Mind Over Market

This video clip from CNBC's early morning Squawk Box show features James Chanos, President of Kynikos Associates and Bill Ackman of Pershing Square Capital Management LP. The two were interviewed April 27, 2010. Quote from Chanos: “Until we find out what happened (with AIG and Lehman), we’re not going to be able to reform the system."

The Senate Permanent Subcommittee on Investigations, headed by Senator Carl Levin (D-Michigan), fresh from its grilling yesterday of executives from the credit rating agencies, has released several emails from Goldman Sachs on a Saturday, no less. Cannon fodder for the Wall Street firing squads on the Sunday talk shows, perhaps? There is no "smoking email," as it were, but a lot of grist for the mills in the Obama Administration, Congress and their cheerleaders in the media to vilify Wall Street, with Goldman Sachs as the preferred target of the moment. A July 25, 2007 email from chief financial officer David Viniar is already burning up the wires from the Associated Press in an article by Dan Strumpf titled "E-mails show Goldman boasting as meltdown unfolds." See AP story here: http://apnews.myway.com//article/20100424/D9F9GVN80.html The mortgage-backed securities and mortgage collateralized debt obligation (CDO) markets were beginning to seriously tank in late Jul...

In a new brief released today, Peter J. Wallison at the American Enterprise Institute states that the Obama Administration's financial regulation plan -- as represented in Senator Christopher Dodd's bill -- 'raises the question of whether its purpose is actually to address the causes of the financial crisis or -- like ObamaCare -- to put the government in control of yet another sector of the U.S. economy." Wallison, who is the Arthur F. Burns Fellow in Financial Policy Studies at AEI, argues that the bill's provisions allowing for the Federal Reserve to regulate all large, nonbank financial institutions "would signal to the market that these institutions are too big to fail." The proposed $50 billion rescue fund to be administered by the Federal Deposit Insurance Corporation (FDIC) enhances the too-big-to fail approach by assuring creditors "that they will be bailed out if one or more of these large institutions are in danger of failing," the br...

A year ago, a paper written by a student at Harvard College -- Anna Katherine Barnett-Hart -- received a fair amount of media attention. The paper examines the collateral performance and credit rating of asset-backed security collateralized debt obligations, so-called ABS CDOs. The author's findings are not surprising, in light of what is already known about the mortgage meltdown, but they do provide a better delineation of the parameters of the CDO meltdown. Given the intense interest in CDO deals following the Securities and Exchange Commission's charges of civil fraud against Goldman Sachs for a deal known as Abacus 2007 AC1, it is worth revisiting the findings in this research and analysis by a college senior seeking to graduate with honors. The author looks at both broad data on CDO performance and the ratings of credit rating agencies, but she also closely examines 735 ABS CDO deals. The author's main finding is that there was far too much in the way of low qual...

How did Big Finance grow so powerful that its hijinks nearly brought down the global economy – and what hope is there for real reform with Washington politicians on Wall Street's payroll? Bill Moyers talks with authors Simon Johnson and James Kwak, two of the nation's most respected economic experts and authors of the new book 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown . To hear the segment, that ran Friday, April 16, click this link: http://www.pbs.org/moyers/journal/04162010/watch.html

Buried in a financial supplement report to the first quarter 2010 SEC filing by J P Morgan Chase is a note that reports that J. P. Morgan chase was paid 5 basis points to borrow $271 billion in repos, which were part of the liquidity provided by the Fed to primary dealers (Wall Street firms) to strengthen financial markets. A post by Edward Harrison on the blog Naked Capitalism argues that, in effect, the government (Federal Reserve) paid J P Morgan Chase to borrow money. Here is how he defends that charge against those who said that technically, the borrowing was not between J P Morgan Chase and the Fed, but between J P. Morgan Chase and its counterparties: A commenter felt my reference to borrowing from the government was misleading. So, note that technically Repo counterparties are largely banks lending and borrowing excess reserves from one another. So, they are not really borrowing from the government. However, the Fed has set the Fed Funds rate at 0.00-0.25%. It controls the Fed ...