Tag: finance

Wall Street has a sad :-(

| February 14, 2012 | 2 Comments

Michael “Moneyball” Lewis was the first one to, er, expose us to the term Big Swinging Dick. His his first novel, Liar’s Poker, was full of them. The BSDs were the guys on the trading floor who brought more rain than El Niño.

But the BSDs have gone a little soft now. Even the famous Wall Street bull has been caged. And some, like number one banking fanboi Dick Bove, say that bankers have been “castrated” altogether by new regulation. Regulation which many argue does not go far enough.

Regardless, the Masters of the Universe suddenly find themselves feeling the pain that many of the rest of us have been feeling for the past four years. Only their ways of coping with it are a little different than what you might expect. Continue Reading

Weekend wrap-up: 1/9 to 1/13/12

| January 15, 2012 | 0 Comments

Here were the most popular posts from this week. Check ‘em out, plus our GIF of the week after the jump!

  1. So what’s the dumb money doing right now?  Newsflash: there’s no investment fairy flying from asset manager to asset manager sprinkling higher ABS yields on the undeserving.
  2. Truth and “truthiness” in TARP. The latest TARP report looks at the lifetime costs to U.S. taxpayers and also showcases the Treasury’s naughty side.
  3. How we went from CDO to CD “No!” There’s a new study out that attempts to understand why so many collateralized debt obligations (CDOs) failed so spectacularly.
  4. Is it time for Uncle Ben to raise the roof? Is it time to prepare ourselves for a return to a less accommodating interest rate environment?
  5. The SEC does it again. Is there any government body having a harder time of it these days than the SEC?

Continue Reading

How we went from CDO to CD “No!”

| January 11, 2012 | 0 Comments

The rabbit does some magic

There’s a new (preliminary) study out by Oliver Faltin-Traeger of Blackrock and Christopher Mayer of Columbia Business School that attempts to explain a key mystery of the financial crisis: why did so many collateralized debt obligations (CDOs) fail so spectacularly? Especially when many of them enjoyed AAA credit ratings from the Big 3 rating agencies?

Remember: it was  AIG’s exposure to CDOs (through the naked credit insurance it sold to Goldman Sachs and others) that caused its epic fail and compelled the U.S. to nationalize what used to be the world’s largest insurance company. (And as I mentioned yesterday we are three years down the road and U.S. taxpayers are still waiting to get their $51.1 billion dollars back.)

We now know that CDOs were kind of like a Febreze for putrid mortgages. Continue Reading

Weekend wrap-up: 10/17/11-10/21/11

| October 22, 2011 | 0 Comments

Check out our most popular posts from the past week.

  1. OWS? Here’s who the banks should really be scared of. Occupy Wall Street’s making big news, but we should be paying attention to another fast-spreading movement that can do a lot more direct damage to the big banks.
  2. No time for tax reform. It’s amazing how much (or how little) can be accomplished within two months.
  3. Federal Reserve: anybody else see a problem with this? This little diagram from the GAO’s audit of the Fed speaks for itself.
  4. Hard questions continue to haunt the Federal Reserve. Why reading the GAO report on Fed governance made me want to tear up the Federal Reserve Act.
  5. PIG-Sity, here we come.The U.S. banks’ third-quarter earnings releases gave us a look at how exposed they are to the eurozone crisis.
And enjoy our Gif of the Week, courtesy of Jimmy Fallon.

Jimmy Fallon

PIG-Sity, here we come

| October 21, 2011 | 2 Comments

Credit: Kevin Hutchinson

This week the big U.S. banks released their 3rd quarter earnings. The information provided stood out for two reasons:

  1. The banks juiced their earnings by using a perfectly legal accounting rule known as CVA DVA, or credit debt value adjustment. CVA allows the banks to look at how their own debt is trading and to book a gain if the price of that debt has gone down. All because the banks could theoretically buy their own bonds back at a price lower than what they originally sold it for. With this trick all 4 of the big banks–Bank of America, Citigroup, JP Morgan Chase and Morgan Stanley–actually benefitted from investors’ worries about whether they’ll be repaid. One report claims that CVA accounted for 54% of the profits reported across the 4. A bit perverse, no?
  2. The other interesting bit about the 3Q releases is that it gave us a good look at how exposed the banks are to eurozone crisis that started at the edges but has steadily been creeping into the core. Let’s call this group PIG-Sity, for Portugal, Ireland, Greece, Spain and Italy. Here’s a graph of the U.S. banks’ exposure to PIG-Sity:

Continue Reading