naked capitalism Tue 2010-08-24 20:02 EDT

Boston Fed's New Excuse for Missing the Housing Bubble: NoneOfUscouddanode

It is truly astonishing to watch how determined the economics orthodoxy is to defend its inexcusable, economy-wrecking performance in the runup to the financial crisis...From the Wall Street Journal Economics blog: Should economists and policy makers have identified the housing market bubble before it burst? The answer is most likely no, says the Federal Reserve Bank of Boston, because economic theory was not up to the challenge... Yves: This recitation is truly embarrassing, in that the writers clearly see this abject failure as completely reasonable, as opposed to compelling evidence that the discipline is not qualified to provide policy advice. What could be more damning than admitting that economics was incapable of seeing the blindingly obvious?...

Boston Fed's New Excuse; housing bubble; missing; naked capitalism; NoneOfUscouddanode.

naked capitalism Mon 2010-07-19 17:07 EDT

Is the SEC Settlement Really a Win for Goldman?

Tom Adams and Yves Smith

...Conventional wisdom in the financial media is that the settlement announced by the SEC over its lawsuit on a Goldman 2007 Abacus CDO is a home run for Goldman. But a closer reading suggests that Goldman's victory is qualified, and the enthusiastic press response is in large measure due to the firm's skillful manipulation of perceptions...it is hard to see how anything in the settlement, if affirmed, would be negative for private parties considering lawsuits against sellers of CDOs...we imagine potential CDO investors will be mightily encouraged that Goldman ended up returning the full amount of investment to the one true third party investor in the deal -- IKB...An investor considering bringing an action against a bank that sold them a CDO that failed (meaning virtually all 2006 and 2007 ``mezzanine'' CDOs) would probably be encouraged that a bank was required to pay such a large amount for making inaccurate statements about the true nature of the CDO...Plaintiffs who sue CDO sellers have good reason to be optimistic...The settlement thus tarnishes the popular myth that the subprime shorts were insightful outsiders who executed ``the greatest trade ever''...the SEC has demonstrated that investors in such a CDO can win a recovery as a result of such inaccurate statements.

Goldman; naked capitalism; SEC Settlement Really; Wins.

Sun 2010-02-28 13:27 EST

Janet Tavakoli: Washington Abandons Greece: Beware of Geeks Bearing Grifts

Janet Tavakoli

The European Union (EU) is shocked--shocked I tell you!--that Greece used financial engineering to qualify for admission. Exactly how did they think that weaker countries managed to meet the requirements?...A few years ago, Greece engaged in derivatives transactions which essentially gave it a disguised loan, a gift from geeks. Greece may or may not have had plans to invest the money to create national wealth instead of say, blowing it all on national bling. Either way, Greece used its national credit card in a futile attempt to keep up with the EU Joneses...Today, rumors are that crony capitalists are using derivatives to profit from Greece's misery. There are allegations that investment banks and hedge funds used their knowledge of Greece's hidden debt to drive up its borrowing cost and drive down the Euro. Then these speculators reversed their positions, when they had advance information of a potential bailout for Greece. Other rumors suggest customized trades on the sovereign credit derivatives index also exploited Greece's problems. Still other rumors point to a campaign to manipulate Greek debt prices and knock down the Euro.

Beware; Geeks Bearing Grifts; Janet Tavakoli; Washington Abandons Greece.

naked capitalism Fri 2010-01-29 16:22 EST

Fed Secrecy Claims Bogus, Redacted AIG Bailout Details Already Public

...The SEC agreed to let AIG keep Maiden Lane III information secret until 2018, since it ``qualifies as confidential commercial or financial information.'' ...this argument is worthless. Nearly all of the deleted information can be reassembled from sources that are publicly available...An examination of our data raises troubling questions about how the Fed is valuing the Maiden Lane III assets.

Fed Secrecy Claims Bogus; naked capitalism; public; Redacted AIG Bailout Details.

Willem Buiter's Maverecon Sat 2009-10-10 13:13 EDT

I know I know nothing; but at least I know that

Willem Buiter

...Except for the important qualifier that the US dollar is a global reserve currency, and that the US government (and private sector) has most of its domestic and external liabilities denominated in US dollars, the pathologies of financial boom, bubble and bust in the US, the UK, Iceland, Ireland and Spain (and many of the Central and East European emerging market economies) track those of classical emerging market crises in South America, Asia and CEE in the 1990s, rather well. The emerging market analogy makes one less optimistic about a robust recovery, as typically, emerging markets whose financial sector was destroyed by a serious financial crisis took many years to recover their pre-crisis growth rates and often never recovered their pre-crisis GDP paths.

know; least; Willem Buiter's Maverecon.

Thu 2008-06-05 00:00 EDT

Mish's Global Economic Trend Analysis: $5 Trillion Hidden Off Bank Balance Sheets

FASB rewrites QSPE rules; qualified special-purpose entities moving onto balance sheets

5 Trillion Hidden; bank balance sheets; Mish's Global Economic Trend Analysis.