social welfare groups

"Speculation: There’s a critique of the regulators and key decision makers during the crisis that invokes cultural capital and the idea that regulators are socialized with Wall Street in a way that it is difficult for them to exercise any type of power over them, to see their interests in conflict. I wonder if the same is true for the corporate sector. As the firm goes global, and as the white-collar workforce is broken by computerization and globalization, more and more elite corporate positions will be filled by those leaving Wall Street. (Has this already happened? Data/Studies?) If so, you’ll see an even more lucrative revolving door between corporate elites and financial elites. As such, any natural checks to financial sector power coming from the corporate market space is less likely to happen."

"…Florida’s legislature recently debated a bill to remove licensing requirements from 20 occupations, including hair-braiding, interior design and teaching ballroom-dancing. For a while it looked as if the bill would sail through: Florida has been a centre of tea-party agitation and both chambers have Republican majorities. But the people who care most about this issue—the cartels of incumbents—lobbied the loudest. One predicted that unlicensed designers would use fabrics that might spread disease and cause 88,000 deaths a year. Another suggested, even more alarmingly, that clashing colour schemes might adversely affect “salivation”. In the early hours of May 7th the bill was defeated. If Republican majorities cannot pluck up the courage to challenge a cartel of interior designers when Florida’s unemployment rate is more than 10%, what hope has America? The Licence Raj may be here to stay."

We were already very unhappy about the fact that the review was conducted on 2800 mortgage files across 14 servicers and there seemed to be no scientific process for how the cases were selected. The GAO signaled it had reservations about the exercise. And no wonder. Not only was it a garbage-in, garbage out process (whether the borrowers were delinquent was based on the servicers’ say so, not any analysis to see if the fees, charges, and applications of payments were in compliance with the law and the various agreements), it effectively said pretty much all foreclosures were warranted when it looked at only 100 completed foreclosures:

"Many models of market dynamics make use of the idea of wealth exchanges among economic agents. A simple analogy compares the wealth in a society with the energy in a physical system, and the trade between agents to the energy exchange between molecules during collisions. However, while in physical systems the equipartition of energy is valid, in most exchange models for economic markets the system converges to a very unequal "condensed" state, where one or a few agents concentrate all the wealth of the society and the wide majority of agents shares zero or a very tiny fraction of the wealth. Here we present an exchange model where the goal is not only to avoid condensation but also to reduce the inequality; to carry out this objective the choice of interacting agents is not at random, but follows an extremal dynamics regulated by the wealth of the agent.…"

"While some of the anti-fraud remedies of the securities laws still apply in 144A transactions, these have been watered down in recent years by Congressional action and judicial interpretation. In a series of opinions authored first by Justice Powell and then by Justice Kennedy, the Supreme Court has steadily scaled back the scope of the securities laws. Opinions by Justice Kennedy, in particular, limited the impact of anti-fraud protections as well as the ability of investors to sue gatekeepers who play a significant role in preparing offerings."

"Now folks, it's pretty revealing when lobbyists have become so accustomed to their privileged access and backroom dealings with politicians --as went on in regards to Cheney's energy discussions, and each of the Bush tax cuts drawn up by a secretive group of GOP without any sunlight (or bipartisansip), for example, and too much with the health care bill as well--that they don't even bother to hide their scorn for the public's views and their hopes for getting that back room deal to go their way. No wonder Wall Street honchos have been so brazenly arrogant about their "entitlement" to bonuses, their rights to continue proprietary trading and hedge funds and derivatives desks--"doing God's work" says Goldman CEO Blankfein--when they are merely running a casino market to strip as much gold off suckers as possible with their "financial innovations" like synthetic CDOs that made the market many times more volatile than "real" securitizations…"

"Unless we get better legislators, and a couple of hundred years of history says not to count on that, enhancing the automatic stabilizers may be our best bet going forward. There's considerable empirical evidence showing that they work, including this new evidence that automatic stabilizers work "always and everywhere"…"

"If a fund/institution/High Frequency Trader generates 100mm shares or contracts a day/week/month, market observers will tell you that's a great thing because it creates a liquidity premium. In other words, because there is always someone on the other side of a trade, it is easier to match buyers and sellers and that ease creates smaller spreads and often lower pricing. On the surface that's a great thing.

