wall street

The Man Who Knew Too Much

Michael Collins

Neil M. Barofsky wrote a devastating column for the New York Times on March 29, his last day as Special Inspector General for the Troubled Asset Relief Program (SIGTARP). The roles for his position were:

"to conduct, supervise, and coordinate audits and investigations of the purchase, management, and sale of assets under the Troubled Asset Relief Program ("TARP"). SIGTARP is required to report quarterly to Congress describing SIGTARP’s activities and providing certain information about TARP over that preceding quarter." April 21, 2009 (Image SIGTARP)

RUBIN'S RUBES: Matt Taibbi's slapdown of the Obama Administration

In the December issue of Rolling Stone the journalist Matt Taibbi hits yet another grand slam exposing the murky world of Wall Street and Washington politics ("Obama's Big Sellout").  Taibbi provides a detailed and thoughtful analysis on the myriad connections between numerous Obama appointees and Robert Rubin, the Obama presidential campaign's economic advisor, and former Clinton Treasury Secretary who led the charge for the passage of the Gramm-Leach-Bliley Act of 1999, to create the megamerger that was to become Citigroup.

Rubin then left the Clinton Administration to lead Citigroup in their tumultuous downfall.

Below is a very brief synopsis of some of Taibbi's salient points.  Any and all remarks in parenthesis are mine, and should not be attributed to Taibbi's article.

They Call This Financial Innovation

(h/t to War on Error)

In my opinion, financial innovation should provide some social benefit and definitely outweigh the potential social costs. But for some that is a too rigorous of a standard. Arguably, "financial innovations" such as credit default swaps or collateralized debt obligations would fail such a standard. Or could it be that 'too much of a good thing is bad'. We truly need a national debate or discussion regarding financial innovation.

Is this an example of financial innovation:

Seattle Times: WaMu Strategies were Reckless

(h/t to CR)

Seattle Times has a good story regarding the WaMu's high risk strategies. Several thoughts:

1) American capitalism can be characterized by a complete lack of accountability; and

2) WTF!?! Where was the Office of Thrift Supervision?

The articles leads off with a story of potential misleading public statements from Kerry Killinger while CEO of WaMu:

On Sept. 10, 2007, Washington Mutual CEO Kerry Killinger stood before an audience of analysts and money managers and assured them the Seattle-based thrift would come out of the housing slump stronger than ever.

WaMu, Killinger told the Lehman Brothers conference, had tightened its lending standards, could access plenty of cash, and was "picking and choosing carefully" when it came to making new loans.

Banks Still Love Credit Default Swaps

File this under Same Shit Different Day. I came across this article today on HuffPost:Banks Still Trading In Risky Derivatives. The articles is OK but the links to the Office of Comptroller of the Currency website are great.

I found a new report: OCC's OCC’s Quarterly Report on Bank Trading and Derivatives Activities Second Quarter 2009 (pdf file). I am kind of slow so this report may not be old news to most EP people.

First, the press release that accompanied the report:

U.S. commercial banks reported trading revenues of $5.2 billion in the second quarter of 2009, compared to record revenues of $9.8 billion in the first quarter of 2009, the Office of the Comptroller of the Currency reported today in the OCC's Quarterly Report on Bank Trading and Derivatives Activities.

Wall Street Ghouls

Are you ready for the latest craze in the Wall Street Casino? As the NY Times is reporting Wall Street Pursues Profits in Bundles of Life Insurance.

After the mortgage business imploded last year, Wall Street investment banks began searching for another big idea to make money. They think they may have found one.

The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.