What $100B buys you

Floyd Norris makes an excellent point. Quoting Martin Halusa, the chief executive of Apax Partners, he posts that: In early 2007, the Royal Bank of Scotland led a consortium that included the Fortis Group of Belgium and Santander of Spain. It paid $100 billion to acquire the Dutch bank, ABN Amro. Had they held on […]

Friday in Fantasy Land with George

I should buck up, I know. The current furore over credit derivatives may well come to nothing. But when I read something like Soros’ article in the FT today, my heart sinks. Let’s play spot the fallacy. The second step is to understand credit default swaps and to recognise that the CDS market offers a […]

Tim and Josh

Am I the only one to think that (1) Tim Geithner looks a bit like Josh Lyman, and (2) Bloomberg’s quote from him We have a financial system that is run by private shareholders, managed by private institutions, and we’d like to do our best to preserve that system,” smacks of ideology rather than the […]

Actuaries and other scams

I think that someone tried to scam me yesterday. I had gone out for a pint of milk, around 8 in the evening, when a man came up to me. At first glance he seemed well dressed – although the suit wasn’t hand-made and the tie wasn’t silk – and he had a sob story. […]

Are there any solvent banks in Spain?

Creditflex’s story (via Alea) that Spain’s banks and cajas are negotiating on a one-to-one basis with the Bank of Spain to “fine-tune” their 2008 accounts in order to avoid taking catastrophic write-downs on loans makes me wonder if anyone knows the answer to this question.

GE cut

The downgrade of GE has long been coming, and long deserved. Now it seems that the agencies will finally do something: see here for Reuters on Moody’s warnings and here for Bloomberg on S&P. As Jonathan Weil says: The credit-rating companies say they’re cleaning up their act. That will be a tough sell as long […]

Short at 35

John Hempton had a post that attracted a lot of comment last year pointing out that the fact that baltic state hookers cost too much was a good sign that the currencies were over-valued. Read Hookers that cost too much, flash German cars and insolvent banks: an introduction to Swedbank’s Baltic homeland here and the […]


Diversity is important, not just on grounds of fairness, but also because dissent is valuable. You want different views in an organisation, different perspectives. And you certainly don’t want the same culture informing all your decision makers. In this context it is interesting to see two different storms blowing up. One against the Goldman Sachs […]

The Barclays dilemma

This one is really hard. On the one hand, Barclays announced that they don’t need more capital, and that their earnings are strong. (Bloomberg story here: Barclays letter to investors here.) And obviously one does not want to do a Peston, and spread irresponsible rumours. But there is still a nagging suspicion that there is […]

Negative basis hell

There have been a few posts around recently about losses on negative basis trades. These were apparently (one of) the source(s) of Merrill’s recent loss. But I had not seen a convincing explanation until I came across this post from Zero Hedge. This picture is particularly eloquent: At the time of the Lehman bankruptcy, it […]

Office decorations

Note to CEOs everywhere. No one, not your shareholders, not your staff, not your clients, thinks you deserve a $87,000 rug. Buying one shows a spectacular failure of judgment. Buy something cheap and inoffensive instead. But don’t go too far. Update. Thain is paying the $1.2M back, according to a letter leaked to FT Alphaville. […]

A warning from Bishopsgate

More solid, responsible journalism from the Daily Mash: The Royal Bank of Scotland is just days away from imploding like that house in Poltergeist, it was claimed said last night. As the bank’s share price plummeted, experts said it was now time to bring in a scary-voiced midget to expel the remaining demons before the […]

Debt and Uncertainty

An interesting posting by Jonathan Hopkin made me wonder what debt is for, specifically government debt. Of course it allows us to borrow money to meet current needs, especially large unexpected current needs – like nationalising a banking system. But also, crucially, it allows us to fund assets of uncertain, fluctuating value. Here’s what I […]

Tarring Taleb

I have always been a little suspicious of Nassim Taleb. He seems to take too much pleasure in discussion of crises. And his first book — a very conventional account of hedging — isn’t actually very useful for actually running portfolios of options. Now a post on Models and Agents (an excellent blog I have […]

Good grief

This is something I never thought I would read in the Economist: Why not nationalise? And I agree. For those banks that have lost the confidence of the market – like RBS – the best way to protect the economy while minimising costs for the taxpayer (and moral hazard) is nationalisation. We have a historic […]

Your real estate data point of the day

One of the points I have repeatedly mentioned is that it did not take a very large fall in house prices to create the credit crunch. Contagion and widespread bank stress had begun by early 2007 despite falls at that point of only 10% or so nationwide. But of course the falls in the worst […]

Bank capital? Not so much…

Sam Jones has an excellent post on FT Alphaville picking up on a momentous, and well concealed volte face from FSA. The regulator has (finally) embraced procyclicality. We have continued to give consideration to appropriate long term changes to the bank capital regulatory framework. We believe that it would be preferable for the capital regime […]

Bad banks

Not bad as in `bad girl’. Bad as in non-performing. Paul Krugman makes the point that bad banks are not the answer to banking system problem, they are a tool for recovering more for the taxpayer after the banks have been nationalised, cleaned up, and sold on. In other words, wiping out existing shareholders is […]


I leave you lot for a week in Asia, and when I come back, the banking system is broken, RBS has announced the largest UK corporate loss ever, BofA has taken another $20B of TARP money and a $100B asset guarantee, and Ireland has nationalised Anglo Irish Bank. I can’t leave you alone for a […]

Country Systems

Which systems work well in a town tells you a lot about the place. The title of this blog was inspired by the wonder of the Italian coffee system, something that provides good, cheap coffee everywhere. In France, it’s the trains. They just work. Similarly the New York taxi model – cheap, available, often don’t […]