It is a great thing until the market becomes completely dependent on that liquidity. If every model expects X volume, what happens when that volume falls?"

"What is striking is that caveat emptor arises as a legal principle mainly because of the tangle the courts would get into if they tried to enforce a more ambitious standard of right and wrong.
Chief Justice Marshall’s logic surely applies with even greater force to modern deals between investment banks and sophisticated qualified investors, both of which will be simultaneously working on many deals, each involving sensitive proprietary information."

"In plain terms, derivatives are THE cause of the Financial Crisis. They are behind EVERY failure/ default that has occurred thus far. The fact that virtually no one is willing to address this issue or include it in the discussion of how to insure we don’t have a Second Round of the Crisis only confirms the fact that no one has a clue how to resolve this situation."

"Then something bad happens. The new product shows its flaws. And precisely because no one really understands it, the market cracks. Investors all run away at once, as they don't really have the tools to assess the situation. Where lack of knowledge about the product originally drove demand, now it accelerates flight."

"In the old world, Russia was the King Kong of conventional gas. It was like the U.S. on military spending: basically the equal of the ROW (rest of world).

But when you look at the unconventional gas reserves, it's Asia-Pac first, NorthAm second, and the former USSR a middling third. In short, rising Asia and the U.S. can suddenly cover themselves a whole lot more, making both Russia and the Gulf pretty minor by comparison. Remember that last Nov Obama and Hu announced a "US-China shale gas initiative" that promised a swap of US technology for investment opportunities in China. That's gotta spook the would-be "OPEC of gas.""

'…These guys aren't number-crunching whizzes making smart investments; what they do is find suckers in some municipal-finance department, corner them in complex lose-lose deals and flay them alive. In a complete subversion of free-market principles, they take no risk, score deals based on political influence rather than competition, keep consumers in the dark — and walk away with big money. "It's not high finance," says Taylor, the former bond regulator. "It's low finance." And even if the regulators manage to catch up with them billions of dollars later, the banks just pay a small fine and move on to the next scam. This isn't capitalism. It's nomadic thievery."'

"Here's why I don't think of "too big" as a myth for resolving a firm. In my mind, the farther you are from the origin in that graph, the harder it is for the government to detect problems and properly deter large firms under resolution authority. (This is why I draw our "safe" resolution as a circle, instead of a square.) Holding for a liquidity risk, the larger the firm, the more vicious the effects of having a shadow banking run on the rest of the financial sector and on the real economy. It is possible that the green circle here will be cast out far, and that size and pressures of campaign donations won't play a major part. But why take the chance?"

"So, for large complex financials, capital cannot be measured precisely enough to distinguish conservatively solvent from insolvent banks, and capital positions are always optimistically padded. Given these facts, and I think they are facts, even “hard” capital and leverage restraints are unlikely to prevent misbehavior. Can anything be done about this? Are we doomed to some post-modern quantum mechanical nightmare wherein “Schrödinger’s Banks” are simultaneously alive and dead until some politically-shaped measurement by a regulator forces a collapse of the superposition of states into hunky-doriness?"

"In a nine-month study, four fictitious companies invented by the accountability office also sought EnergyStar status for some conventional devices like dehumidifiers and heat pump models that existed only on paper. The fake companies submitted data indicating that the models consumed 20 percent less energy than even the most efficient ones on the market. Yet those applications were mostly approved without a challenge or even questions, the report said."

"Wow. If a person markets something, like a book they've written, or a product they are selling, it is regulated as if it were advertising published by a media company, such as a newspaper, TV, magazine, etc.

That means everyone is now a media company. And subject to the same regulations - at least in the UK. Wow."

