• News

    The New York Times Holding A Candle For The Triumphant Return Of Tim Geithner

    With just nine months to go in the Beard Era, the time has come for the press to start casting about for a successor. There’s the obvious one: Janet Yellen, Fed vice chairwoman, who has friends and foes, according to the Gray Lady. Apparently, though, she may be a little too worried about getting people […]

    / Apr 25, 2013 at 5:09 PM
  • He should sue. Wait.


    AIG Is Even More Not Owned By The Government

    AIG is in the news today for two very small numbers in connection with much larger numbers. First: AIG is no longer bailed out! I know, you thought that happened like six months ago, and then again three months ago, but today AIG got rid of the last little bits of government ownership, really this […]

    / Mar 1, 2013 at 5:04 PM
  • This has nothing to do with anything but y'know it's Art. And I like it.


    Worst Abuses Of Unregulated Art Market Look A Lot Like Typical Day In Financial Industry

    If you like or hate financial regulation you might take a quick look at today’s front-page New York Times article about how the art market is unregulated. Apparently this leads to terrible things like “chandelier bidding,” where auctioneers get the ball rolling by calling out a few fake bids, as well as conflicts of interest […]

    / Jan 28, 2013 at 11:10 AM
  • This is just a great picture.


    2007 Fed Not As Informed About 2008 As 2013 Critics

    Today the Federal Reserve released transcripts of its 2007 FOMC meetings. The Fed has a policy of releasing these transcripts with a five-year lag. This has various advantages in terms of encouraging candor and allowing the FOMC members to discuss material nonpublic information, etc., but it has the singular disadvantage of making them look like […]

    / Jan 18, 2013 at 4:42 PM
  • Okay let's make that ... rock wall ... thing ... taller.


    Regulators Close Aquarium Door Behind Escaped Whale

    Once upon a time there was a whale, and he had a synthetic credit portfolio, and one day he did terrible terrible things with that synthetic credit portfolio, and the next day he woke up and realized he had lost $5.8 billion, and he was sad. The question for you is: was that a disaster? […]

    / Jan 14, 2013 at 6:33 PM
  • Also, just, is this good or bad? Like on the one hand 5% up-front(ish) for something where you have no(ish) more risk is pretty good. On the other hand 5% edge on a 30-year product where you do a lot of underwriting work and retain some risk for, like, ever, isn't *that* amazing is it?


    Banks Making Up For Bad Old Mortgages By Charging More For Good New Ones

    There are lots of things to worry about in the world and somewhere on the list is the fact that, while yields on agency mortgage-backed securities are really really really low, the rate you’ll pay for a new mortgage is only really low, so a couple of reallys have fallen off a truck somewhere. This […]

    / Dec 3, 2012 at 11:50 AM
  • In happier times.


    Fed’s New Stress Test Rules Come Too Late To Save Vikram Pandit

    My simple model of How To Be A Bank goes something like (1) amass assets that are numerous and volatile enough to make your management rich and happy and (2) give as much money back to shareholders as you can, consistent with (1). If that were your model and you were building your capital plan […]

    / Nov 9, 2012 at 3:13 PM
  • satisfied customer


    Dogs Getting More Attractive Financing Than Houses

    I guess if you read the jobs numbers today you’d say “huh, the economy is getting a little better,” though there are other avenues you could go down. But if you read that Petco Animal Supplies, where the pets go for their animal supplies,1 sold $550 million of Caa1/CCC+ holding-company covenant-lite PIK-toggle notes at an […]

    / Oct 5, 2012 at 1:59 PM
  • "Source: Thomson Reuters/University of Michigan Surveys of Consumers and Bloomberg" is what my source (the SF Fed paper) says


    The Fed Is Worried That You Might Be Worried About Uncertainty

    When you are in the business of buying and selling volatility you can get sort of cynical about whether volatility is a thing, and whether it is appropriate to buy and sell it. We talked earlier today about the fact that if you have a client who doesn’t care about something valuable, then you should […]

    / Sep 17, 2012 at 5:48 PM


    You Misplace 5 Or 6 Billion Dollars And All Of A Sudden People Stop Trusting You To Keep Track Of Your Money

    When JPMorgan’s whale drowned a lot of people asked “where were the regulators?” and that was a silly question, because the people with the most incentive and ability to keep the whale afloat were, in descending order, (1) the whale, (2) the whale’s bosses, (3) the whale’s bosses bosses, (4) the regulators, and (5) the […]

    / Aug 10, 2012 at 2:25 PM
  • This money is just so happy to be hanging out with its friends, the other piles of money.


    Money Market Funds Can Lose Money, Just Not Your Money

    Money market mutual funds are among other things “mutual funds,” meaning that they’re piles of stuff owned by people called “shareholders.” The shareholders ultimately own the stuff, so if you put $100 into a money market fund and it invests it in stuff and the stuff loses half its value then you should only get […]

    / Aug 9, 2012 at 6:16 PM
  • This cash is awake.

    Banks, News

    Shadow Banking Is Just Like Regular Banking, Only Darker

    It feels virtuous every so often to take glance over at the triparty repo market. You get a nice dose of horrified vertigo and then go back to your life and don’t think about it for a while and that always feels better. Now is a good time to get back to it, what with […]

    / Aug 2, 2012 at 1:13 PM
  • bernanke lip


    Ben Bernanke’s Superpowers Include Propping Up Stock Prices, Time Travel

    This paper from David O. Lucca and Emanuel Moench at the New York Fed, concluding that 80% of excess returns to U.S. equities come in the 24 hours before Fed monetary policy announcements, is pretty amazing. Here is the money chart; what does this tell you about the effect of the Fed’s actions on stock […]

    / Jul 11, 2012 at 1:55 PM
  • Please don't leave us Bob

    LIBOR, News

    When You’ve Got A Global Financial Crisis To Worry About, A Few Trillion Dollars Of Fraud Don’t Seem Like That Big A Deal

    The Libor scandal presents a whole range of questions from the very micro “how much did I lose on my mortgage”* through the micro yet fantastically large “what kind of total damages are floating around in lawsuits” past the pseudo-philosophical “how can I ever trust the financial system again”** all the way up to the […]

    / Jul 10, 2012 at 11:28 AM
  • I did a search for "sarcastic clap" and this came up, it's just a coincidence that it's Dimon.

    Banks, News

    Banks Prove That They Are Not Too Big To Fail By Saying “We Can Fail” On A Piece Of Paper, Moving On

    One way you could spend this slow week is reading the “living wills” submitted by a bunch of banks telling regulators how to wind them up if they go under. Don’t, though: they’re about the most boring and least informative things imaginable and I am angry that I read them.* Here for instance is how JPMorgan would wind itself up if left to its own devices**:

    (1) It would just file for bankruptcy and stiff its non-deposit creditors (at the holding company and then, if necessary, at the bank).

    (2) If after stiffing its non-deposit creditors it didn’t have enough money to pay its depositors it would sell its highly attractive businesses in a competitive sale to willing buyers who would pay top dollar.

    This seems wrong, no? And not just in the sense of “in my opinion that would be sort of difficult, what with people freaking out about JPMorgan going bankrupt and its highly attractive businesses having landing it in, um, bankruptcy.” It’s wrong in the sense that it’s the opposite of having a plan for dealing with banks being “too big to fail”: it’s premised on an assumption that the bank is not too big to fail. If JPMorgan runs into trouble that it can’t get out of without taxpayer support, it’ll just file for bankruptcy like anybody else. Depositors will be repaid (if they’re under FDIC limits); non-depositor creditors will be screwed just like they would be on a failure of Second Community Bank of Kenosha.

    / Jul 5, 2012 at 10:40 AM
  • News

    The Fed’s Survey of Wealth and Income Is Out: How’d You Do?

    The Fed released the Survey of Consumer Finances data through 2010 yesterday, and the big story is that median family net worth declined 39% from $126,400 in 2007 to $77,300 in 2010, with median income declining 8% from $49.6K to $45.8K. There is probably something housing-wealth-effect-related to say about this. But my own reaction to […]

    / Jun 12, 2012 at 12:22 PM
  • Banks, News

    Let’s Talk About: Basel III

    The Fed last night unleashed eight zillion pages of Basel III implementation on the universe and I’m tempted to be like “open thread, tell us about your hopes and fears for capital regulation.” So do that! Or don’t because it is super boring, that is also a valid approach. Still I guess we should discuss.

    Starting slow though. Banks have to have capital, meaning that they have to fund some of their assets with things that are long-lived and loss-absorbing, like common equity, rather than with things that have to be paid back soon and at face value. The reason for this is that the rest of banks’ assets are funded with things that we really do want to be paid back soon and at face value, like deposits, and if the value of those assets declines you don’t want those deposits to be wiped out.

    The rules say that you need capital equal to a percentage of your assets. The game is deciding (1) what that percentage is, (2) what is capital (proceeds from selling common stock, and actual earnings, yes, but, like, deferred tax assets?), and (3) how you count assets (you might want more capital to shield you from losses in, say, social media stocks than you would to shield you from losses in Treasury bonds, so regulators use “risk-weighted assets,” so that $1 of corporate bonds counts as $1 of assets, $1 of Treasuries counts as $0 of assets, and $1 of Facebook stock counts as $3 of assets*).

    Anyway, here are the required capital levels:

    / Jun 8, 2012 at 1:17 PM
  • News

    Volcker Rule Would Have Required JPMorgan Whale To Look Himself In The Mirror And Ask “Is This Really What I Want To Do With My Life?”

    It looks like London Whale Bruno Iksil is currently vacationing in a quantum state between fired and not-fired, which I suspect is relatively pleasant compared to, like, trading credit indices, and his immediate supervisors have all moved on to bluer oceans. But layers and layers of people above them continue to have to tug at […]

    / Jun 6, 2012 at 6:45 PM
  • Banks, News

    Treasury Wants To Make Banks Boring Again By Selling CDOs Of Community-Bank Hybrid Capital Instruments

    “Make banking boring again” is a favorite reaction to news that JPMorgan was screwing up its VaR modelling of its attempt to get long gamma with improperly delta-hedged tranches of the CDX.NA.IG.9 and, sure, maybe, but don’t tell Treasury: The U.S. Treasury may pool stakes in small banks bailed out during the financial crisis to […]

    / May 17, 2012 at 3:15 PM
  • Vikula

    Banks, News

    Citi Will Try The Stress Test Again With A $9bn Stock Buyback

    More stress tests, bleargh. I guess the news is that Citi “failed”, though I can’t get all that excited by that because it didn’t exactly “fail” in the sense of now it’s being forced to raise capital / broken up / burned to the ground. Instead it failed assuming it follows the capital plan it submitted to the Fed, which is clearly a capital-lowering rather than capital-raising plan. I ballpark it at $10bn of share repurchases and dividends,* which is … well, it’s pretty big for Citi. So they can just not do that then. Or not do quite as much of that, which seems to be their plan:

    In light of the Federal Reserve’s actions, Citi will submit a revised Capital Plan to the Federal Reserve later this year, as required by the applicable regulations. The Federal Reserve advised Citi that it has no objection to our continuing the existing dividend levels on our preferred stock and our common stock, and we plan to do so, subject to approval by the Board of Directors each quarter. The Federal Reserve also advised that it has no objection to Citi redeeming certain series of outstanding trust preferred securities, as Citi proposed in its Capital Plan.

    We plan to engage further with the Federal Reserve to understand their new stress loss models. We strongly encourage the public release of these models and the associated benchmarks and assumptions. We believe greater transparency in this process will best serve all banking institutions and their shareholders as well as the international regulatory community and market participants, and will encourage a level playing field globally.

    There are at least two ha! moments in that snotty last paragraph. First there’s the fact that the Fed had planned to release the stress test results on Thursday and got gun-jumped by Jamie Dimon. So much for Fed transparency. But also, specifically, as people are all running around suing each other about the Fed maybe kind of encouraging bank CEOs to hide material information from investors, it is odd that the Fed would have the stress test results and sit on them for two days. Imagine the scenario where Jamie Dimon, Vikram Pandit, and the Fed all know that JPM passed and was going to do a largeish buyback, while Citi failed and was going to do a … I guess somewhat smaller buyback – and they didn’t tell anyone from today until Thursday. If you sold JPM to buy C today, wouldn’t you be kind of annoyed?**

    / Mar 13, 2012 at 6:51 PM
  • Banks, News

    TARP Charts!

