• Banks

    Gary Gensler Going Down Swinging

    International regulatory amity, bipartisan concerns and common sense be damned: The (probably) outgoing CFTC chair is going to see to it that these swaps-trading rules go into effect next month, damn the consequences.

    / Jun 21, 2013 at 5:18 PM
  • It's been too long, Googly-Eyed Pile Of Money.

    Banks, News

    Who Would You Rather Trust: Bankers Or Regulators?

    A simple model of banking regulation and, like, counter-regulation goes something like this: Regulators are conservative and dumb, and want to safeguard banks from bad risks even at the cost of preventing good risks, Bankers are aggressive and smart, and want to take lots of good risks even at the cost of taking some bad […]

    / May 7, 2013 at 12:11 PM
  • Tarullo does surprisingly well on Google Images.


    Fed Governor Wants Everyone To Remember That It’s Not Just Banks That Are Too Big To Fail

    One reason that a lot of people are enamored with the Brown-Vitter approach to bank regulation is that it’s very simple, and everyone deep down sort of thinks that the simple answer has to be better than the complicated one. “You don’t need risk-based capital or stress tests or liquidity coverage ratios or VaR models […]

    / May 3, 2013 at 3:23 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


    One Part Of Goldman’s Principal Investing Group Caught Doing Principal Investing

    If you’re a true believer in vulgar Volckerism – “banks shouldn’t be allowed to make bets with their own money” – then you have an inexhaustible source of things to get mad about, since the only thing banks do is make bets with their own money, for some values of “bets” and “own.” Bloomberg’s Max […]

    / Jan 8, 2013 at 4:57 PM
  • more cow


    Turns Out Global Regulators Are Fine WIth Using Credit Ratings To Decide What Banks Can Do

    It’s popular to say that financial markets and regulators have extremely short memories and so let’s say it about these new Basel liquidity coverage ratio rule changes out today. But not in an annoying sneery way. I mean, in an annoying sneery way, but not the obvious one. The story is that among the post-2008 […]

    / Jan 7, 2013 at 4:53 PM
  • Partnoy & Eisinger make a big deal of the stagecoach. This one seems to come from an official WFC web page.


    Turns Out Wells Fargo Doesn’t Just Keep Your Deposits In A Stagecoach Full Of Gold Ingots

    There’s a huge article by Frank Partnoy and Jesse Eisinger in the Atlantic today about how banks are so horribly complicated that even sophisticated investors, meaning basically Bill Ackman, don’t trust them any more. I suppose this provides an excuse for me to trot out a toy theory that’s been congealing in my head, which […]

    / Jan 3, 2013 at 2:03 PM
  • Honestly she has nothing to do with this at all, but she's (1) European and (2) kind of fun to look at.


    On The Bright Side, European Banking Bonuses May Be A Lot More Predictable

    It’s probably good news that “European Union finance ministers reached a landmark deal early Thursday that would bring many of the continent’s banks under a single supervisor,” but of course it wouldn’t be Europe without some self-evidently bad ideas for financial regulation, so today we also get this: Bankers’ bonuses in Europe would be capped […]

    / Dec 13, 2012 at 1:26 PM
  • Wait, this isn't my Intrade account, this is my 401(k).


    Now You Can’t Buy Your Crude Oil Futures In $10 Increments On Intrade

    Like a lot of people I got an email yesterday telling me to close my Intrade account. This will not be a problem for me because: Now I know it looks like I was terrible at predicting the election, but the real explanation is of course that I was astutely predicting the end of Intrade […]

    / Nov 27, 2012 at 11:13 AM
  • Mary Schapiro: probably not working at Goldman Sachs soon, but who knows?


    SEC Lawyers Annoy Their Way Into The Hearts Of Private-Sector Employers

    So let’s say you’re a bank and, redundantly, you are in trouble with the SEC. And you want to hire a new lawyer to get you out of that trouble, because your old lawyers got you into it. You decide, sensibly, to hire a lawyer directly from the SEC, both because those lawyers have valuable […]

    / Aug 6, 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

    Market Volatility Soon To Be Just A Distant Memory

    So, um, news today, not great, huh? So no surprise that stocks are down. It’s okay though, since the SEC has cooked up a cure: The Securities and Exchange Commission has approved two proposals submitted by the national securities exchanges and the Financial Industry Regulatory Authority (FINRA) that are designed to address extraordinary volatility in […]

    / Jun 1, 2012 at 1:55 PM
  • News

    Reducing High Frequency Trading By Regulating It Less

    Market microstructure is a thing that I don’t really understand and that seems daunting to me so I’ll pass this along as tentatively as possible, but: I thought this piece was really good.* Again, not my area, so if you disagree just get furious at me in the comments, but I thought it might be […]

    / May 24, 2012 at 12:37 PM
  • Banks, News

    Whom Should We Prevent From Blowing Themselves Up, And Why?

    I might have enjoyed this Andrew Ross Sorkin column, about how bringing back Glass-Steagall would have prevented neither the financial crisis nor l’affaire Whaledemort, more than most people.* Yes, the argument is pretty silly – like saying we shouldn’t have speed limits because they probably wouldn’t have prevented the Columbine massacre – but it contains […]

    / May 22, 2012 at 4:16 PM
  • Banks, News

    Europe Will Try To Make Its Banks’ Creditors Play Nicer With Each Other

    Today the EU issued a discussion paper about how it plans to forcibly write down the debts of shaky banks if it ever comes to that, which for some reason is called a “bail-in,” I guess in the sense that the bailing is coming from creditors who are already in the bank’s credit rather than […]

    / Mar 30, 2012 at 6:28 PM
  • Founder and Managing Partner of T2 Partners LLC Whitney Tilson speaks at the Reuters Investment Summit in New York

    Hedge Funds

    Which Hedge Fund Manager’s TV Commercial Are You Most Looking Forward To?

    I take back whatever mildly negative things I may have said about the JOBS Act, since apparently in addition to making it easier for small startups to rip off investors, it will also make it easier for small hedge funds to rip off investors:

    President Barack Obama’s securities-law rollback known as the Jobs Act, expected to be signed into law next month, also contains a provision that would lift the ban on the marketing of private funds, potentially giving hedge funds, private-equity funds and others greater freedom in marketing their offerings to the public, industry attorneys said.

    Currently, private funds are allowed only to market to a small group of investors: those with whom they have pre-existing, “substantive” relationships. