Category Archives: Moral hazard

Volcker Does Not Get It

Paul Volcker has an op-ed in the New York Times that made my stomach sink. I had considerable hopes for Volcker’s involvement in financial reform; he’s one of the few regulators with the stature (literally and figuratively) who can say things to bankers, the media, and government officials that are unpalatable yet need to be […]

Is There An Overlooked Reason for Fed Secrecy on AIG?

Not that I have the time or patience to dig through 250,000 pages of documents, but I have a nagging suspicion that the people who are pouring through various AIG-related disclosures may be missing key points or snookered into interpretations that may be unduly flattering to various banksters. The focus of the recent investigations into […]

Fed Secrecy Claims Bogus, Redacted AIG Bailout Details Already Public

By Thomas Adams, an attorney and former monoline executive, and Yves Smith In September 2008, the Federal Reserve bailed out AIG, and ever since then, controversy has swirled around the motivation and terms of the bailout. A major part of the bailout funds went directly to three banks: Goldman Sachs, Merrill Lynch, and the French […]

Guest Post: Recent Lehman MD Reviews “The Murder of Lehman Brothers”

By Arthur Doyle, a former managing director of Lehman Brothers who now manages a hedge fund. I didn’t come to Joseph Tibman’s The Murder of Lehman Brothers expecting a blow-by-blow insider’s account of the financial meltdown of 2008. That ground has been covered adequately by, among others, Andrew Ross Sorkin in Too Big To Fail. […]

Tainted Burgers Show That Corporate Profits Trump Public Safety (Cargill and McDonalds Edition)

Reader Crocodile Chuck pointed out a set of articles at the New York Times that illustrates how skewed priorities in America have become. They also reveal how little public ire there is in the face of large-scale abuses that affect the average Joe. If corporate prerogatives cannot be reined in when personal safety is at […]

More on Goldman Shorts: McClatchy Weighs In

McClatchy has a breathless piece up on CDOs and other “exotic” transactions that Goldman did in the Caymans (hat tip reader John D). The problem is that the author got his hands on some very solid information (prospectuses of 40 deals) but the story itself is a bit of muddle. While it has some helpful […]

Guest Post: Find a Local Credit Union and Assess Its Safety

In support of Huffington Post’s call for people to move our money from the giant banks to community banks and credit unions: Here is a site which lets you find local credit unions Here is a site which rates the safety of banks, thrifts and credit unions And here is another site which rates the […]

On Goldman’s (and Now Morgan Stanley’s) Deceptive Synthetic CDO Practices (aka Screwing Their Customers)

Goldman is trying to diffuse the increasingly harsh light being turned on its dubious practices in the collateralized debt obligation market, with the wattage turned up considerably last week by a story in the New York Times that described how a synthetic CDO program called Abacus was the means by which Goldman famously went “net […]

How not to solve a financial crisis

By Edward Harrison As we head into the New Year, I am trying to look back at the last one with some semblance of a coherent interpretation of events that leads to a strategic vision of the future. I have already touched on stimulus, kleptocracy and crony capitalism as dominant themes for the year 2009. […]

Guest Post: The Real Reason Newspapers Are Losing Money, And Why Bailing Out Failing Newspapers Would Create Moral Hazard in the Media

By Washington’s Blog. Conventional wisdom is that the Internet is responsible for destroying the profits of traditional print media like newspapers. But Michael Moore and Sean Paul Kelley are blaming the demise of newspapers on simple greed. Michael Moore said in September: It’s not the Internet that has killed newspapers … Instead, he said, it’s […]

Guest Post: Economists Are Trained to Ignore the Real World

By George Washington of Washington’s Blog. As I have repeatedly noted, mainstream economists and financial advisors have been using faulty and unrealistic models for years. See this, this, this, this, this and this. And I have pointed out numerous times that economists and advisors have a financial incentive to use faulty models. For example, I […]

Blodget and Task say Obama suffers because “taxpayer always finishes last”

The latest WSJ/NBC News poll shows that President Obama’s approval rating has now slipped under 50%. This makes his the steepest first year decline in modern history. Why? You know what I would say: Obama doesn’t know when to be an asshole Obama wasted political capital on bank bailouts See what Aaron Task and Henry […]

Guest Post: Larry Summers Is Like a Guy Who Yells That the Sun Really DOES Revolve Around the Earth and that the Current Orbit is Just a Temporary Aberration . . . and That If We Just Wait a Little While, “Everything Will Return to Normal”

Two leading White House economic advisors – Larry Summers and Christina Romer – are giving very different views on the economy. As Fox news summarizes: “Everybody agrees that the recession is over,” said Larry Summers, director of the National Economic Council. “Of course not,” countered Council of Economic Advisers Chairwoman Christina Romer in a separate […]

Volcker: Little Evidence Financial Innovation Has Helped Economy

Tall Paul is my hero. I would go further than he did in a speech in Sussex. The case can made that financial innovation of the OTC derivatives variety, which has mushroomed from 1992 onward, has been at best a wealth transfer device from the real economy to the financial economy, and has probably exacted […]

Guest Post: Woman Who Invented Credit Default Swaps is One of the Key Architects of Carbon Derivatives, Which Would Be at the Very CENTER of Cap and Trade

As I have previously shown, speculative derivatives (especially credit default swaps or “CDS”) are a primary cause of the economic crisis. They were largely responsible for bringing down Bear Stearns, AIG (and see this), WaMu and other mammoth corporations. According to top experts, risky derivatives were not only largely responsible for bringing down the American […]