Goldman has just issued an eight page letter to shareholders, in which it tries to defend itself against its critics, particularly regarding its conduct vis-a-vis AIG, with how it got short the residential mortgage market, and its compensation. To be more terse than usual: the AIG argument is generally plausible (and not inconsistent with what […]
Read more...The Financial Times reports that the SEC has launched a probe into whether other financial firms used repos to engage in what amounted to financial fraud (as in fraudulent financial reporting), although perilous few are using the “F” word. From the Financial Times: US regulators on Monday asked more than 20 financial groups whether they […]
Read more...By Tom Adams, an attorney and former monoline executive Felix Salmon at Reuters and Steve Gandel at Curious Capitalist used some of the analysis in Michael Lewis’s The Big Short as an opportunity to attempt to exonerate Goldman Sachs for the charge of deliberately constructing CDOs to go bad for their own profit. In particular, […]
Read more...Get this: insurance companies have long been very big institutional investors. They get cash from premiums and have to pay it out in the future. If they are in the property and casualty or health insurance business, there isn’t that long a time between premium payments and when the losses might show up, but other […]
Read more...The current number one non-fiction best seller, Michael Lewis’ The Big Short: Inside the Doomsday Machine, addresses the question “Who got it right? Who saw the real estate market for the black hole it would become, and eventually made billions from that perception?” It is hailed as meeting the usual Lewis high standards of engaging […]
Read more...Via an e-mail from someone who has worked at the SEC. Note that the reason for the mention of the Department of Justice is that the SEC cannot bring criminal cases on its own, but has to secure the cooperation of the DoJ. The SEC-DoJ relationship is not entirely functional, but I suspect that the […]
Read more...I had not pointed to the letter written by Matthew Lee, the so-called Lehman whistle blower, because it seemed to add little to the main story: insider alerts senior management to a Big Problem (or in Lehman’s case, that its chicanery/incompetence was so pervasive as to be impossible for anyone within hailing distance of it […]
Read more...The Lehman Examiner’s report gives an unintentionally damning portrayal, both of the the structure of financial regulation in the US and how regulators failed to use the powers they had effectively. Section III.A.6: Government shows that even with its imperfect grasp of the situation, the authorities recognized Lehman had a large negative net worth. Yet […]
Read more...By L. Randall Wray, a Professor of Economics at the University of Missouri-Kansas City who writes at New Economic Perspectives Just when you thought that nothing could stink more than Timothy Geithner’s handling of the AIG bailout, a new report details how Geithner’s New York Fed allowed Lehman Brothers to use an accounting gimmick to […]
Read more...A reader wrote to tell me his firm had been shown transactions at the end of 2007 from an investment bank (not Lehman) that he was confident were to tart up its balance sheet. This confirms the hardly shocking idea that window dressing was not limited to Lehman: Around Dec 2007 bank I work for […]
Read more...By Frank Partnoy, Professor of Law and Finance University of San Diego School of Law and author of Fiasco, Infectious Greed, and The Match King The buzz on the Lehman bankruptcy examiner’s report has focused on Repo 105, for good reason. That scheme is one powerful example of how the balance sheets of major Wall […]
Read more...From the December 2009 issue of The Baffler (no online version of this article available). For those not familiar with The Baffler, this is the revival of a magazine of business and culture edited by Thomas Frank that had previously been published from 1988 to 2007. This issue was called “Margin Call” and included articles […]
Read more...By Richard Smith, a London-based capital markets IT specialist Hmm, I wonder if Yves’s resolution authority post will become the econoblogosphere’s equivalent to Clochemerle’s shattered urinal and its entourage of rioters. Surely not; yet it’s impressive how often such modest, utilitarian objects – a pissoir, a blog post about a financial reform proposal – can […]
Read more...This came via e-mail from a savvy past client with the sign off, “Frustrated on a plane.” I like all his suggestions, and I particularly call readers’ attention to his recommendation regarding compensation reform. One thing that is striking is that the media (and pretty much everyone in DC) has fallen in with the industry-flattering […]
Read more...We have pointed out more than once that a major impediment to reform of the financial services industry is that a small number of firms control infrastructure crucial to modern capitalism: 1. Credit is essential to any society beyond the barter stage 2. Debt markets are now at least as important in providing credit as […]
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