Bailout

Wine market datapoint of the day

Posted on July 08, 2009
Some good news is coming out of California: Total U.S. wine sales rose about 5% in terms of volume in the first quarter from a year earlier, but wines priced at $25 a bottle and up fell about 12%, estimates Jon Fredrikson, an industry consultant with Gomberg, Frederikson & Associates in Woodside, Calif...

McNamara and model risk

Posted on July 07, 2009
Philip Delves Broughton notes that Robert McNamara, one of Harvard Business School's most notorious graduates, basically did in the field of war what Wall Street quants did in the field of finance: The journalist David Halberstam wrote that McNamara mistrusted people who did not speak his language of statistics and hard data...

When journalism misses the big picture

Posted on July 07, 2009
Or think about Bob Rubin, who famously told Carol Loomis that he'd never heard of the notorious liquidity puts which ended up all but destroying Citigroup until after it was far too late -- despite the fact that Rubin, more than any other individual, was meant to be the person taking the big-picture view of the bank's overall risk profile...

How did the automakers emerge from bankruptcy so quickly?

Posted on July 07, 2009
Micheline Maynard has a good 1,000-word article today on the surprising fact that both GM and Chrysler managed to exit bankruptcy in record time. ... And is this a heartening precedent for the wave of future bankruptcies which seems inevitable when all those leveraged loans mature over the next four or five years?

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Bankslaughter

Posted on July 07, 2009
Paul Collier is worried about the skewed incentives built in to any bonus system: the upside of taking risk -- a big bonus -- is much bigger than the downside if the risk blows up: The inherent problem facing shareholders is that incentive payments cannot go negative...

How to reform overdraft fees

Posted on July 07, 2009
J Mann asks what exactly I'm proposing, and what I think the consequences might be: Are you thinking about (1) requiring banks to allow customers to opt-out of overdraft protection (or maybe requiring opt-in); (2) setting maximum overdraft fees, but permitting banks to decline to provide ovedraft financing altogether; or (3) requiring banks to provide overdraft financing to all checking customers and setting maximum rates for that financing? It seems to me that the likely consequences would be some combination of (a) banks declining to offer overdraft financing, which would leave people paying bounced check fees to their payees; (b) banks reinstuting minimum balances for checking accounts; and/or (c) banks removing interest and other benefits from checking accounts.

Why Mark Thoma doesn?t accept advertising

Posted on July 07, 2009
I don't think it's wrong to take money from outside sources for being an economist, just because the state pays you to be an economist. ... But Smith's blog has lots of ads on it, which means that she's much more likely to find herself the recipient of takedown notices, C&Ds, and other nastygrams.

Regulatory arbitrage attempt of the day

Posted on July 07, 2009
Patrick Jenkins gives a good example of why insurance is not a sensible way to think about or regulate financial products: Investment banks, including Goldman Sachs and Barclays Capital, are inventing schemes to reduce the capital cost of risky assets on banks' balance sheets...

Commercial real estate datapoint of the day

Posted on July 07, 2009
Worldwide Plaza is being sold after all (a previous deal fell through ), and at what looks like a seriously knock-down price: Deutsche Bank AG has agreed to sell Worldwide Plaza, a 1.8 million square-foot skyscraper in New York City, for $600 million to developer George Comfort & Sons and partner RCG Longview...

Why insurance commissioners should not regulate CDS

Posted on July 04, 2009
Just like with the interest-rate swap, if the spreads on Massachusetts' CDS had tightened in, then the CDS contract would have cost Harvard a lot of money -- protection buyers are just as subject to margin calls as protection sellers are (but as buyers of insurance products are not)...

Thursday links take a different tack

Posted on July 03, 2009
Morningstar's John Rekenthaler defends target-date funds from my attack Richard Florida celebrates the past and future decline in homeownership Weird: the iShares California Municipal Bond ETF is up this year , even as the Aggregate Bond Fund is down What is Seaweed Survival , how did it end up being owed lots of money by Crabtree & Evelyn, and why does it seem to have zero online presence? How Goldman Sachs is like the delivery guy from Empire Szechuan

The limits of economic policy

Posted on July 03, 2009
Are the financial markets in denial about how soon the recovery will come and how impressive it will be? Mohamed El-Erian, for one, thinks so, and he points to the unemployment rate as a key reason why things are not going to get noticeably better any time soon:

Weekend infoporn

Posted on July 03, 2009
Well that's annoying. I just wrote a very long blog entry about Brad Setser's wonderful multimedia extravaganza over at CFR.org -- click here and then click on "Chapter III: Motion Charts". And then when I tried to post it, it disappeared entirely. So here's the short version: all four of the wonderful Gapminder-style charts (household balance sheets, financial failures, global imbalances, and economic power shifts) are great, but my favorite is the financial failures one, which shows banks' capital, assets, and market capitalization over time.

How driving a car into Manhattan costs $160

Posted on July 03, 2009
In the world of urban planning, there are few things hairier than transportation hypotheticals. When NYC pedestrianized Broadway in Times Square and Herald Square in May, the transportation commissioner said that traffic speeds would go up -- but now it seems that we won't know until December at the earliest whether that's actually true...

