Rating agencies have made it abundantly clear they will not perform due diligence for investors. An investor should never rely on a rating as assurance that documentation is in order. Rating agencies don’t take losses, investors do.
If you wonder why savvy derivatives traders rewrite contracts, Bloomberg News unintentionally provided an example yesterday evening. The home page showed the Dow at zero, down 100%. Bloomberg was apparently unaware of the error until I contacted the top of the house. Read More »
Almost five years after the financial crisis, Congress confirmed Richard Cordray, former Attorney General of Ohio, as the head of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) established Consumer Financial Protection Bureau (CFPB).
As Ohio’s AG, Cordray took JPMorgan Chase, Bank of America and Citigroup to court over their mortgage servicing practices, robo-signing, forclosure fraud, and losses to state pension funds. Read More »
Kyle Bass, founder of Hayman Capital Management, announced during his March 2013 talk to the Chicago Booth’s Global Markets Initiative that he is bearish on Japan and has engaged in $500 billion notional tail-risk trades.
Alan Greenspan, former chairman of the Federal Reserve board (August 1987 – January 31, 2006), recently appeared on The Daily Show with Jon Stewart. Greenspan said he didn’t see the financial crisis coming; he thought bankers would be better stewards of their capital. That was meant to be an apologia of sorts for the Fed’s bungling oversight of the banking system. According to Greenspan, banks didn’t understand their risks, and neither the Fed nor the banks can forecast well. He added that people on Wall Street are “screwy.” Greenspan says he always thought “screwiness” would wash out, since people “would act rationally in their long term self-interest.” Read More »
I intend to perform my responsibilities in a way that will live up to the standards set by the men and women serving in the British armed forces: my comrades in combat, and my friends. You claim you are doing “God’s work.” I see your work is ongoing. I have chosen a different path. I aspire only to acquit myself well in doing the work of an adult person of honor, as so many of the men and women I admire have done.
Whenever we see another case of manipulation in the currency, energy, gold, commodities, interest rate, credit derivatives, securitization, or equity markets, management of the culprit financial institution inevitably blames it on “unauthorized” trading by one or more “rogue” traders.
Traders’ salaries are low relative to the potential for seven figure bonuses. When you offer a trader a pink slip for failure and a princely bonus for success, traders tend to minimize losses and inflate successes. Read More »
Bloomberg News’ Yalman Onaran wrote an article on Monday about the disaster that would unfold if we don’t raise the debt ceiling and the U.S. has a technical default by missing an interest payment on U.S. Treasuries. James Kochan’s quote summed up my feelings: “Well, holy cripes!” It has never happened in modern history and would be a disaster greater than the September 2008 financial crisis. Read More »
The U.S never really minded if a Latin American oil minister took a kickback here or a bribe there to grease the wheels for a foreign oil company or an importer of hard liquor. Latin American taxpayers wouldn’t notice. The money was really just an upfront golden parachute. No U.S. executive ever went to jail just because he voted himself a huge separation bonus as a corporate raider took over a company. Shareholders didn’t complain. The only difference between an executive and a Latin American honcho was the executive got his money after he lost power. But the U.S. minded a lot after Alan Garcia won Peru’s presidential election in 1985. Garcia announced to the world that Peru couldn’t pay back its debt. Garcia was going to mess with U.S. banks, and that was definitely not okay. Read More »
Seymour Hersh, the Pulitzer Prize winner who exposed the My Lai massacre during the Vietnam War, wants to fix what’s wrong with American journalism. He asserts the press should be outsiders instead of access journalists:
“Our job is to find out ourselves, our job is not to just say—here’s a debate, our job is to go beyond the debate and find out who’s right and who’s wrong about the issues.” Read More »
A reconsideration of the London Whale, JPMorgan’s risk management, Jamie Dimon’s oversight – and their implications for other financial institutions
If you are a risk manager at a U.S. bank, you will be faced with difficult decisions. You’ve probably already run into one or more of what I think of as the three major problems for risk managers. The first is the lip service paid to risk management by people in leadership positions who are unfit to lead; the second is ignoring or covering up oversized risky positions; and the third is not effectively managing short positions. Read More »
What is it like to live in a country where the government has been accused of torture, fickle application of the law to imprison citizens, unfair courts, repression of journalists, and a huge prison system? I’m not talking about the United States—in case you thought I was—I’m talking about Cuba.
That’s the question that ran through my mind as I read Havana Lost, a new thriller by my friend Libby Hellmann, former president of the Midwest chapter of Mystery Writers of America and National President of Sisters in Crime. She deftly weaves a story of the Chicago Mafia and its ties to Cuba spanning several generations. Read More »
In November 2008, President Obama was elected, and he was sworn in January 2009. The country was promised change and reform. Recently two democrats close to the top of President Obama’s administration made excuses to me for the lack of financial reform in the United States. Their separately related versions were remarkably similar, so similar they seemed scripted:
The administration made a bargain, and I’m not sure it was the right decision. The world was teetering on the edge of collapse. There was a crisis of confidence. There would have been unimaginable consequences. So bad even your imagination can’t handle the truth? Read More »
Who is right? Warren Buffett and Charlie Munger and many more say you shouldn’t own gold. Ray Dalio, David Einhorn, Jim Rogers, John Paulson, George Soros, and I (among many others) own some gold—but that doesn’t mean you should own it.
Many people believe Warren Buffett is the magic Jesus of finance. He’ll be the first to tell you he is not. He’s made a lot of mistakes. He held on to Berkshire textiles for too long; he bought and sold Conoco Phillips for a $2 billion loss a couple of years ago, and more. But he’s avoided the really big mistakes, and he positioned himself to prosper in the wake of the financial crisis—irrespective of any taxpayer’s opinion about the methods. He also engaged in a huge successful silver speculation many years back. He might be right about gold today. Read More »
The financial reform farce continues. The DOJ and so-called regulators tickle bankers with feathers as CEOs shriek: You’re too tough!
September 2013 marks the five-year anniversary of the 2008 global financial crisis. Earlier this month, Attorney General Eric Holder said the DOJ is pursuing cases as the statute of limitations runs out for many of them. He “declined to discuss specifics or say when such cases would be announced.”
The revolving door between Washington (including friends and relatives) and Wall Street continues to spin. Grateful beneficiaries of campaign contributions protect cronies.