Beyond propping up an industry which clearly needs to shrink, anyone else noticing a pattern?
If a company actually makes something, i.e. manufacturing, they get pretty much nothing. This includes the auto industry whose "bail out" amounted to peanuts in comparison to the financial sector.
But when a hard wind blows on anything to do with banking, such as commercial real estate, oh my, the Federal Reserve and Treasury just jumps to the rescue.
This is ridiculous. How many boom and bust cycles have their been in residential and commercial real estate, especially commercial. I know there was a major one about 1987 time frame and as I recall this was part of the savings and loan crisis, commercial real estate, especially office space was way over built.
I mean good God, they talk about efficiencies in the auto industry and all of this, but when it comes to things like commercial real estate, it all clearly being a bubble that was going to pop....oops, cannot let that happen.
Also talk about going against market principles and efficiencies.
But, manufacturing at deaths door, can't get a damn dime here.
Just another example of how corrupt private financial interests hurt U.S. foreign policy. And, another reason why Obama needs to help develop a system that lets us speak with one tongue.
as well as what is happening with regulation generally. I haven't been watching the latest and when it comes to every single derivative, I think you could educate us....
I have a real serious issue with CDSes because they are almost a short and also because they are traded daily, one can kind of "cash in" when one finds out there is a potential default happening on the underlying asset...I mean could it create an incentive to cause a default?
i.e. I'm Hank Paulson and I think Lehman Brothers CEO is an asshat because he jerked my chain 10 years ago...therefore I am going to create this major CDS buy on their MBS and also leak it to the press or ....
(can that create that kind of rumor panic with an actual underlying asset, another unknown, but you get the idea)
I mean if you do your major "new financial insurance company" type deal, what's their incentive and what's really the feature here that regular insurance can't do...
or should there even be insurance here, is this like Blackjack or removing the risk from speculation or ?
Then, my other very serious issue with CDSes is they are not linear, 1:1, bounded, correlated to the underlying assets per say.
At minimum they should be seriously decoupled from any sort of CDO or tranche evaluation.
You can tell me why I'm wrong on this but if I had all of my conditions, they would plain disappear and we would have good old fashioned insurance really.
He showed up, violated multiple rules and was gone from site in probably less than 12 hours.
We're not a self-help group or a walk in clinic, we're an economics site.
In terms of the difference, I really don't know what to say except we are an economics community blog and one cannot use the site to write nonsense. Keynesian vs. Hayek vs. Behavioral economists is not what I refer to in this statement.
I scanned some of the comments on your thread and I think you're seeing the picture.
As everyone may or may not know, the move to a regulated exchange-based CDS market is happening. Now I had a crazy idea, what I propose is a simple three part regulation regarding future Credit Default Swap trading.
1) Allow only a certain type of institution to sell swaps, a new type of financial insurance company of sorts or primary dealers. These companies would meed stringent requirements, like the performance bonds one sees for regulated commodities, where they must have the collateral to back up the claims. They can sell them in a secondary market of qualified purchasers, even in strips, so long as those buyers are able to back up a future claim and are recorded via a clearing house mechanism (this would help in avoiding the "who owns what?" scenario).
2) Any purchasers of CDSes cannot short sell the equity of the company who's debt is linked with those swaps. Also, and maybe this may or may not be an extreme idea, make it a crime akin to insider trading to purposely cause a company to default on their loans to trigger a payout.
3) For those not in the primary dealer circle, say investors who wish to purchase an exchange traded CDS, they must meed the same performance bond requirements. Indeed, perhaps their should be income/asset requirments to get involved in CDS trading. At one time, you had to have a high networth to really invest in the spot currency market, like George Soros, today anyone can.
Grozny has made two threads on an ethics forum -- the main one here -- on whether you were right or wrong to ban him from this forum and at the very least the other side involved should be aware of this discussion.
He seems to have some personality problems, but from what I read here it seems that he was just too far off topic. Either way, it's your website and I don't see any ethical issue with banning him.
What I am most curious to know is what the "divide" is between him and the posters here. He seems to describe you guys as "post-autistics". I've read a bit on the debate and I've explained myself in the thread I linked to, but I'd be curious to better understand what the deal is and Grozny seems a bit too emotive to be the one to help me figure this one out, so I turn to you.
... being hammered, and Spain is the worst of the Continental economies, shrinking by 3%, year on year.
If Spain has had half of the unemployment generated since the recession washed across the Atlantic, no wonder Germany and France are balking at going heavily into debt to prop up the Anglo Disease economies.
The naked CDS's are the root of all evil. They are essentially a very high stakes poker game which essentially amounts to financial extortion through the use of arbitrage. I'm pretty sure the regulators understand this but it will take some prosecutions to bring the practice into the light of day. Maybe Cuomo's investigation will get there. If not, let's hope some European regulator has the guts to expose it. Certainly, this article will reverberate in the EU.
