Category Archives: Derivatives

Banks May Have Scored Hollow Victory on Volcker Rule/TRuPS CDO Compromise

Readers may recall that banks, in their eagerness to depict the final Volcker rule as a terrible miscarriage of justice, made a great deal of noise about the case of Zions Bank, which was blaming $378 million of prospective losses on the Volcker-rule requirement that banks sell these dubious instruments called TruPS CDOs by July 21, 2015. The regulators clarified the relevant rules, which looks like a concession. But how much of a concession is it?

In Echo of Runup to Crisis, Bond Investors Reaching for Yield

An article in the Financial Times by Tracy Alloway gives yet another sighting that bond investors are getting a bit frantic in their hunt for yield. The piece has the eyepopping title, Yield-hungry investors snap up US homeless bond. It uses recent deals in the CMBS (commercial mortgage backed securities) market as a proxy for bond investors’ QE-driven hunt for more return.

Your Humble Blogger Speaks on RT: “Banks Are Still Getting Away With a Lot”

I had fun on this interview…

Simon Johnson Reminds Us That the Banks’ Quiet Coup is Still Very Much in Place

Simon Johnson wrote a remarkably blunt article for the Atlantic in May 2009 titled The Quiet Coup. In case you managed to miss it, it remains critically important reading. He provided an update of sorts in a New York Times column today.

Banks Squealing Over Volcker Rule Exposing Their Dirty Laundry. Will Regulators Capitulate?

By George Bailey, who has worked in senior compliance roles at Big Firms You’ve Heard Of and is also a member of Occupy the SEC

The first few legs in the in the Volcker Rule repeal relay race are now under way.

Amar Bhidé on How Following Hayek Leads to Regulating Banks Like Utilities, Looking Askance at Liquidity and Securitization

I highly recommend this short interview by John Authers of the Financial Times with Amar Bhidé, a professor at Tufts, in which he argues that a proper reading of Friedrich Hayek would lead to considerable skepticism about whether most of the changes in finance over the last three decades actually represent progress.

Tom Adams: Citigroup is the Real Reason We Need the Volcker Rule

In my view the real purpose of the Volcker Rule is to prevent another Citigroup bailout and therefore the measure of its effectiveness is whether the rule would accomplish this.

Banks Start Volcker Rule Blame Game

Nothing like being able to use something in the headlines to hide your real behavior. And even better if you can get a banking stalwart columnist to run PR for you.

Volcker Rule: The Devil’s in the Unimpressive Enforcement Details

If you managed to be late to the Volcker Rule party, you can learn a great deal of what you’d need to know via the revealing contrast between two reasonably detailed accounts, one at Huffington Post by Shahien Nasiripour, the other by Matt Levine at Bloomberg. If you didn’t know better, you’d wonder if they were talking about the same rule.

Eric Ben-Artzi: How Risky is Citigroup’s New, Improved Version of a Once-Toxic Type of Synthetic CDO?

We are all still paying the price for the stream of ever more leveraged credit derivatives that fueled the world’s greatest credit bubble. It appears that some of these are attempting a comeback.

CFTC’s Bart Chilton Takes it to the (Position) Limits One More Time

Yves here. This post is important not simply because it describes where the fight over position limits stands and why it’s important, but it also gives some insight into regulator processes. It makes clear how even as few as two well placed officials, Bart Chilton and Gary Gensler, did a great deal to hold the line against predatory large financial firms. It also shows how hard regulators have to fight to do their job.

Jamie Dimon, the Lance Armstrong of Finance

I’m sure some readers will protest that comparing Jamie Dimon to Lance Armstrong is unfair. After all, Dimon is better looking than Armstrong. But this post will demonstrate that the big reason that Armstong’s reputation has crashed while Dimon’s remains largely intact is first, that bank CEOs have a powerful and largely compliant messaging apparatus in the financial media and second, that we hold sports stars to much higher standards than titans of finance and commerce.

Regulators Opening New Major Front With Banks on Foreign Exchange Trading Probe

The Financial Times story revealing that regulators in Switzerland, Hong Kong, the UK and US have starting probing foreign exchange markets, based on evidence that currency traders were rigging markets, is thin on details because the inquiries are still underway. Nevertheless, these investigations have the potential to unearth a Libor-level scandal.

Robin Hood Tax: How Reformers Sabotage Themselves with Terrible Branding

If I were a still a Wall Street type, I don’t think I could have done a better job of sabotaging an effort to impose transaction taxes on big financial firms than the left has managed to do itself with lousy branding.