Category Archives: Credit markets

Mirabile Dictu! Barclays CEO Bob Diamond Resigns Over Libor Scandal (Updated)

Wow, this resignation took place a mere day before the Treasury select committee hearings on Wednesday. The Wall Street Journal bizarrely sent a news alert out announcing the resignation, yet it links to a front page story that is out of date, saying that Diamond “resisted pressure to resign” and has “no plans to leave. FT Alphaville, natch, already has the resignation announcement from the board posted, which clearly shows that Diamond has resigned with “immediate effect” and that the departing chairman, Marcus Aigus, will lead the search for his replacement.

Why the EU Summit Decisions may Destabilise Government Bond Markets

By Paul De Grauwe, Professor of international economics, University of Leuven, member of the Group of Economic Policy Analysis, advising the EU Commission President Manuel Barroso, and former member of the Belgian parliament. Cross posted from VoxEU

Among the questions still remaining since last week’s summit of European leaders is whether the new measures will stabilise government bond markets. This column’s answer is ‘no’.

Quelle Surprise! State Legislatures Aren’t Buying Bogus Mortgage Settlement

The Obama Administration’s full-bore effort to push a bank-favoring mortgage “settlement” over the line earlier this year has led to a rearguard action that appears to have caught the mortgage industrial complex and its allies flatfooted.

Satyajit Das: “Super Brussels” Saves The World, Again, Maybe!

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk (2011). Jointly posted with Roubini Global Economics

The Pavlovian response of financial markets to the European leaders’ summit of 28 and 29 June 2012 was remarkable. The frugal communiqué of 322 words fired the “animal spirits” of financial markets, which now believe that the European debt crisis has been “solved”. As comedian Robin Williams joked: “reality is just a crutch for people who can’t handle drugs.”

Quelle Surprise! Fed Economists Side Firmly With Bank Criminality Over the Rule of Law

Although Dave Dayen already gave a well-deserved shellacking to a remarkable piece of bank PR masquerading as “insight” at Reuters, “Evidence suggests anti-foreclosure laws may backfire,” it merits longer-form treatment as a crude macedoine of anti-homeowner messaging.

London Whale Trade Explodes, Current Estimate of JP Morgan Losses as High as $9 Billion

So again, what did Dimon know when? Under the hot lights at the House Financial Services Committee, he repeatedly brushed off the losses on the failed Chief Investment Office trades as no biggie. Let us remind readers that the size of the CIO’s balance sheet would make it the 8th largest bank in the US and it was running half of JPM’s total risk exposures, so it’s hard to see the failure of oversight as something to be waived off. And now it turns out the losses are going to clock in at a much higher number than the $2 billion that Dimon kept repeating in the hearings.

Europe Has No Levers for Growth

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from http://www.macrobusiness.com.au/2012/06/the-european-summit-is-a-write-off/“>MacroBusiness.

It’s the eve of the 19th EU summit and as I type Angela Merkel and Francois Hollande should be getting started on their pre-summit meeting. I don’t think there is doubt in anyone’s mind that although we have seen 18 before it, this summit is of particular importance. Hollande and Merkel had a few words to say before their meeting:

Quelle Surprise! Barclays Settlement on Massive Interest Rate Price Fixing Illustrates Bank Crime Pays Well

It’s become oh-so-predictible that banks get at most “cost of doing business” punishments that they almost seem not worth noting. But that’s precisely why it’s important to keep tabs on them, to let the complicit authorities and the perps know that the public is not fooled, even it is not in a position to do anything about it…yet…

Even though the Libor/Euribor price-fixing scandal hasn’t gotten much attention in the US, this is a really big deal.

Jeffrey Sommers/Michael Hudson: Latvia, the Austerians’ Potemkin Village

Yves here. I’m dwelling on the spectacular failure of Latvia in part because readers like the writings of Michael Hudson, but more important, because a major push is on to reimage the implosion of that economy as some sort of success, not unlike the claims the Chicago Boys made for their efforts in Chile. It also doesn’t hurt that this account, which is a considerably expanded version of a recent Financial Times op-ed, is vivid and pointed.

By Jeffery Sommers and Michael Hudson, a associate professor at the University of Wisconsin-Milwaukee and distinguished professor at the University of Missouri-Kansas City respectively, who have both advised members of Latvia’s government on alternatives to austerity. They are also contributors to the forthcoming book by Routledge Press: The Contradictions of Austerity: The Socio-Economic Costs of the Neoliberal Baltic Model. Cross posted from Counterpunch by permission of the authors

Austerity’s advocates are declaring victory with Latvia’s battle against the European economic crisis and advocating it as the model for Greece & Spain to emulate. Curiously, Latvians have been declaring this “win” by exiting their country.

The European Summit is a Write Off

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

Spain took a beating overnight after Moody’s downgraded the long term debt and deposit ratings of 28 Spanish banks on the back of the sovereign downgrade earlier in the month. Yields on short term debt spiked at auction:

Yanis Varoufakis: Greece is Finished

Yves here. Yanis just posted an interview with ABC (Australia’s BBC) which describes how Greece cannot be salvaged. Its fate will be determined at the eurozone level, and its possible outcomes range from bad to awful. You can watch the conversation here. Transcript below:

Michael Olenick: Irrational Exuberance, Housing Edition

By Michael Olenick, creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha). You can follow him on Twitter at @michael_olenick or read his blog, Seeing Through Data

… how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions…
– Alan Greenspan, Dec. 5, 1996

In any context except a Gay Pride parade grown men wearing short skirts and carrying pom-poms look out of place. But if they’re cheering the artificial rise of housing prices we’ve seen lately, they seem to be not only accepted but welcome.

Battle Royale Coming Over Fed Currency Swap Lines?

John Dizard of the Financial Times gives an early warning of a potential flashpoint later in the year: that of the Fed’s currency swap lines.

Simon Johnson: JP Morgan at Risk if Euro Breaks Up

I’m surprised it has taken this long for Someone Serious to make the argument set forth in a new article by Simon Johnson at Bloomberg, which in short form says “You are dreaming if you think a European financial crisis stays in Europe.”

Johnson somewhat undercuts the urgency and importance of his article by working from the assumption that the eurozone dissolves back into its earlier configuration of one currency per nation. Economists and analysts have discussed other scenarios, such as a exit by Greece, which has the potential to precipitate contagion in Portugal, Spain, and Italy; an exit by Germany; a split into more economically homogeneous sub-groups (most likely north v. south). And Bloomberg refrains from putting the real sizzler in the headline: Johnson considers JP Morgan to be vulnerable and explains why.