Paul Craig Roberts published an outstanding article on this in counterpunch.org some time back where he made this excellent point:
"Credit default swaps are a form of unregulated insurance. One danger of the swaps is that they allow speculators to purchase protection against a company defaulting on its bonds, without the speculators having to own the company’s bonds. Speculators can then short the company’s stock, driving down its price and raising questions about the viability of the company’s bonds. This raises the value of the speculators’ swaps which can be sold to holders of the company’s bonds. By ruining a company’s prospects, the speculators make money."
Isn't it astounding how Democrats have hijacked some exceptional sounding rhetoric, claiming to be for the U.S. middle class and implementing Keyensian Stimulus theory, all the while letting that money go offshore, funneling it to foreign banks and Goldman Sachs and seemingly promoting more the interests of illegal immigrants, India, China and Mexico?
What is even more bizarre is just how many people out there are drinking the kool-aid. I don't think it helps that the radical right goes off about socialism, when the real outrage is corporatism and the stimulus is about as Keynesian as any corporate globalist pocket lining wet dream can muster.
I'm also fairly certain on EP, the political make up of people is probably 85% "lefties", so anyone else feel like Cassandra and being left out of the Popular kids party from high school because we do not have blinders on?
Related to economics, trade, labor economics, etc. by Moyers that I can repost, put them in a comment. I try to theme the Friday Night videos series so one can easily find something they recall through the search, in one place.
I rarely list Charlie Rose. I saw one too many frothing, d at the mouth interviews from him, drooling over big money interests, letting corporate agendas just use his show as a glorified advertisement, all the while Rose just worships the big money. (kind of like watching CNBC most of the time!)
We cannot post entire articles that are subject to copyright. We can quote them and link to them (acknowledge the publication, author, give a link so people can read the original article).
What I try to do is capture that quote which either gives an overview of what the article is about or a quote which is the key piece of info, then link over information on the topic that has been previously written on EP or elsewhere, plus whatever insights (or lack thereof) of it.
Same is true with any media. If there is embedding code, linking code it's fair game, else there might be some copyright restrictions from the content producers/owners that they want.
The real problem with the Internets and sharing to this day is how revenue streams are not bound to the original content....i.e. if someone lifts an author's work, there are no ads attached to it so they can get paid.
At some point, with so much interconnectedness among the funds and banking institutions, doesn't a line need to be drawn? It's incestuous, to be sure. Bankruptcy aimed at escaping excessive cumbersome debt ultimately ends up screwing the taxpayers, who bailed out some of these creditors. Where does the insanity stop?
And what you described above sounds eerily familiar (Lehman Bros., WaMu, General Growth Properties, Inc., Chrysler bankruptcy, Bear Stearns (I seem to recall some involvement of Goldman Sachs, JP Morgan and Deutsche Bank with that one?). And one wonders how many of those hedge funds were interlocked, or owned, perhaps outright, by the banks which signed on to the Chrysler rescue plan which fell through (Goldman Sachs, JP Morgan, Morgan Stanley, perhaps??).
And did Cerberus (private equity owner of Chrysler) also profit from their CDS position? And who would profit from any CFO (Collateralized Fund Obligations) Cerberus might have with regard to Chrysler?
That's why it's so hard to defeat the H1b program because schools make it a point to recruit foreign students and then give them H1bs or OPT visas. The one thing that burns me up, they come here from a foreign country and expect America to pay for their education from loans/grants; when American students still find it hard to get funding to go for Advanced Degrees.
I Wish America reboots and gets a shot of "gold ole Common Sense".
It's also astounding that http://www.cerberuscapital.com/ was alowed to acquire such a public icon via private means.
Again, another failure (among many, many...) on the part of the FTC, and a reaffirmation that the U.S. has long needed an "Industrial Policy." Can we spell...Industrial Pol...
The problems facing us are immense. It's too huge for us to rely on our political/academic leaders alone. We all need to network locally. And, we need some clear direction. Yes, there are increasing numbers of unemployed and homeless. yes, many MSEEs and PhDs are out of work, many filing for bankruptcy. It's not just here, but throughout the world. The new green technologies are no panacea, but merely an added potential for new jobs. I believe the long-term problem is (globally) a systemic excess productive capacity,
due to technology and automation efficiencies. (Just one man's opinion.)
Keep in mind, their "assets" are effectively Accounts Receivable (as Loans) and the reason they're in receivorship is due to the "quality" of loans, based on their performance. Missing here is the "Reserve" number, which as a ratio would indicate the leverage of actual
reserves on-hand to outstanding loans. Just an FYI;-)
Beyond propping up an industry which clearly needs to shrink, anyone else noticing a pattern?
