product of economic evolution and the growing demands and strains of international trade. Famous examples of the break-down of the gold standard and its inflexibility to meet trade demands include the UK in 1931 and the U.S. government's destruction of the gold linked currency system under the Bretton Woods agreement...

currency; Go; gold; Money game; Sorry; Weimar; Zimbabwe.

Wed 2010-05-19 13:23 EDT

Conspiracy of Banks Rigging States Came With Crash (Update1)

...a nationwide conspiracy in which financial advisers to municipalities colluded with Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Lehman Brothers Holdings Inc., Wachovia Corp. and 11 other banks... rigged bids on auctions for so-called guaranteed investment contracts, known as GICs, according to a Justice Department list that was filed in U.S. District Court in Manhattan on March 24 and then put under seal. Those contracts hold tens of billions of taxpayer money...The workings of the conspiracy -- which stretched from California to Pennsylvania and included more than 200 deals involving about 160 state agencies, local governments and non- profits -- can be pieced together from the Justice Department's indictment of CDR, civil lawsuits by governments around the country, e-mails obtained by Bloomberg News and interviews with current and former bankers and public officials. "The whole investment process was rigged across the board," said Charlie Anderson, who retired in 2007 as head of field operations for the Internal Revenue Service's tax-exempt bond division. "It was so commonplace that people talked about it on the phones of their employers and ignored the fact that they were being recorded." Anderson said he referred scores of cases to the Justice Department when he was with the IRS. He estimates that bid rigging cost taxpayers billions of dollars...

Banks Rigging States Came; conspiracy; Crash; Update1.

Tue 2010-05-11 09:02 EDT

Barofsky Says Criminal Charges Possible in Alleged AIG Coverup - Bloomberg.com

Richard Teitelbaum

...The TARP watchdog [Neil Barofsy] has also criticized Treasury Secretary Timothy F. Geithner in reports and in congressional testimony for his handling of the process by which insurance giant American International Group Inc. was saved from insolvency in 2008, when Geithner was head of the Federal Reserve Bank of New York. The secrecy that enveloped the deal was unwarranted, Barofsky says, adding that his probe of an alleged New York Fed coverup in the AIG case could result in criminal or civil charges. In Senate Finance Committee testimony on April 20, Barofsky said SIGTARP would investigate seven AIG-linked mortgage-related securities similar to Abacus 2007-AC1, the instrument underwritten by Goldman Sachs Group Inc. that is at the center of a U.S. Securities and Exchange Commission lawsuit filed against the investment bank on April 16...

Alleged AIG Coverup; Barofsky Says Criminal Charges Possible; Bloomberg; com.

Mon 2010-04-26 14:57 EDT

SPIEGEL ONLINE - Druckversion - A Homecoming for Lost Jobs: Burned by Offshoring, Mid-Sized Firms Return Production to Germany - SPIEGEL ONLINE - News - International

SPIEGEL ONLINE, Hamburg, Germany

The trend towards offshoring production from Germany to other countries is slowly being reversed, with medium-sized businesses leading the way. In fact, Germany is itself becoming an attractive location for foreign investment...Many thousands of German companies joined the march to Eastern Europe and China during the past 15 years, hoping to reduce production costs there. But recently many have been returning, disillusioned. Smaller companies in particular are finding they overestimated the apparent advantages of low labor costs or more advantageous tax laws. So far, it has not been the largest and most well known companies that have begun reconsidering Germany as a production location. And the return home usually involves considerably less ballyhoo than the earlier offshoring of production. Nevertheless, the trend is significant because medium-sized companies are both the heart and the driving force behind the German economy...

burned; Druckversion; Germany; homecoming; International; Lost Jobs; Mid-Sized Firms Return Production; news; offshore; Spiegel Online.

Mon 2010-04-26 14:55 EDT

When Outsourcing Fails: One in Five German Firms Leaving China - SPIEGEL ONLINE - News - International

SPIEGEL ONLINE, Hamburg, Germany

Citing fast-climbing labor costs and pesky production quality problems, a growing number of German companies are doing an about face and pulling their manufacturing operations out of China. Some are searching for countries with lower wages while others are returning production to Germany...

German Firms Leaving China; International; news; Outsourcing Fails; Spiegel Online.

naked capitalism Mon 2010-04-19 18:46 EDT

Soros, Galbraith and Stiglitz on resisting inevitability in Greece

However, for now, it is Greece which is on everyone's mind...Kevin de Bruxelles says: ...I have to give credit to Angela Merkel. She is holding a pretty strong hand and it is now clear we are down to two choices for the endgame. The bailout solution will be international, in other words not limited to the Eurozone, and the amounts donated will be proportional to the risk each country holds. Or Greece simply defaults, probably first on their Anglo-Saxon debt (in return for low interest loans from Germany and France!), and each country then just bails out their respective banking system.

Galbraith; Greece; naked capitalism; resisting inevitability; Soros; Stiglitz.