Posts filed under “Finance”

Failings in Structured Finance Agency Conflicts

As we begin to address regulatory reform in the financial services industry there is a clear consensus view that the credit rating agencies played a role in fomenting the crisis environment.

In February 2007, Joe Mason and I presented a paper warning of the risks that CDO market problems would present in the capital markets and in the real economy. “How Resilient Are Mortgage Backed Securities to Collateralized Debt Obligation Market Disruptions?” http://www.hudson.org/files/publications/Mason_RosnerFeb15Event.pdf

In May 2007, we presented a follow-up paper more specifically detailing the role the rating agencies played. “How Misapplied Bond Ratings Cause Mortgage Backed Securities and Collateralized Debt Obligation Market Disruptions”. http://www.hudson.org/files/publications/Hudson_Mortgage_Paper5_3_07.pdf

My recently authored “Toward an Understanding: NRSRO Failings in Structured Ratings and Discreet Recommendations to Address Agency Conflicts”
appears as the lead article in the current issue of the Journal of Structured Finance. In the article I detail the fundamental flaws in the NRSROs rating of structured securities, why those problems are unique to structured securities (as distinct from single issuer debt e.g. corporate, municipal, sovereign) and why the problem is not  solved by changing the “issuer pays” model nor using “market based” ratings. Instead I present a series of non-invasive recommendations that would resolve most of the problems in the ratings of structured securities. Such a resolution is fundamental to a revival of the ABS market and resumption of securitization activity on a sustainable and responsible basis.

I urge you to read the paper and would be more than happy to discuss it or respond to any questions you may have.

JSF Winter 09 – Rosner

>

Source:
NRSRO Failings in Structured Ratings and Discreet Recommendations to Address Agency Conflicts
Winter 2009 Volume14,Number 3
The Voices of Influence | iijournals.com

http://www.iinews.com/site/pdfs/JSF_Winter_2009_Rosner.pdf

Category: Credit, Derivatives, Finance, Markets, Real Estate, Really, really bad calls, Research

Volcker Urges More Transparency in Hedge Funds/Private Equity

Live! From Capitol Hill: Former Fed Chairman Paul Volcker Testifies in Front of Senate Banking Committee

Bloomberg, February 05, 2009

Category: Finance, Video

Blame the Enablers

I couldn’t agree with this article more: Madoff Enablers Winked at Suspected Front-Running. I look at Madoff as a Sociopath — he is a sick individual. The enablers, on the other hand, were simply greedy hacks who didn’t, (and probably couldn’t) do the suitable investigation and due diligence into Madoff’s asset management business. Were they…Read More

Category: Finance, Investing, Legal, Regulation

Nationalize Like Real Capitalists

Steve Randy Waldman writes the blog interfluidity. His take is usually away from the mainstream, and always interesting. His most recent discussion on Bank Nationalization is quite interesting ~~~ It will come to no surprise of readers of this blog that I favor nationalization of failed, systemically important banks. But James Surowiecki and Floyd Norris…Read More

Category: Bailouts, BP Cafe, Credit, Finance

Selling Banks’ Crown Jewels

Analysis and Discussion with Ben Phillips of Casey Quirk & Associates

Category: Finance, M&A, Video

Niall Ferguson on Colbert Report

Niall Ferguson explains money as a relationship between a creditor and a debtor

Category: Economy, Finance, Video

Madoff’s Investors Had $43 Billion

via Bloomberg:

Client                   Total          Source

Access International     $1.4 billion   Company statement,
Advisors                                Bloomberg Data

Alicia Koplowitz,        $14 million    Bloomberg News
One of Spain’s richest
women

Aozora Bank Ltd.         12.4 billion   Company statement
                         yen ($137
                         million)

Bard College             $3 million     Bloomberg News
 Read More

Category: Digital Media, Finance, Legal

Was There Really a Financial Crisis ?

Hale “Bonddad” Stewart is a former bond broker with several regional firms. He currently writes for Bonddad Blog, the Huffington Post and practices domestic and international tax law

Website: http://www.bonddad.blogspot.com/

Law office: http://halestewartlaw.com/

>
~~~~
>

A recent paper by the Minneapolis Federal Reserve has gotten a lot of attention. The paper is titled Facts and Myths About the Financial Crisis of 2008 and it argues there was in fact no credit crisis. Several people have used this paper to argue that Wall Street overstated the severity of the credit crisis in order to get a bail-out they didn’t need. What these commentators have failed to heed is this paper was widely criticized within the financial community, even drawing a rare rebuke from a sister Federal Reserve Bank. In short, to argue there was no credit crisis — to say we were “punked by Wall Street” — flies in the face of every available fact on the crisis.

First, let’s provide some background for this debate. As of this writing 311 lenders have “imploded.” The XLFs — the ETF that tracks the financial sector – is down almost 70% from a high in the summer of 2007. Total credit losses at the world’s financial institutions have totaled 1 trillion dollars:

The gauge is down 46 percent in 2008 as credit losses and writedowns at the world’s largest banks surpassed $1 trillion and the U.S., Europe and Japan entered the first simultaneous recessions since World War II.

In other words, the financial sector’s economic position is terrible at best.

But the evidence runs deeper. About every six weeks the Federal Reserve issues a paper titled “The Beige Book.” This is a book complied from anecdotal evidence from the Federal Reserve Districts on the general economic environment. Every Beige book issued in 2008 has indicated credit conditions were tightening and loan demand was decreasing.

Read More

Category: BP Cafe, Credit, Derivatives, Finance, Really, really bad calls, UnScience

The Walking Zombies of Wall Street

WSJ’s Dennis Berman tells colleague Evan Newmark that although tens of thousands of people have managed to hold on to their jobs, there isn’t much work to go around. Instead, he says, Wall Streeters are working to appear busy.

12/9/2008

Category: Finance, Markets, Video, Wages & Income

What Did the Repeal of Glass-Steagall Do ?

Here is a question that I have been wrestling with: What exactly did the repeal of the Glass-Steagall Act accomplish? Were there positives as well as negatives? Should the Gramm-Leach-Bliley Act be repealed, and Glass-Steagall reinstated? > ~~~ What say ye? >

Category: Bailouts, Credit, Finance, Legal, Regulation