If a company actually makes something, i.e. manufacturing, they get pretty much nothing. This includes the auto industry whose "bail out" amounted to peanuts in comparison to the financial sector.
But when a hard wind blows on anything to do with banking, such as commercial real estate, oh my, the Federal Reserve and Treasury just jumps to the rescue.
This is ridiculous. How many boom and bust cycles have their been in residential and commercial real estate, especially commercial. I know there was a major one about 1987 time frame and as I recall this was part of the savings and loan crisis, commercial real estate, especially office space was way over built.
I mean good God, they talk about efficiencies in the auto industry and all of this, but when it comes to things like commercial real estate, it all clearly being a bubble that was going to pop....oops, cannot let that happen.
Also talk about going against market principles and efficiencies.
But, manufacturing at deaths door, can't get a damn dime here.
We can quote a few paragraphs from someone else's copy protected writing, just not the entire thing.
Just another example of how corrupt private financial interests hurt U.S. foreign policy. And, another reason why Obama needs to help develop a system that lets us speak with one tongue.
as well as what is happening with regulation generally. I haven't been watching the latest and when it comes to every single derivative, I think you could educate us....
I have a real serious issue with CDSes because they are almost a short and also because they are traded daily, one can kind of "cash in" when one finds out there is a potential default happening on the underlying asset...I mean could it create an incentive to cause a default?
i.e. I'm Hank Paulson and I think Lehman Brothers CEO is an asshat because he jerked my chain 10 years ago...therefore I am going to create this major CDS buy on their MBS and also leak it to the press or ....
(can that create that kind of rumor panic with an actual underlying asset, another unknown, but you get the idea)
I mean if you do your major "new financial insurance company" type deal, what's their incentive and what's really the feature here that regular insurance can't do...
or should there even be insurance here, is this like Blackjack or removing the risk from speculation or ?
Then, my other very serious issue with CDSes is they are not linear, 1:1, bounded, correlated to the underlying assets per say.
At minimum they should be seriously decoupled from any sort of CDO or tranche evaluation.
You can tell me why I'm wrong on this but if I had all of my conditions, they would plain disappear and we would have good old fashioned insurance really.
He showed up, violated multiple rules and was gone from site in probably less than 12 hours.
We're not a self-help group or a walk in clinic, we're an economics site.
In terms of the difference, I really don't know what to say except we are an economics community blog and one cannot use the site to write nonsense. Keynesian vs. Hayek vs. Behavioral economists is not what I refer to in this statement.
I scanned some of the comments on your thread and I think you're seeing the picture.
As everyone may or may not know, the move to a regulated exchange-based CDS market is happening. Now I had a crazy idea, what I propose is a simple three part regulation regarding future Credit Default Swap trading.
1) Allow only a certain type of institution to sell swaps, a new type of financial insurance company of sorts or primary dealers. These companies would meed stringent requirements, like the performance bonds one sees for regulated commodities, where they must have the collateral to back up the claims. They can sell them in a secondary market of qualified purchasers, even in strips, so long as those buyers are able to back up a future claim and are recorded via a clearing house mechanism (this would help in avoiding the "who owns what?" scenario).
2) Any purchasers of CDSes cannot short sell the equity of the company who's debt is linked with those swaps. Also, and maybe this may or may not be an extreme idea, make it a crime akin to insider trading to purposely cause a company to default on their loans to trigger a payout.
3) For those not in the primary dealer circle, say investors who wish to purchase an exchange traded CDS, they must meed the same performance bond requirements. Indeed, perhaps their should be income/asset requirments to get involved in CDS trading. At one time, you had to have a high networth to really invest in the spot currency market, like George Soros, today anyone can.
Grozny has made two threads on an ethics forum -- the main one here -- on whether you were right or wrong to ban him from this forum and at the very least the other side involved should be aware of this discussion.
He seems to have some personality problems, but from what I read here it seems that he was just too far off topic. Either way, it's your website and I don't see any ethical issue with banning him.
What I am most curious to know is what the "divide" is between him and the posters here. He seems to describe you guys as "post-autistics". I've read a bit on the debate and I've explained myself in the thread I linked to, but I'd be curious to better understand what the deal is and Grozny seems a bit too emotive to be the one to help me figure this one out, so I turn to you.
Cheers.
... being hammered, and Spain is the worst of the Continental economies, shrinking by 3%, year on year.
If Spain has had half of the unemployment generated since the recession washed across the Atlantic, no wonder Germany and France are balking at going heavily into debt to prop up the Anglo Disease economies.
The naked CDS's are the root of all evil. They are essentially a very high stakes poker game which essentially amounts to financial extortion through the use of arbitrage. I'm pretty sure the regulators understand this but it will take some prosecutions to bring the practice into the light of day. Maybe Cuomo's investigation will get there. If not, let's hope some European regulator has the guts to expose it. Certainly, this article will reverberate in the EU.