Wednesday links exaggerate for effect

Posted on July 02, 2009
" I'm coming to the worrying conclusion that Katy Perry's song represents a generation of girls who are happy & relaxed" Treasury will give banks $525 million by undervaluing their TARP warrants Hollywood cancels a movie. ... What is the "long, confusing story" of the Bicycle Access to Buildings bill, and what now are its chances?

Why bank fees need to be regulated

Posted on July 02, 2009
Whenever I write a blog entry advocating more and/or better regulation, the laissez-faire types, like Vincent Fernando, have a tendency to come out of the woodwork: I believe we need to keep holding people responsible for their decisions and personal management...

The banks? cunning MBS plan

Posted on July 02, 2009
But it turns out that the banks have been buying up billions of dollars of subprime mortgages, driving up their price. If they carry on doing that a bit longer, the market price will go higher than the price the banks have on their books, and they can then mark their mortgage book to market and report lots of lovely profits.

How AIG FP brought down the world

Posted on July 02, 2009
He tells the story of Gene Park, who examined FP's business at the end of 2005 and found that it was insuring deals which were 95% subprime: Park then conducted a little survey, asking the people around AIG FP most directly involved in insuring them how much subprime was in them...

The scandal of overdraft fees

Posted on July 02, 2009
Bank of America will now assess such things ten times a day, and the NYT's Eric Dash has a good overview of the problem using data from Moebs Services: The most unexpected change has occurred in overdraft fees ? the industry?s most lucrative and controversial charge ? where the typical fee rose to $26 after five years at $25...

Modelling model risk

Posted on July 02, 2009
Paul Wilmott has words of wisdom for anybody in the financial-services industry who's putting a model together: At every stage of valuation and model development you must be asking questions about risk and robustness. ... While mitigating model risk is a very recondite field which very few people have any expertise with; what's more, it doesn't really make money in and of itself.

What Larry Summers did to Harvard?s finances

Posted on July 02, 2009
Nina Munk's VF article on Harvard's endowment isn't online, but the précis is, and it seems that Larry Summers takes a particular beating, being blamed for $1 billion in losses on interest-rate swaps, as well as for meddling with Harvard Management Company's investment strategies and ultimately, with Bob Rubin, being responsible for the departure of Jack Meyer...

The access arbitrage

Posted on July 02, 2009
As I noted in May, if you?re a senior editor at a major news publication, you can expect regular meetings with VIPs up to and including heads of state, substantially all of them off the record. ... So we shouldn't really be surprised by this : For $25,000 to $250,000, The Washington Post is offering lobbyists and association executives off-the-record, nonconfrontational access to "those powerful few" ? Obama administration officials, members of Congress, and the paper?s own reporters and editors.

Moneyball

Posted on July 02, 2009
He's standing between The Moustache, on the left, who has just taken over as deputy chairman, president and chief operating officer of News Corp for a total first-year comp package which could be more than $40 million ; and The Hair, on the right, who was earning about the same when he quit the job ...

Tuesday links reminisce

Posted on July 01, 2009
Michael Jackson tickets were designed to be a collector's item . ... Absolutely bonkers 6,000-word investigation of whether LA vegan restaurants are really really vegan

California: The haves and have-nots

Posted on July 01, 2009
People needing temporary assistance for basic family needs Public Employees' Retirement System ... People in drug prevention, treatment, and recovery services Legislators, legislative employees, and appointees

The FTC?s attack on business opportunity scams

Posted on July 01, 2009
Well done to the FTC for putting some serious resources into attacking business opportunity scams. It doesn’t hedge, it doesn’t say that some are better than others — instead it says in a simple and forthright manner that if someone is advertising a “business opportunity”, even if it’s a celebrity like Adam West, you should [...

Felix Salmon smackdown watch

Posted on July 01, 2009
I've been saying for a while that much mainstream financial journalism is very weak, and that one would in many cases be better off reading blogs instead. But Choire is quite right when he notes: Taibbi at least is explaining (or trying to explain!) complicated financial operations to the real world?while the finance writers and bloggers are often willfully obscure, tradey, impenetrable and even at times useless to any audience who actually isn't working at (or recently laid off from) a bank...

Bond prices finally go online

Posted on July 01, 2009
This section includes general bond market information such as news, benchmark yields, and corporate bond market activity and performance information, descriptive data on U.S. Treasury, Agency, Corporate and Municipal Bonds, Credit Rating Information from major rating agencies, and price information with real-time transaction prices for Corporate Bonds (TRACE), Municipal Bonds (MSRB) and end of day prices for U...

The crazy story of Hernan Arbizu

Posted on July 01, 2009
At this point the story gets seriously crazy: UBS never seems to have informed Arbizu's clients that he had left the firm, and so both Lopez and the Acevedos continued to deal with him, via his cellphone, in the belief that he was their account representative...

The Taibbi debate, in 140 characters or less

Posted on July 01, 2009
But in any case, this is debate in 140 characters or less: HM : For the record, I don't think any article that contains the line "vampire squid sucking the face of humanity" is real journalism. ... It is mass participation that makes it bubble. .....

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