Loving occupy the SEC

Those guys. Wow. Soooo cute. Occupy the SEC has filed a lawsuit in the Eastern District of New York against six federal agencies, over those agencies’ delay in promulgating a Final Rulemaking in connection with the “Volcker Rule”.

PRA sense, EBA analysis

The FT tells us Lord Turner told the Commission on Banking Standards that new banks would be allowed to start up with core capital equal to as little as 4.5 per cent of their assets, adjusted for risk. The Prudential Regulation Authority, which takes over bank supervision from the FSA in April, would give new […]

Blue sky, blue water

It was pretty cold though…

What did Lehman’s Eurosystem collateral turn out to be worth?

From the Bundesbank: Frankfurt-based Lehman Brothers Bankhaus AG settled its monetary policy transactions with the Eurosystem via the Bundesbank… In September 2008 … liabilities vis-à-vis the Bundesbank stood at €8.5 billion. These liabilities originated exclusively from monetary policy refinancing operations, for which LBB had pledged a total of 33 securities, chiefly highly complex instruments… Since […]

Macroeconomics with Canadian potatoes

There is a nice parable of the money supply here, from Worthwhile Canadian Initiative. Have a nice weekend.

European banks would be less scary if they were in the US

Matt Levine is wrong. He has a post U.S. Banks Would Look Scarier If They Were European Banks which is entirely the wrong way around. Yes, if US banks reported under IAS their balance sheets would be bigger, but that’s because IAS is wrong and US GAAP right. The real problem is HSBC, Deutsche and […]

Take it slowly

Good sense on regulatory change from Charles Whitehead: This Article argues that a better approach to new financial risk regulation is to introduce it in stages… Regulators should be authorized to phase-in or forego additional regulation over time as it becomes clear, through experience, what the likely impact will be… [This] approach relies on real […]

Deflating a Swedish bubble

Sweden has made a countercyclical move. Bloomberg tells us: Sweden’s financial regulator says it’s ready to tighten restrictions on mortgage lending to stop banks feeding household debt loads after a cap imposed during the crisis failed to stem credit growth… The [Swedish] FSA is ready to enforce a cap limiting home loans relative to property […]

Don’t look back

Shearman and Stirling have a useful note on an important case in the UK: The High Court in London has held that clients of insolvent UK brokers are entitled to a claim based on the value of their open positions as at the date of entry into administration or liquidation, rather than based on the […]

Pastel snowscape

I love the delicacy of these early morning colours*. Click for a bigger image. *I’m sure that there is a Pissarro with a similar gray/pink/orange winter colour palate, but the nearest I can find is the Road at Eragny. Any hints appreciated.

The discontents of post-democracy

I have read three things in recent days that make for a dispiriting insight into the state of Western democracy. First, Zoe Williams on the up-coming Eastleigh byelection: There is one matter on which the people of Eastleigh are in complete unison – “this lot,” says [UKIP supporter] Talbot, “I just think they’re in it […]

Countercyclical theory and practice

The Swiss are imposing a 1% countercyclical buffer due to real estate market overheating. This is probably sensible. But it does come in the same week that I read There is little evidence that the credit to GDP gap, the ratio of credit to GDP or credit growth are factors affecting the incidence of crises […]


What’s a credit event? It’s a difficult question. Dealbreaker is exercised on this, or more specifically on the issues with CDS protection holders getting paid on some unusual credit-event-like happenings: There are bonds. You buy CDS that is supposed to pay off if something goes wrong with the bonds. Something goes wrong with the bonds, […]

Just deserts only in Utopia

One of the key messages of this blog in its early years was ‘actuaries have escaped a big dollop of blame for our financial mess that is rightfully theirs’, the argument being in very short form that without their utterly unjustified assumptions about investment growth and life expectancy we would not have nearly as big […]

That Stein speech

The recent speech by Jeremy Stein received a lot of attention for its suggestion that monetary tools might be used in addressing credit market-overheating. That is an interesting argument, but I don’t want to deal with that today. Rather, I want to look at Stein’s comments on collateral transformation: Collateral transformation is best explained with […]

There may be a twitter feed

If the technology Gods are with me, there is now a twitter feed for DEM.

In honour of an angry fish

I hope that none of you are too inconvenienced by Nemo. Here’s a rather chilly river, from a snow storm a little while ago. (Click for a higher res version.) Update. The award for ‘making the best of it’ after heavy snowfall goes to… I’m not approving of that choice of beer, mind you.

No one owns stock

A timely reminder from Matt Levine: nobody owns stock, they just own interests in their brokers’ interests in DTCC’s interest in stock. “Oh I own AAPL shares,” you say, but you don’t; you own like a second derivative on Apple shares. A delta-one derivative but still.

Securitised loans are riskier than retained ones

João Santos reports some interesting research on the NY FED’s blog: We show that during the boom years of securitization, corporate loans that banks securitized at loan origination underperformed similar, unsecuritized loans originated by the same banks. Additionally, we report evidence suggesting that the performance gap reflects looser underwriting standards applied by banks to loans […]

Fixing too big to fail

Previously I have suggested a regulatory capital multiplier that is quadratic in balance sheet size over some threshold as an incentive for too big to fail banks to split themselves up. But now Richard Stallman has something I like even more: tax rates that increase with company size. We tax a company’s gross income, with […]