"Now right now, consumers are facing a range of financial products, from student loans to credit cards to mutual funds, that are much more complicated than they faced in 1933. Some of this complication is innovation, some is meant to synthetically create opacity in the product innovating product differentiation, and some is just regulatory arbitrage. As Dan Geldon has written, the regime of disclosure has been turned into a weapon against consumers instead of the mechanism to let information and competition do its job. So it’s time to update that regime to handle the 21st century."

"That someone with such a understanding of complex financial institutions highlights her naiveté, as if things are what they are, not because they are an equilibrium of borrower and saver preferences, but rather, the whims of The Captains of Industry in their top hats. To give her power, would merely reinforce what everyone in the industry knows, that Washington regulators are out-of-touch. For her, competition is simply a "race to the bottom to develop new ways to trick customers", and so we should expect her to create a 'stable' industry, like in our education and postal industries, where there is limited competition but lots of guarantees, and little or no productivity growth."

"Where management has a significant portion of its net worth invested along with shareholders, agency costs are likely to be at a minimum. Shareholders can easily determine how invested management is in a company by looking in the same place that a company's executive compensation can be found. Unfortunately, the use of equity swaps, becoming more common in the financial world, can render the information on management's stake in the company essentially useless."

"The graph below shows examiner experience as grouped by technology center as of the end of FY2009."

"President Obama promised us “Change We Can Believe In,” and the Democrats control Congress. Ironically, Senate Majority Leader Harry Reid is a former chairman of the Nevada Gaming Commission whose unwillingness to be compromised by a gangster was featured in the Martin Scorsese film Casino. Mr. Reid has since been accused of some personal ethical lapses, but he could easily redeem himself if he used his gaming regulation expertise and spearheaded a movement to take on Wall Street’s powerful lobby and create a no-nonsense regulatory agency akin to the Nevada Gaming Commission."

"Justice Holmes once famously dissented that it’s a form of judicial activism to base our courts on “an economic theory which a large part of the country does not entertain.” It seems like the same should be said for our government and our regulatory bodies, especially as they try and figure out how to fix the mess that is the financial markets. And it’s worth noting that the founder of this economic theory, The Efficient Markets Hypothesis, doesn’t even believe that people actually in the financial markets entertain it."

"The slower traders began issuing buy orders. But rather than being shown to all potential sellers at the same time, some of those orders were most likely routed to a collection of high-frequency traders for just 30 milliseconds — 0.03 seconds — in what are known as flash orders. While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee."

"We saw this sort of "favored garbage" all the time in the 90s. As a consequence Regulation FD, for "fair disclosure", was passed. It mandates that you cannot issue information that is material to your stock price to only a few select people - you have to give it to everyone at the same time, and the most common way you do this is to request a halt on your stock from the NYSE, issue the press release, then have the NYSE lift the halt.

This way nobody can get either long or short in front of your announcement and nobody gets to profit unfairly (or get screwed unfairly) as a consequence of whatever it is you need to announce."

"In other parts of the book, Brandeis goes on to challenge the conventional stereotype of the banker as conservative—on the contrary, he noted their “financial recklessness”—and he argued that Americans had systematically been “confusing the functions of banker and business man.” He argued for a system of smaller, more local banks.

I’ve been thinking of this lately, as our old friend urbino (who, alas, doesn’t come around here no more) has beaten almost every major pundit to the punch in arguing that if banks have grown too big to fail, then perhaps they ought to be stopped from supersizing themselves...."

"Consequently I think it is possible to think of AIG as the insurer-of-last resort to the United States’ own shadow financial system. That shadow financial system just operated offshore. There was a reason why investors in the UK were buying so many US asset backed securities during the peak years of the credit boom."

"Analysts, regulators, and politicians are beginning to recognize that most if not all of the widely touted benefits of modern finance redounded only to its purveyors. The decidedly retro Canadian banking system, with simple products, high equity requirements, and relatively modest securities operations that focus on domestic customers, is the soundest in the world."

