Category Archives: Federal Reserve

Did Goldman and Other Dealers Squeeze Mortgage CDS Shorts So They Could Sell Toxic CDOs?

By Tom Adams, an attorney and former monoline executive, and Yves Smith

As reported in the Financial Times, Senator Carl Levin of the Senate permanent investigations released damaging e-mails in which Goldman traders discuss “killing” some mortgage-related CDS shorts in May 2007. Levin understood the implications, that damaging the shorts would allow Goldman to buy CDS even more cheaply, but did not tease out the logical conclusion. This move was a likely a major step that allowed Goldman (and fellow dealers not under investigation who likely pursued parallel strategies) to package its remaining mortgage dreck into CDOs, which were launched as the reported squeeze evidently took place, and unload as much toxic inventory as possible before the wheels came hopelessly off the subprime bandwagon….

Debunking the Myth That Bigger Banks are More Efficient and Necessary

A very good op ed by Thomas Hoenig in the New York Times, “Too Big to Succeed” provides a solid recap of why the business of reining in the too big too fail banks is crucial. It isn’t simply that this is yet another version of “Mission Accomplished”; the bailouts actually made industry concentration worse, […]

Fed Thumbs Its Nose at Audit the Fed; Withholds Data Required on $885 Billion of Collateral

Well, even under the compulsion of law, the Fed chooses not to comply. Should we be surprised that it continues to refuse to make mandated disclosures? In this case, as reported by Bloomberg, the Fed has withheld information that was of the collateral posted by borrowers to secure $885 billion of loans. Without this information, […]

Richard Alford: “Quantitative Easing Explained” And Its Critics

By Richard Alford, a former economist at the New York Fed. Since then, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side. The YouTube video “Quantitative Easing Explained” has surpassed 2.9 million views. The video is both entertaining and unremittingly critical […]

China Wants Concessions for Mercantilism in Return for Rare Earths

A story in Reuters signals that China is willing to soften its stance on rare earths. But of course, it has no reason to offer such a concession for free. The article indicates that China wants its trade partners to back off on their pressure on China to curb its abuses of international trade rules. […]

Guest Post: A recession to remember – Lessons from the US, 1937–1938

Yves here. Normally I put up cross posts without additional commentary, but I wanted to offer a couple of observations about this post. While this piece is admittedly a bit heavy on economist-speak, and readers may differ with the policy recommendations, = it gives an even-handed account of the early rebound during the Great Depression […]

Part 2 of Real News Network Interview: “The Turkey Votes for Thanksgiving”

Hope you enjoy the second part of our discussion on Real News Network. Part 1 is here. More at The Real News

Alford: The Fed Tests The Thesis That Two Wrongs Don’t Make A Right, But Three Do

By Richard Alford, a former economist at the New York Fed. Since then, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side. In reaction to the OPEC-engineered oil price spikes of the 1970s, which economists would depict as external negative supply […]

We Speak to Real News Network About QE2

I was tight on time for this interview, and as a result I spoke at an even more rapid clip than usual. Hope you enjoy it nevertheless! More at The Real News

Auerback: Amateur Hour at the Federal Reserve

By Marshall Auerback, a portfolio strategist and Roosevelt Institute Fellow As any student of Economics 101 realises, you can control the price of something, or the quantity, but not both simultaneously. In announcing its decision to purchase an additional $600bn of treasuries last week, the Federal Reserve presumably intended to create additional stimulus to an […]

John Hussman on QE2, Bernanke’s Recklessness, and the Fed’s Constitution-Abusing Quasi-Fiscal Role

John Hussman is always worth reading, and his current missive is a hum-dinger. I’m extracting some key bits below, and urge you to read it in full. Note that Hussman is far from alone in chiding the Fed for encroaching on Constitutionally-mandated budget processes, including former central bankers. From Willem Buiter: As regards democratic accountability […]

Bank of America Refuses to Play Ball With Overhyped Pimco/Fed/Blackrock Putback Letter

We’ve been astonished at the continued poor reporting on the overhyped mortgage putback possible future action by Pimco, the Fed, Blackrock and others against Bank of America. Everyone seems so mesmerized by the names and the incorrect dollar size attached (the possible action relates to $47 billion of bonds, but the potential liability is much […]

QE2: Bernanke Cuts Geithner Off at the Knees

The Fed’s announcement of $600 billion of intermediate and long Treasury purchase, informally dubbed QE2, teed off a peppy rally in stocks, and led to further weakening of the dollar. These trends were already well in motion thanks to the central bank’s winks and nods that it was going to embark on another round of […]