Tuesday, May 26, 2009
Chrysler: "Badges?! We don't need no stinkin' badges."
Sunday, May 17, 2009
WSJ: Chrysler and the Rule of Law
JRB
The Emperor's New Clothes
2009-05-15 Bloomberg News, By Nicholas Johnston
Federal Follies: OTC derivative regulation
May 14 (Bloomberg)
There are so many reasons why this won't work, or work well. Simply put, every derivative trade is unique whereas every bond (CUSIP) is the same.
"'It is simply unacceptable in today’s environment that the design and structure of the OTC derivatives market can be controlled by a handful of large dealers," Lubke said."
Chrysler's death-rattles
U.S. May Be Preparing Filing for Chrysler Bankruptcy: NYT Link
2009-04-23 19:30:30.339 GMT
http://www.nytimes.com/2009/04/24/business/24chrysler.html?_r=1&partner=rss&emc=rss
Whazzamatter, can't the Barracudas at Cerberus fill out their own docts? In 1978-79 it took a Caravan of lawyers and an act of Congress -- the Vipers, literally, to have the U.S. govt perform such meddling. Today? Well, who needs law when you can rule by FIAT! (pun very much intended). As a rookie commercial lending officer "back in the day" I had to give the Chrysler Loan Gty Act and the then-new Chapter 11 (replacing Ch. XI) a side-by-side reading as my territory was the auto-belt, now rust-belt, of MI, OH, and IN.
The PBGC picks up only $2 bln of the $9.3 bln pension shortfall. That's assuming the $9.3b is fully valued. While ERISA plans are more accurate than GASBs, there are still some holes in the PPA of 2006 reforms, letting them Dodge their responsibilities. Pensioners and those soon-to-be, will find this Challenger-ing as the $7.3b gap is for their account.
Crisis Post-Mortem w/Volcker, Levitt
Monday, May 4, 2009
Paulson's deception
Pirates of the Potomac
JRB
5/4/09
Wednesday, April 22, 2009
Geithner v. Hubris
No such thing as "bank capital" -- it's either an asset or a liability
Wednesday, April 8, 2009
Pension follies (farce as tragedy)
2009-04-08 17:07:50.395 GMT By Holly Rosenkrantz
Wednesday, April 1, 2009
AIG-FP's 10-Q: Collateral was the Contagion
Tuesday, March 31, 2009
The Beltway's Governor Le Petomane rides again
Tuesday, March 24, 2009
"PPImP My SPV"
Regulation by hemlock
Thursday, March 19, 2009
Proving the SEC is under-brained, not under-staffed
--------------------
To: wsj.ltrs@wsj.com
Subject: "Short on Common Sense" (9/25/08) -- a far better solution
Date: Sun, 28 Sep 2008 17:38:05 -0400
A simpler, more effective, and market-friendly solution to 'naked' shorting would be for the SEC require that all short sales (beyond "retail") be done through a clearinghouse, like DTC. The short-seller, securities lender, and prime broker input their instructions, DTC matches & settles them. Fewer fails, nobody's 'naked', there's an audit trail, and no more biweekly short interest surveys as the SEC would have real-time surveillance.
Take it a step further and create "dark pools" or crossing networks as alreadyexist for block-trading. Now you have all of the above, plus more efficient price & size discovery for the benefit of both securities borrowers (including shorts) and lenders (institutional investors). Granted, maybe it isn't the best time for that step.
GM and Ford aren't the most ludicrous names on the list. Moody's is there, but it's their opinions not their balance sheet that are the "systemic"risk concern. Is the SEC opposed to 'poetic justice'? The good folks at U-Haul (Amerco) are also on the SEC's list. That seems an even more unlikely short, what with all the capitalists packing-up in search of free markets and lower taxes.
JRB
Jack R. Buchmiller
Stamford, CT
9/28/08
Wednesday, March 18, 2009
Does Air Force One have training wheels?
2009-03-18 By Roger Runningen March 18 (Bloomberg)
Tim Geithner and the Starship Enterprise
But then apparently Geithner thinks he's skippering the Starship Enterprise:
"Put her into warp-drive, Ben!"
"But Captain, the ship's fisc can't take it much longer!"
"I don't care Scotty -- I mean Ben -- we've got to pull away the Klingon's Bonus Pool!"
"Excuse me, Captain Kirk -- I mean Tim, this isn't logical. We still must first escape the Subprime Death Star. (From which I told you not to try to pull the Starship Citibank out of by brute force because the Collateral Tractor Beam is too strong to defeat head-on. Besides, that's "Star Wars" not "Star Trek")."
