Quoting the Crisis21/11/2009
Only a short while ago, we were teetering on the brink of global financial collapse. Essentially, what occurred was a crisis of unintended consequences: Misperceptions of risk and misplaced incentives led to misguided actions. The crisis metastasized in large financial institutions and spread through the entire body of the financial system. Both on and off balance sheets, banks levered up to cancerous levels and funneled funds into assets of questionable quality.
These bad bets were made worse by their scale and the rapidity with which they spread. It was not enough that one or two large institutions erroneously thought that real estate prices would rise forever—nearly all of the biggest banks did. It was not enough that one or two large institutions thought they could contract with third parties they presumed would immunize them against failure—nearly all did. And it was not enough that one or two regulators turned a blind eye to the systemic risk posed by this behavior—nearly all did, including the Federal Reserve.
„Quote posted at 23:08
Christopher Taylor, former executive director of the Municipal Securities Rulemaking Board in Alexandria, Virginia, quoted by Dunstan McNichol in Goldman Sachs Still Paid for Swaps on Redeemed Bonds (Update2) - Bloomberg.com
Quote posted at 21:08
So, maybe Blankfein is sorry that his company is so good at wrapping up garbage and selling it as a birthday present.
Or, maybe he’s sorry he didn’t tell everyone (or even the company’s clients) that while Goldman Sachs was selling $40 billion in securities backed by housing junk, the company secretly made a bet against the housing market. When the housing market started to collapse, Goldman Sachs’ profits soared. The company managed to avoid a total meltdown with good timing and excellent salesmanship.
„Ilyce Glink in Goldman Sachs Says Sorry For The Housing and Credit Crisis - CBS MoneyWatch.com
Quote posted at 19:08
Lloyd Blankfein, CEO of Goldman Sachs, quoted by Simon Kennedy in Goldman apologizes, offers small businesses help - MarketWatch
Quote posted at 17:05
What the good Professor is suggesting is that the Treasury doesn’t have to issue bonds at all. In fact, since the Treasury does control the electronic printing press, it could legitimately buy stuff with money it prints out of thin air. Sounds a bit like counterfeiting, doesn’t it?
But, let’s step back for a second: what is the functional difference for the federal government between Treasury securities and bank notes? Both are liabilities of the federal government. But liabilities of what? The only obligation they enforce on the government is the promise to repay with more paper (or electronic bank credits, if you will). For all intents and purposes, bank notes, reserve deposits, and Treasury securities are fungible: they are obligations to be repaid in the same fiat currency.
„Edward Harrison in If the U.S. stopped issuing treasuries, would it go broke? - Credit Writedowns
Quote posted at 15:03
While seeking concessions from the various banks, the Fed contacted the Commission Bancaire, a French regulator, to request support in its negotiations with two French institutions, Société Générale and Calyon.
The Commission Bancaire responded “forcibly” that unless A.I.G. were in bankruptcy, the French banks were “precluded by law from making concessions and could face potential criminal liability” if they helped.
„Mark Williams Walsh in Audit Faults New York Fed in A.I.G. Bailout - NYTimes.com
Quote posted at 13:01
20/11/2009
Just two days before the New York Fed paid A.I.G.’s partners 100 cents on the dollar to tear up their contracts with the insurance giant, one bank volunteered to take a modest haircut — but it never got the chance.
UBS, of Switzerland, alone offered to give a break to the New York Fed in the negotiations last November over how to keep A.I.G. from toppling and taking other banks down with it. It would have accepted 98 cents on the dollar.
But UBS’s good-faith gesture was quickly drowned out by Goldman Sachs and the top French bank regulator. They argued, with others, that it would be improper and perhaps even criminal to force A.I.G.’s trading partners to bear losses outside of bankruptcy court.
„Mark Williams Walsh in Audit Faults New York Fed in A.I.G. Bailout - NYTimes.com
Quote posted at 18:46
Treasury Secretary Tim Geithner, quoted by Sarah O’Connor and Alan Rappeport in FT.com / US / Economy & Fed - Geithner defends record to Congress
Quote posted at 16:46
19/11/2009
» U.S. House Dems sharpening 'too big to fail' plan | Business News | Reuters
WASHINGTON (Reuters) - A key U.S. congressional panel moved toward toughening a plan for dealing with “too big to fail” financial firms on Tuesday, while rejecting a Republican alternative backed by Wall Street.
Link posted at 23:45
18/11/2009
» Bank of America Foreclosure Shenanigans?
There’s a sinister point here: When Bank of America auctions a foreclosure property and it is bought by Bank of America Home Loan Servicing (formerly Countrywide), it counts as an existing home sale. This inflates housing statistics, both for numbers sold and for home prices.
Accounting is important.
Link posted at 19:06
Donald Tsang, chief executive of the city of Singapore, quoted by Christopher Anstey and Michael Dwyer in Fed May Cause Next Crisis, Hong Kong’s Tsang Suggests (Update2) - Bloomberg.com
Quote posted at 17:06
James Coffman in Note to Jamie Dimon: Repeating Something Doesn’t Make It True « The Baseline Scenario
Quote posted at 13:02
Yves Smith in Goldman Gives Preferential Treatment to Junior CDO Holders Over Senior « naked capitalism
Quote posted at 11:02
17/11/2009
The authorities are completely responsible for the messes on two different fronts that intersect to create monetary policy dilemma. Going below 2% for Fed funds was a huge error (well maybe you could justify 1% as a very short term expedient), but the Fed is now painted in a corner. But second, and the much bigger issue, is that (as everyone can see) all this cheap money is not going into the real economy. A few very high quality borrowers are getting good rates; everyone else finds credit scarce and costly. So spreads are higher than before, and even absolute rates are often higher expect in markets like mortgages where the Fed has intervened.
Now some readers will correctly say that overly loose lending is what created the problem, and we need to undo that, but they are conflating two issues. Tightening up on WHO gets credit and HOW MUCH they get is separate from pricing. If this was mere improved standards, you’d expect to see more discrimination within various types of borrowers. But instead, across entire swathes of borrowers, particularly consumers and small businesses, banks have simply turned off the spigot. This has little to do with a return to prudent practices. In fact, it illustrates a real cancer: that across consumers and many small business owners, old-fashioned multi-variable decision-making (which included some verification of income) has been replaced by heavily or entirely FICO based systems. Those systems failed utterly. But they were cheap to operate, banks have no intention of reverting to earlier, more costly approaches. So we have a credit assessment process that is broken, but no one wants to admit it.
„Yves Smith in China Lambastes Dollar “Carry Trade,” Diverting Attention from Its Currency Manipulation « naked capitalism
Quote posted at 22:51
Tyler Durden in Quantifying The Cost Of FAS 166 And FAS 167: At Least $450 Billion Of Onboarded “Assets” With Citi #1 At $154 Billion | zero hedge
Quote posted at 20:51
