No, not my standard broker’s commission, but the average level of credit enhancement in CMBS before 2003. FT alphaville, commenting on the forthcoming tsunami of CMBS downgrades, reprints this enlightening table from S&P: This very clearly shows how investors let their standards slip in the hurt for yield during the Boom years. Not everyone was […]

Physics envy, History envy

Physics is in some ways the geekiest science. It’s fundamental, it has hard maths in it, and it has had enormous success at explaining the phenomena it tries to study. What other subject can successfully predict something to twelve decimal places? As a result, some practioners in other fields have physics envy. This is a […]

Most expensive cities for residential property

Via Infectious Greed, an interesting list of the top 10 cities globally by average residential sale price: Hong Kong is a special case, being an island where much of the undeveloped land is owned by the government, but the others do certainly look like short candidates. Chinese property derivatives anyone?

Restructuring and bankruptcy

The Economics of Contempt has a nice historical summary: the first major restructuring that I can remember being significantly hindered by CDS was Marconi, and that was back in 2001-2002. Marconi was negotiating a restructuring with a bank syndicate, but for a long time certain syndicate participants (cough, UBS, cough cough) refused to agree to […]

Seriously antiquated

FED, OCC, OTS, FHFA, CFTC, SEC, FDIC, NAIC, … It seems that Obama and co. do not have the balls to sort out the mess that is US supervision. Even the obvious targets – the OTS, who supervised AIG (yes, technically AIG was a Thrift) and the SEC’s regulatory capital regime, which did such a […]

The types of instability

Money market funds were one of the more minor vectors of the crunch. Since they did not want to break the buck, and as they had rather limited loss absorption capability (thanks to the lack of anything akin to equity), they were sellers of the debt of any institution rumoured to be in trouble. In […]


Is it a good time to start an old-fashioned bank?


Martin Wolf, quoting Mervyn King, writes in the FT: ‘My word is my bond’ are old words: ‘My word is my CDO-squared’ will never catch on. He’s right, but it is a shame. After all, we need a convenient shorthand for ‘My word is badly structured and likely to lead you into trouble’.

The loneliness of the long distance regulator

Lord Turner, a decent, thoughtful regulator, told the Treasury select committee yesterday that there should instead be a “tax on size” by requiring the big banks to set aside more capital when they expanded beyond a certain size. Quite right too, and nice to see an idea I championed being mentioned in such august circles. […]

Post of the day

How can you not like something that begins ‘Emerging Markets and derivatives are like alcohol and barbiturates: each on its own has attractions but create a recipe for choking on one’s own vomit when combined‘? It’s about nefarious doings in the CDS market on the Kazakh bank BTA, and it is here.

Before the bust: AIG’s early collateral postings

AIG’s collateral postings after the rescue are well known – essentially the firm was saved so that it could continue to fulfil its obligations to the banking system, notably under the CDS it had written. AIG before the fall has received less attention. But now Bloomberg has done some digging, and the story of the […]

Cash up front please

The Telegraph reports an idea of Paul Tucker’s: making the banks pay to clean up their own mess: The banking industry could be told in advance that, if ever there was another crisis, the ultimate cost would come from banks themselves. In the midst of a crisis, that would not be possible. A government would […]

Each way bet

One of the nice things about Foyle bookshop – despite its Waterstoneisation – is that the staff selections are still charmingly eclectic. Leonardo Sciascia’s Equal Danger was one a few weeks ago. Sciascia is an oddity, a novelist who write political polemic disguised as detective stories, a stylist rather than a plotter. Here’s a nice […]

Chop the tail off a 911 or something…

Please accept my apologies for the scarcity of postings – I have been in Berlin. There will be more soon but meanwhile, here’s a tip from the locals. Short Porsche. Porsche’s short options position on VW expired on Friday, and it is thought that they escaped by the skin of their teeth, but the firm’s […]

A nice graphic on large bankruptcies

(Click for a larger version.)

5% is not much

The Obama administration is proposing that originators should retain a 5% stake in securitisations. This is not enough. 20% or 25% would achieve the desired alignment of interests. 5% gives 20:1 leverage. Yet another missed opportunity.

The Amherst Trade

This is a geeky post about the CDS market. The newswires have been buzzing recently with news of a ‘daring’ CDS trade by Amherst Holdings. I didn’t comment on it at first as I didn’t understand the trade from the initial news items, but I now think it is possible to work out what’s going […]

Wasted opportunities

As weeks have dragged into months, my frustration at the lack of real financial reform has hardened into anger edged with ennui. I don’t expect much to happen now, and it irritates me. Ruth Sutherland sums up the situation quite well in the Guardian: the Obama administration in the US, which still has plenty of […]

Sunday foreclosure datapoint

Courtesy of Realtytrac:

What we need now

Less regulation of financial institutions. More leverage. After all, look how well that worked the last time… No? No. So it is rather a surprise that there is even any discussion of Goldman Sachs moving back from being a commercial bank to being an investment bank. The Reuters story is here. The regulatory regime Goldman […]