Category Archives: Moral hazard

Perry Mehrling: Flash Crash Explained by HFT

The official report on the October 15, 2014 “Flash Crash” raises some questions which unfortunately it does not answer.

How Pension Funds, Universities and Endowments Pay for Private Equity Private Jets

One of the class markers of the private equity industry is that its members routinely fly on private jets. That’s because the larger and even some of the smaller firms charge their private jet travel to private equity portfolio companies.

Wolf Richter: Microsoft Tallies the True Costs of the M&A Boom: Layoffs, Write-Offs, Shut-Downs, and Economic Decline

Microsoft illustrates the real-world fallout of letting corporate executives, either out of desperation or out of finding deal making more fun than the grind of making businesses perform better, follow the siren song of M&A mavens.

What If There is No Deal on Greece?

The alarming part of the deadlock between Greece and its lenders is the lack of a plan on the creditor side to develop a Plan B, a sort of mirror image of the Greek government’s claim that its has bet everything on securing a favorable agreement.

Bill Black: Geithner’s Ghost Writer and the Parable of the River of Risk

Bill Black flags a new stunning bit of bank propaganda, that risk is an unavoidable natural condition that is futile for regulators to control.

Memo to Readers: If You Want to Beat Big Finance, You Need to Be Able to Take the Fight to Their Terrain

We are now 35 years into a finance-led counterrevolution. If you care about income inequality, student loan debt slavery, foreclosure abuses, and other products of the success of this effort, it behooves you, as Sun Tzu urged, to understand your enemy.

A Unifying Approach to Preventing Asset Price Bubbles

An integrated regulatory approach with a common leverage ratio for debt-based financing across the financial system would prevent bubbles

Bill Black: HSBC CEO – My Pay Was so Outrageous I Had to Use Tax Havens to Hide it from My Peers

This tidbit from HSBC reveals a new low in the standards of banking, which given how low those already are, amounts to an accomplishment of sorts. Perhaps we should create a Stuart Gulliver Award for other instances of creative extreme seaminess. Nominees?

The ECB’s QE Decision

The European Central Bank has just launched full-fledged quantitative easing. This column argues that the ECB’s watershed decision highlights both the strengths and the persistent vulnerabilities of the Eurozone. The limited-risk-sharing provision flags the need for greater fiscal union; and governments should use the respite that QE provides to launch much-needed structural reforms.

That’s their story and they’re sticking to it.

Bill Black: Roger Cohen’s Ode to Colonialism and Imperialism: Why is It “Insidious” to Want Justice for Banksters?

A remarkable (in a bad way) New York Times op-ed shows that Roger Cohen is so deep in the banksters’ pockets that he cannot see that he is a leader in the movement to ensure that no bankster will ever “pay for his sins.”

NYT’s William Cohan Blasts “Holder Doctrine” of Headfake Bank “Settlements” With No Prosecutions

Even though there is tacit acceptance, or perhaps more accurately, sullen resignation, about regulators’ failure to make serious investigations into financial firm misconduct (probes on specific issues don’t cut it), occasionally a pundit steps up to remind the public of the farce that passes for bank enforcement.

Benjamin Lawsky Shows Other Bank Regulators How to Do Their Jobs

It’s really easy to default to cynicism these days, since you are almost always certain to be right. And that goes double as far as bank regulators are concerned.

So that makes it even more important to call attention to exceptions to that sorry rule. One big one is the New York Superintendent of Financial Services, Benjamin Lawsky. As we’ll discuss later in this post, he’s again the subject of a top story in the Financial Times for doing what the banks treat as horrifically unwarranted behavior: punishing them for failing to live up to agreements to reform their conduct. Didn’t he get the memo that that was all theater for the rubes, and no one takes those commitments seriously?

New York Fed Worried About Gambling in Casablanca, Um, Ethics Problem at Big Banks

This story would be funny if it weren’t so pathetic. Yesterday, the Financial Times reported that the New York Fed woke up out of its usual slumber and realized that the crisis has changed nothing and that banks still ~~are in the business of looting~~ have unaddressed ethics issues.

Bill Black on Real News: BNP Paribas Fine Shows Financial Crime Still Pays

This Real News Network interview with Bill Black provides a good high-level overview of what is right and (mainly) wrong with the $8.9 billion settlement with BNP Paribas over money-laundering charges. Black stresses that financial crime remains a very attractive activity for both the enterprise and its employees. As usual, no executives were charged or even fined, although thanks to the intervention of New York financial services superintendent Benjamin Lawsky, eleven employees of the French bank lost their jobs.