"I don't care, you pointy-headed -- I mean eared -- Vulcan, Starship Citibank is the Federation's flagship! It's carrying Admiral Rubin! Go back to your station, Spock!"
[Spock to McCoy, aside] "I think the Captain has gone insane. Besides, we beamed-up Admiral Bob in the last episode. It's Captain Hank who's still aboard, even though relieved of command last season."
[McCoy to Spock] "Suicide or mutiny, Mr. Spock, which is more logical? "
[Spock ponders; fade to black]
JRB
3/18/09
Tuesday, March 17, 2009
Grassley Suggests AIG Execs `Resign or Commit Suicide'
Bloomberg News, 3/17/09
Sunday, March 1, 2009
A cash investor suffers but a single loss; a mark-to-market counterparty suffers a thousand losses.
Each mark-to-market of one of those Warren Buffett-ish “weapons of mass destruction” is a mini-Hiroshima for one counterparty and, when the market zigzags the other way, a mini-Nagasaki for the other counterparty. All before Enola Gay has left the tarmac.
JRB
3/1/09
How Washington is creating the Depression of 2009 (catching up on my blogging!)
State Debt Ratings May Be Affected by Pension Losses, S&P Says
2009-02-26 17:18 -- Bloomberg News, by Jerry Hart
But S&P (and Moody’s & Fitch) still accepts that liabilities can be discounted at 8% or more. CAPM, Modigliani & Miller, and all the rest of modern finance don't exist in pension-world. Yet cash is cash so, in my world, they must converge. Ah well, it's all too late now. More than just first-mover advantage has been lost.
JRB
2/26/09
Dodd Surprised By Market Response to Nationalization Comments
2009-02-24 19:05 -- Bloomberg News, by Alison Vekshin
What an idiot! He’s chairman of the Senate banking committee, and surely he saw IndyMac get ‘schumered’ just a few months ago.
It’s too much to hope for, but the entire House and Senate banking committees should resign in disgrace. As for myself, when Chris “Friend of Angelo” Dodd is up for re-election, I’m writing-in Travis Herold’s name. While it may not be true that ‘a thousand chimps given a thousand typewriters and a thousand years could write Shakespeare’ it appears true that 535 of them can generate 787 billion tons of pork in a matter of weeks. But they’ve been practicing their earmarks for years.
U.S. Bailout, Stimulus Pledges Total $11.6 Trillion (Table)
2009-02-24 Bloomberg News, by Mark Pittman and Bob Ivry
JRB
2/24/09
Central Banks Sacrifice Independence as Crisis Grows
2009-02-09 12:24, Bloomberg News, by Rich Miller and Simon Kennedy
And none more than our Federal Reserve. The only way to completely remove the cancer of moral hazard is to abolish the Fed and replace it, them, with something else. But what?! Anyway, that’s not going to happen (unless we have The Great Depression of 209), but as it was the moral hazard created by 1984's Continental Illinois bailout created the current global potlatch, how else do we remove it? (Not only were uninsured depositors bailed out, so were creditors and even preferred shareholders.)
JRB
2/9/09
Bernanke Risks ‘Very Unstable’ Market as He Weighs Buying Bonds
2009-01-26, Bloomberg News, by Rich Miller
How can they even contemplate another "Operation Twist" when the PSBR* is into the trillions!? It was a complete failure!
* “public sector borrowing rate” is the UK’s term for “deficit”.
JRB
1/26/09
Tuesday, February 17, 2009
Aligning banks' shareholder, management, and public interests.
Saturday, February 7, 2009
Michael Phelps vs. Bill Clinton
WSJ: "A Republican Fannie Mae"
Wednesday, February 4, 2009
"Toxic" asset solutions: a Fed' collared guaranty
Tuesday, February 3, 2009
Daschle, Rangel, & Geithner vs. Bank CEOs
Fed follies: a more intelligent CP program
JRB
2/3/09
Monday, February 2, 2009
Fed Follies: TARP - How it should work
Price and value are two different things -- three if you include mark-to-market (MTM). (See below) If regulators were able to validate fair or economic values, then maybe prices wouldn't be so depressed and they wouldn't need to buy so much. Price is relevant for leveraged institutions like banks & brokers but, ultimately, if value -- fair value or economic value -- is perceived then maybe they can fund themselves. (FASB has corrupted the term "fair value".) In buying assets the Fed 'gives up some of their height', as Teddy Atlas might say (ESPN-2's boxing analyst), and as I've said before.
