Comments on: $45 trillion in credit default swaps: a number of concern

By: Will Barrett

Will Barrett — Wed, 24 Sep 2008 16:41:34 +0000

Our Economy is a “house of cards”. It will fall sooner or later, and I prefer sooner. There will be much pain, but that will be the case regardless. Many companies will go bankrupt, but the sooner and quicker this happens, the faster we can pick up the pieces.

We should use that 700B to provide loans to entrepreneurs to start up local banks and buy corporate assets at auction.

We have antitrust laws that have been ignored, and now these companies are too big to fail? Special interest will cry foul either way. Fed Chairman Paulson has said many times, that “the markets are the best regulator”. Let the chips fall when they may.

By: gs

gs — Sat, 26 Jan 2008 02:59:40 +0000

I accept that something is seriously askew with the US financial system. How to preserve the benefits of financial innovation while discouraging Wall Street wise guys from perverting the system; while minimizing the risks of unintended consequences; and without driving markets offshore as Sarbanes-Oxley is said to do?

Beats me. It is a capital mistake to theorize before one has data..

If sunlight is the best disinfectant, how ’bout the gummint creates a humongous data storage volume and requires that the particulars of every US-traded financial instrument–CMO, CDO, OTC derivative, whatever–be placed therein? Counterparties’ identities need not be divulged, but prices, trade dates, ratings and rating agencies must be.

After the think-tank community and financial academy have made sense of the data–shades of the human genome project?–, an appropriate, uncomplicated level of regulation can be formulated. The intent is that, for a given financial instrument, mandatory transparency will add value that more than compensates the counterparties for low compliance costs.

I suspect that the big merchant banks’ first preference is for no oversight so they can oligopolize their markets; their second preference is for heavy regulation that stifles the birth of agile entrepreneurial competitors.

They should be allowed neither.

By: staghounds

staghounds — Sat, 26 Jan 2008 01:10:57 +0000

Once upon a time, I participated in a bank fraud trial. The defendants owned several banks. They created a large pool of fake assets- in this case, unsigned promissory notes which reflected loans that were never made. They used this “asset” to permit making new, genuine loans to insiders. They then moved the fake loans on to another of the banks and did the same, et cetera.

The key to this was that they had friends in the banking regulators’ offices, so when Mr. Carter was on his way to one of the banks, the Defendants could shoot the bogus assets onto its books before he arrived from Elmira.

Of course when those damned voters changed administrations and the regulators descended on all the banks the same day…

Sound familiar?

By: Canucklehead

Canucklehead — Fri, 25 Jan 2008 21:10:50 +0000

Here is an interesting read…

http://nakedshorts.typepad.com/nakedshorts/2008/01/new-standards-q.html#more

By: Canucklehead

Canucklehead — Fri, 25 Jan 2008 21:09:20 +0000

Here is an interesting read…

http://www.typepad.com/t/trackback/20123/25423292

By: Canucklehead

Canucklehead — Fri, 25 Jan 2008 18:11:18 +0000

I guess the big question in all of this is who has entitlements/liabilities related to all of this and can these entitlements/liabilities be enforced in a court of law, and in the court of public opinion?

In a shadow banking system, you natually have shadow self-regulation. When that fails (because the sun sets) do you have shadow losses? Can these shadow losses materialize as something more than shadows, or do the shadow parties affected need to go to a shadow court to have their claim adjudicated in a shady manner?

Is there anyway to get to the chase here or do we rely on the opinions of inside players of the shadowy game who suddenly don’t like the light shining on their actions?