Morgan Stanley bows to the inevitable

Or so it seems. The WSJ tells us: Morgan Stanley has told investors that its under-performing fixed-income unit will have to be a lot smaller than rivals’ businesses in order to earn decent profits. The shift, disclosed by a senior executive at a dinner earlier this month, marks a twist in Morgan Stanley’s decade-long struggle […]

Going loopy with the SEC

Thanks to Matt Levine, I have this lovely story of the Facebook IPO on Nasdaq. Matt points us at the SEC account of that dismal day for NASDAQ here. The first few pages are hilarious: In a typical IPO on NASDAQ, shares of the issuer are sold by the IPO’s underwriters to participating purchasers at […]

May graffiti

The law and the window*

Laws are only imperfectly aligned with public morality. We (nearly) all agree, for instance, that theft is wrong, but a substantial number of people don’t see speeding as immoral. Moreover, even when something is legal, it isn’t necessarily moral. Indeed, as Louise Weinberg points out, there is in US law “a rather large legacy of […]


Single Dealer Platforms asks a good question: Has CFTC given too much power to SEFs? … swaps that are subject to clearing, will be required to trade on a SEF or DCM, except where no SEF or DCM makes the swap ‘available to trade’… the SEF or DCM can ‘self determine’ that the swap is […]

Should the state care about savers?

I have been perhaps too focussed in this past on the potential influence on monetary policy of savers: issuing linkers rather than fixed rate bonds, for instance, to facilitate better ALM for pension funds. Suitable government debt can, after all, substitute for some of the equity component of a traditional pension fund. Reading the ever-excellent […]

If taxing equity-holder-owned corporations does not work, what does?

David Cameron has finally* written to the Crown Dependencies asking them to buck up their game on international tax. I don’t have high hopes. Many of these places have based their business models on secrecy, tax avoidance, and perhaps even the whiff of money laundering. Asking them to help the UK get its rightful tax […]

Dennett’s seven tips

The Guardian has an instructive article discussing Daniel Dennett’s seven tips for better thinking. Here’s a short summary (of their summary). USE YOUR MISTAKES. Try to acquire the weird practice of savouring your mistakes, delighting in uncovering the strange quirks that led you astray. RESPECT YOUR OPPONENT. Attempt to re-express your target’s position clearly, vividly […]

Saturday Sea

(Click to make it bigger, or if your browser does not support embedded colour profiles.)

Lehman, five years later

Matt Levine has an excellent dealbreaker post which in turn references a Bloomberg story on Lehman’s derivatives. The facts first: Almost five years after Lehman Brothers filed for bankruptcy and set off the global financial crisis, managers of the bank’s estate are demanding millions of dollars from retirement homes, colleges and hospitals… [For instance] The […]

New CDS trigger event proposed – at last

From IFR: ISDA is consulting on a proposal to add another credit event… The proposed criteria for the credit event would be a government authority using a restructuring and resolution law to write down, expropriate, convert, exchange or transfer a financial institution’s debt obligations… the rules would allow written down bonds to be delivered into […]

The defaulter does not pays without CVA

The slogan ‘defaulter pays’ is often used of collateral and other credit support arrangements. It’s seductive: after all, shouldn’t the defaulter pay for the damage their default might do to another party? Yes they should – but they don’t. Instead, as Mark Roe points out in a new article (although the point is hardly new), […]

Junk ratings

Bloomberg reproduces the following chart of Moody’s ratings of major banks with and without government support. You could read this at face value: the claim would then be that an unsupported BofA and Citi are junk. But really, is this credible? The BB+ one year default rate averages, depending on period, somewhere around 1 – […]

The Co-op suggests – co-operative interest?

Listening to the sad news about the Co-op bank today on the radio, it occurred to me to wonder if with-profits banking might work for them. Let me explain. Some banks, the Co-op included, need more equity. Indeed, if Brown-Vitter get their way, all big banks will need a lot more equity. No one wants […]

The second phase of asset price bubbles…

…is often buying on margin. So we can worry a little when Pragmatic Capitalism shows us this, courtesy of Orcam:

EMIR for corporates

Herbert Smith has a nice summary here (HT the OTC space). What I for one had not realized is that from September 2013, EU parties with more than 500 trades, of whatever status, must establish procedures for Portfolio Reconciliation and they must at least semi-annually consider Portfolio Compression and provide valid explanations if they choose […]

Giraffe diving

It’s a holiday here in the UK so I feel the need to give you something a little lighter than usual. And what could be lighter than giraffes leaping into the air and executing perfect dives?

Tarullo prudently prepares

FED governor Daniel Tarullo gave an interesting speech recently; interesting because he is clearly trying to set out a regulatory agenda while uncomfortably aware that legislators, if anything like Brown Vitter is passed, might pull the rug out from under him. He therefore has to tread delicately. That doesn’t stop him from pushing the FED’s […]

The light has arrived…

…even in the forest. It’s a little creepy though.

Choice Italian insults

One has to celebrate the creativity of the man. From a single paragraph description of the new Italian government on Beppe Grillo’s website we find ministers described variously as a talking mannequin the defrosted stock-fish the psycho dwarf the internationalist and frequenter of Bildeberg And most cutting of all the nephew of his uncle, the […]