Here's the sketch of an idea how the Fed could be more parsimonious with their capital -- our tax dollars! First, regulators validate fundamental or fair values (not the corrupted FASB definition) by modeling the expected cashflows. Then they validate market value (FASB's fair values, levels 1 - 3) and translate or 'calibrate' that value/price into the implied cashflows. The Fed then puts a guaranty 'collar' on those cashflows: the Fed pays the shortfall if actual cashflows are less than the market-implied, and the Fed receives the excess if cashflows are greater than the fundamental forecast. As with conventional bond insurance, the bonds receive a new CUSIP and trade as one with the Fed's wrap. Perhaps it could be a derivative that could trade separately (although forever tied to the original bond's performance). Obviously, this is a massive undertaking given the number of banks, securities, and their complexities. But things like this have been done before and so can be done again. Sometimes there is no shortcut.
Example of price v. value v. MTM: The negative basis trade -- if I bought an investment grade bond at T+200 and matching CDS protection at T+75 then I've locked-in a 125 bps p.a. return. When spreads blew-out, let's say doubled to T+400 & T+150, respectively, then I've a larger MTM loss on my bond than gain on my CDS so I report a huge MTM loss. But, assuming my CDS ctpy is now the Federal Reserve (d/b/a BofA or JPM) and not Lehman, I still have a locked-in 125 bps pa return which has gone up, not down, in value because the discount rate is now lower! (ceteris paribus -- legal risk, etc.)
JRB
2/2/09
Monday, January 26, 2009
TARP's Barney Blagojevichs
"Operation Twist" -- the Fed & Treasury's sequal to a failure
Friday, January 23, 2009
Why TARP's capital injections don't (can't) work
Geithner calls the Chinese currency "manipulators"
Citigroup, Bank of America ‘Nationalized’ as U.S. Calls Shots
1/23/09
Wednesday, January 21, 2009
Neo-Keynesianism will fail, is failing.
The fallacy or error is, fiscal policy has been Keynesian ever since 1930-something with only a brief & partial supply-side interruption (8 years of Reagan minus Tip "Reagan's budget is 'dead on arrival'" O'Neil). Unlike the 1930's, state & local & federal governments are already leveraged to the hilt, long before the current crisis. Governments, just like banks, hedge funds, SIV's, or any other borrower, must eventually pay-off their debts. Or be perceived to have that ability. But, as I wrote before, that perception must be grounded on fact & analysis, something the U.S. govt has not been subject to in the past but is becoming subject to now. Today's WSJ observed the Chinese are shortening maturities, possibly (probably) due to credit concerns. The Keynesian solution will not work if & when no one wants to lend the money to create the deficit-spending "solution". Today, that 'someone' is Red China, Japan, or OPEC, each with their own problems and not to be mollified by the notion we can print more dollars as they are nondollar investors.
Geithner, et al, are "generals fighting the last war", the Great Depression. While many of the problems are the same or similar, the solution cannot be the same as we are starting from the point of maximum Kenyesian intervention.
I haven't entirely developed this analysis: this post is more planting the 'germ' of an idea. The old nostrums won't work but I need to translate that gut-feel into analysis. (Whether or not and when I can further elucidate it are other questions.) I think we'll see 10%+ unemployment. Whether we see the -10% decline in GDP that, unofficially, defines a "depression" (as opposed to recession) is another matter. But I think & fear that policymakers are pushing us further over the cliff, not pulling us back, and at the same time increasing its height. They've "doubled-down" on Citibank & BofA, and the UK continues to paint itself into a complete nationalization corner.
JRB
1/21/09
Tuesday, January 13, 2009
Aphorisms & Observations
"Damnation!" No, just a couple of states will do. (~1970)
Television is to news as bumperstickers are to philosophy.
"You can lead a horse to water but you can't make him drink." But a jack-ass will not be led; he'd sooner perish from thirst. (~1998)
"Mother Nature favors the hidden flaw" (one of Murphy's Laws) but human nature seeks it out. (~2005)
Of the 'Three C's of Credit' we've given-up 'character' for 'correlation' -- and that matters! (regarding CDOs, 2005)
Constant-proportion debt obligations (CPDO) are leveraged credit gamma. (2005)
My "safe harbor" statement: When the wind & water rise high enough, no harbor is safe. (2003)
Republicans have failed to govern. Democrats will not fail to rule.
JRB
1/13/09