    The Federal Reserve has this new paper out about TARP that does a bit of highly suggestive eyebrow raising about some banks that shall remain nameless. They start from the awkward fact that TARP wanted everything in one bag but didn’t want the bag to be heavy, or as they put it:

    The conflicted nature of the TARP objectives reflects the tension between different approaches to the financial crisis. While recapitalization was directed at returning banks to a position of financial stability, these banks were also expected to provide macro-stabilization by converting their new cash into risky loans. TARP was a use of public tax-payer funds and some public opinion argued that the funds should be used to make loans, so that the benefit of the funds would be passed through directly to consumers and businesses.

    So you might reasonably ask: were TARP funds locked in the vault to return the recipient banks to financial health, or blown on loans to risky ventures, or other? Well, here is Figure 1 (aggregate commercial and industrial loans from commercial banks in the U.S.):

    So … not loaned then. But that’s not important! The authors are actually looking not primarily at aggregate amounts of loans but at riskiness of loans and here’s what they get:

    / Mar 7, 2012 at 6:06 PM
  • Sheila Bair

    Banks, News

    Sheila Bair’s Cruelty To Banks Included Trying To Get Them To Hang On To $33bn They Didn’t Want

    There are so many good stories in Jesse Eisinger’s piece in ProPublica about how the Fed let banks return capital to shareholders that they somewhat obscure the central non-story: In early November 2010, as the Federal Reserve began to weigh whether the nation’s biggest financial firms were healthy enough to return money to their shareholders, […]

    / Mar 2, 2012 at 2:40 PM
  • News

    Fed Researchers Say Europe Borrowed From China To Buy Crappy American Mortgages

    It’s by now a familiar story of the financial crisis: German and Icelandic bankers keep finding themselves the owners of mortgages on grandmothers’ houses in Kansas, and it’s hard to decide which side is more befuddled by it. The Federal Reserve yesterday went one step further up the value chain, publishing an interesting discussion paper […]

    / Aug 18, 2011 at 1:30 PM
  • News

    FOMC Minutes Out

    FOMC members were split on balancing the potential need for more monetary stimulus against inflation fears, with most members viewing current inflation levels as temporary and driven by energy prices. The minutes sum up the debate on additional easing:

    / Jul 12, 2011 at 3:01 PM
  • News

    Bernanke to be Audited

    The Senate just voted 96-0 to impose a one-time audit of the Federal Reserve’s emergency actions during and after the financial crisis. Senate Backs One-Time Audit of Fed’s Bailout Role [NYT]

    / May 11, 2010 at 1:00 PM
  • News

    Fed Moves To Stamp Out Conflicts Of Interest, Interest In Regional Directorships

    Remember that whole nasty incident with former New York Fed Chairman Stephen Friedman? The Fed sure does. And it’s taking steps to make sure no one on the boards of its 12 regional banks can have those annoying perceived conflicts of interest, because the public gets really pissed off when a bank you’re bailing out […]

    / Nov 25, 2009 at 1:30 PM
  • News

    It’s International Save The Stimuli Day

    The recession may be over, but that doesn’t mean governments should stop pouring trillions into their economies. A pair of policymakers from both sides of the Atlantic want to keep those stimulus dollars (and euros and pounds) rolling. James Bullard, the St. Louis Fed president who’s had an awful lot to say these days, wants […]

    / Nov 23, 2009 at 11:18 AM
  • News

    Hold Your Horses

    Put down the emasculators, Chris Dodd. Your plan to geld Ben Bernanke just hit a serious roadblock. President Barack Obama sent out some of his lesser minions to make clear he wants his Federal Reserve to remain virile and whole, whether or not it’s an “abysmal failure” as a bank regulator. While Dodd says his […]

    / Nov 13, 2009 at 5:06 PM

Our Sites

  • Above the Law
  • How Appealing
  • ATL Redline
  • Breaking Defense
  • Breaking Energy
  • Breaking Gov
  • Dealbreaker
  • Fashonista