Posts filed under “Derivatives”
Courtesy of NYT
Louise Story has a front page article in the Sunday NYT that is your must read this morning:
“On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.
The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.
Drawn from giants like JPMorgan Chase, Goldman Sachs and Morgan Stanley, the bankers form a powerful committee that helps oversee trading in derivatives, instruments which, like insurance, are used to hedge risk. In theory, this group exists to safeguard the integrity of the multitrillion-dollar market. In practice, it also defends the dominance of the big banks.
The banks in this group, which is affiliated with a new derivatives clearinghouse, have fought to block other banks from entering the market, and they are also trying to thwart efforts to make full information on prices and fees freely available.”
I keep coming back to this simple fact: If you understand what caused the crisis, the first step in preventing another is working backwards and undoing each of the causes. Front and center is the Commodity Futures Modernization Act that allowed the rampant shadow banking system to develop. It still needs to be overturned . . .
A Secretive Banking Elite Rules Trading in Derivatives
NYT, December 11, 2010
During the housing boom, banks underwrote over $2 trillion in subprime, alt-A and option-adjustable rate mortgages underwriting could have losses as high as $700 billion, according to Amherst Securities research. The problem is, they weren’t particularly careful in how they performed their duties. Administrative and substantive errors, missing trust documents, misleading placement memorandums, all create…Read More
I hate when I do this: I grabbed this killer chart from somewhere — it looks like a Fed research paper — then I promptly misplace the PDF. Anyway, here is a closer look at the entire loan to RMBS process: > Mortgage Origination, Assignment, and Securitization Process
I met Eric Von Berg at an ING conference where I had just given a speech. Afterwards, he handed me a copy of this short book he wrote and illustrated: Mad Meat! How securitized lending collapsed the financial system which now exists on life-support. As the plane waited in the queue for takeoff in Atlanta,…Read More
> The MSM article of the day is a NYT takedown of JP Morgan’s raping and pillaging of various cities and pension funds. The accusation: Shared profits, client’s losses. When hedge funds do this, the private placement memorandum covers the terms. It is less clear that a brokerage firm can do this legally. This follows…Read More
There are quite a few misunderstandings, denials, and exaggerations floating around as to what the final outcome might be of “Fraudclosure.” At the current stage, we really do not know how extensive the problems are. We could make wild and unsubstantiated conclusions, but we prefer reason and logic. So let’s break this down as to…Read More
October 14, 2010 Joshua Rosner 646/652-6207 jrosner-at-graham-fisher.com ~~~ Several new-media have quoted an early story on our October 12th note which suggested we saw risks that origination flaws would allow investors to challenge securitizations on $1.3 trillion of mortgages. This is incorrect. The story read: “potential paperwork errors on some of the $1.34 trillion of…Read More
You may have missed this hard hitting McClatchy article over the weekend. It essentially accuses then Treasury Secretary (and former Goldman Sachs CEO) Hank Paulson of “willful inaction in late 2006 and 2007 during a period when lending criteria were disintegrating in favor of so-called “liars’ loans,” for which applicants weren’t required to document their…Read More