"If I get enough named supporters so it looks like a real show of force, I’ll include the list in the spot at the bottom. If I don’t get a big response, I’ll probably leave the list of supporters off. Either way, your expression of support will be appreciated.

Note that I am very upset over the proposed rule and the text and tone of my comment reflects this as best I know how without using profanity. And the proposal deserves profanity. If you work for an alphabet organization or otherwise have a relationship with the TSA that requires not angering the TSA, this is not the comment with which you want to be associated. Only the brave and the independent need sign up here."

"Governor Patterson said it best when he stated that most swaps are used by speculators and for “destructive speculation” that damages “the health of targeted companies.” The proposed clearinghouse will mostly be used for naked credit default swaps and will be the biggest and most technologically advanced gambling joint in the world. And, the destructive impact of naked credit default swaps will grow.
Rather than facilitating the casino mentality that has almost ruined the economy, the SEC, CFTC and other state and Federal regulators should be outlawing naked credit default swaps as gambling contracts and regulating hedging credit default swaps as insurance contracts. And, New York shouldn’t have abandoned its effort to regulate these derivative contracts."

"The recent disruption marked the final blowup in a year-long game of chicken played by Sprint Nextel and Cogent and brought to light an uncomfortable reality: The Internet is held together by collection of secret contracts struck between private companies, free from government oversight and regulation."

"The sooner you “drop out” of the speculative economy and its abstract concerns, the sooner you will be able to create and provide real value for the people all around you, and the better position you will be in to get what you need for yourself and your family.

This is not bad; it is good. The pain that people are about to go through now is not the product of the speculative economy’s failure, but its former and intentional unjust success."

"Our regulators have been stunningly inept. The up-tick rule has been abolished. Niggling distinctions between "abusive" naked short-selling and acceptable naked short-selling become the basis for a tentative approach to possible regulation. A state official, Eric Dinallo of the NY Insurance Department, was the only regulator to come to the defense of MBI, when he finally wrote an article in the Financial Times, noting the illegality of Ackman's defamatory attacks.
Meanwhile, the huge credit default swap industry, a totally unregulated business of insurance, continues as an arena of toxic machinations. Here, in total obscurity, bets are placed: which of the remaining financial companies should be the next victim? Would you be comfortable if strangers could legally place bets on your longevity? Or on whether your house would burn down?"

"What to do? Not to socialize capitalism with bailouts and subsidies that put taxpayers at risk. If what's lacking is trust rather than capital, the most important steps policymakers can take are to rebuild trust. And the best way to rebuild trust is through regulations that require financial players to stand behind their promises and tell the truth, along with strict oversight to make sure they do.

We tell poor nations they have to make their financial markets transparent before capital will flow to them. Now it's our turn. Lacking adequate regulation or oversight, our financial markets have become a snare and a delusion. Government only has two choices now: Either continue to bail them out, or regulate them in order to keep them honest. I vote for the latter."

"When reader Nick tried to sign up for ATT "naked DSL" or "dry loop" service (getting DSL without having paying for a landline), a curious thing happened.

AT&T said his address doesn't exist. But when he went through the process to sign up for bundled service, more expensive, with landline phone service, magically, it could find his address.

This is odd when you consider a customer service rep later said both options draw from the same database. It's not odd when you consider that AT&T only made naked DSL available because the FCC made them in exchange for letting them do some fancy business transactions, and then initially made it very confusing for people to try to sign up."

"In Alabama it is illegal to recommend shades of paint without a license. In Nevada it is illegal to move any large piece of furniture for purposes of design without a license."

DTE makes it hard to find info on net metering. They call it "DG", or "customer generation" or "sellback".

Paper explaining results of SEC's pilot test of limited SHO short-sale price-test removal.

It may have an effect on the underlying dynamics of market prices... but it seems like a rule of decreasing importance as the tick resolution of trading increases.

"One of the major changes to their selling agreements that will occur in 2007 is a requirement by eBay that anyone accepting consignments for auction who holds themselves out to be an auctioneer, who participates in auctioneering or who advertises that th