Accounting for the future

Deutsche Bank (HT FT Alphaville) have analysed the fraction of bad assets in the Cajas under various definitions of ‘bad’: In the Alphaville article this leads to a discussion of the varying amounts of capital the Cajas might need under different scenarios: €15B, €24B, €30B, even €69B. For me though what is striking is the […]

AIG and collateral again

The Economics of Contempt highlights an interview with an AIG executive on their collateral agreements, a topic we have commented upon before here and here. I don’t completely agree with EoC’s take in that I find the following entirely predictable if depressing, but anyway, here it is: In the FCIC’s interview with Andrew Forster (mp3), […]

When we get risk wrong

I have been involved in risk analysis, measurement and management for more than half of my life. That’s a scary thought, but it does perhaps mean that I might have some insight. It helps (and apologies if this is sounding like a boast; bear with me) that I have worked not just in finance, but […]

Memories of deep midwinter

I will be away for a little while so posting will be light.

Favourite socio-economic characterisation of the day

“The kind of family that thinks it is OK to own a gaz-guzzling luxury car as long as it is made in a nation that is hostile to US foreign policy.” (Original here.)

Operational risk in manufacturing

Basel 2 contains a substantial set of rules that require banks to monitor and capitalise operational risk. We screamed like scalded cats at the time, and I still think that the capital requirements are foolish, but one of the big advantages of making banks capitalise something is that they do actually start to monitor and […]

America’s income distribution as a snack

This one is from Bill Maher via Naked Capitalism…(start watching around 2.10) To understand where the money goes in America, suppose 100 people order pizza. They order a hundred slices, and they line up in order of income. Then the first guy in the queue would take eighty slices. 80. And if the rest of […]

Telling the truth about old new labour

The Guardian discusses a speech from Jim Murphy, Labour shadow defence secretary. Murphy is quoted: Labour won’t win next time by joining others in claiming how bad Labour was last time. We should be proud of so much of what we achieved, from the National Minimum Wage to cutting crime to our social reforms on […]

Policy on the asset side again

The FT last week had an article about exactly what I meant in my earlier post. They said: UK pension funds are urging the government to issue more long-dated and inflation-protected gilts to help them deal with increasing life expectancy of members and regulations that put pressure on the to “de-risk” investments” The result of […]

Circles in the Park, Lehman addition

Bloomberg has a good article about Lehman’s Fenway CP conduit. It’s a complicated story so stick with me. First, what was Fenway? Lehman transferred dozens of loans and equity positions in commercial real estate to a conduit called Fenway Capital LLC… Then Fenway Funding LLC, a Fenway Capital subsidiary, issued short-term notes backed by the […]

Sadly false prediction

I am spending altogether too much time in Brussels. One of the few compensations is the exceeedingly high quality of the graffitti.

Covering up the capital structure

FT alphaville earlier in the week pointed out the continuation of a trend we discussed earlier, the increase in the use of covered bonds. Indeed, according to UBS, some Spanish banks in particular are close to their limit for issueing covereds. In other words, all the mortgages that can be used to support covereds, have […]

Getting naked with the European Parliament

In depressing but entirely predictable news: The [ECON] committee position would prohibit anyone from being involved in credit default swap (CDS) transactions if they do not already own sovereign debt linked to that CDS (“naked” CDS trading), or securities whose price depends heavily on the performance of the country, But look at the wonderful stream […]

What Kelley taught them

Kelley McDaniel, a teacher from Portland, testified in front the State of Maine Appropriations Committee about the right wing Governor’s proposed budget. The Portland Press Herald picks up the story and, while it’s not exactly the New York Times, what this story has to say is really worth reading: She told the committee that she […]

Policy on the Asset side

The standard account of the financial system is about capital allocation. It starts from the premise that there are people who need capital – companies, individuals, whoever – and the job of the financial system is to give it to those who (in some sense) deserve it at the right price. In other words, it […]