Paul Craig Roberts published an outstanding article on this in counterpunch.org some time back where he made this excellent point:
"Credit default swaps are a form of unregulated insurance. One danger of the swaps is that they allow speculators to purchase protection against a company defaulting on its bonds, without the speculators having to own the company’s bonds. Speculators can then short the company’s stock, driving down its price and raising questions about the viability of the company’s bonds. This raises the value of the speculators’ swaps which can be sold to holders of the company’s bonds. By ruining a company’s prospects, the speculators make money."
Isn't it astounding how Democrats have hijacked some exceptional sounding rhetoric, claiming to be for the U.S. middle class and implementing Keyensian Stimulus theory, all the while letting that money go offshore, funneling it to foreign banks and Goldman Sachs and seemingly promoting more the interests of illegal immigrants, India, China and Mexico?
What is even more bizarre is just how many people out there are drinking the kool-aid. I don't think it helps that the radical right goes off about socialism, when the real outrage is corporatism and the stimulus is about as Keynesian as any corporate globalist pocket lining wet dream can muster.
I'm also fairly certain on EP, the political make up of people is probably 85% "lefties", so anyone else feel like Cassandra and being left out of the Popular kids party from high school because we do not have blinders on?
Related to economics, trade, labor economics, etc. by Moyers that I can repost, put them in a comment. I try to theme the Friday Night videos series so one can easily find something they recall through the search, in one place.
I rarely list Charlie Rose. I saw one too many frothing, d at the mouth interviews from him, drooling over big money interests, letting corporate agendas just use his show as a glorified advertisement, all the while Rose just worships the big money. (kind of like watching CNBC most of the time!)
We cannot post entire articles that are subject to copyright. We can quote them and link to them (acknowledge the publication, author, give a link so people can read the original article).
What I try to do is capture that quote which either gives an overview of what the article is about or a quote which is the key piece of info, then link over information on the topic that has been previously written on EP or elsewhere, plus whatever insights (or lack thereof) of it.
Same is true with any media. If there is embedding code, linking code it's fair game, else there might be some copyright restrictions from the content producers/owners that they want.
The real problem with the Internets and sharing to this day is how revenue streams are not bound to the original content....i.e. if someone lifts an author's work, there are no ads attached to it so they can get paid.
At some point, with so much interconnectedness among the funds and banking institutions, doesn't a line need to be drawn? It's incestuous, to be sure. Bankruptcy aimed at escaping excessive cumbersome debt ultimately ends up screwing the taxpayers, who bailed out some of these creditors. Where does the insanity stop?
And what you described above sounds eerily familiar (Lehman Bros., WaMu, General Growth Properties, Inc., Chrysler bankruptcy, Bear Stearns (I seem to recall some involvement of Goldman Sachs, JP Morgan and Deutsche Bank with that one?). And one wonders how many of those hedge funds were interlocked, or owned, perhaps outright, by the banks which signed on to the Chrysler rescue plan which fell through (Goldman Sachs, JP Morgan, Morgan Stanley, perhaps??).
And did Cerberus (private equity owner of Chrysler) also profit from their CDS position? And who would profit from any CFO (Collateralized Fund Obligations) Cerberus might have with regard to Chrysler?
Time for another AIG infusion/bailout???
I had a feeling it was one of those "look good but really don't support it" pieces of legislation that one tends to see.
That's why it's so hard to defeat the H1b program because schools make it a point to recruit foreign students and then give them H1bs or OPT visas. The one thing that burns me up, they come here from a foreign country and expect America to pay for their education from loans/grants; when American students still find it hard to get funding to go for Advanced Degrees.
I Wish America reboots and gets a shot of "gold ole Common Sense".
It's also astounding that http://www.cerberuscapital.com/ was alowed to acquire such a public icon via private means.
Again, another failure (among many, many...) on the part of the FTC, and a reaffirmation that the U.S. has long needed an "Industrial Policy." Can we spell...Industrial Pol...
The problems facing us are immense. It's too huge for us to rely on our political/academic leaders alone. We all need to network locally. And, we need some clear direction. Yes, there are increasing numbers of unemployed and homeless. yes, many MSEEs and PhDs are out of work, many filing for bankruptcy. It's not just here, but throughout the world. The new green technologies are no panacea, but merely an added potential for new jobs. I believe the long-term problem is (globally) a systemic excess productive capacity,
due to technology and automation efficiencies. (Just one man's opinion.)
Keep in mind, their "assets" are effectively Accounts Receivable (as Loans) and the reason they're in receivorship is due to the "quality" of loans, based on their performance. Missing here is the "Reserve" number, which as a ratio would indicate the leverage of actual
reserves on-hand to outstanding loans. Just an FYI;-)
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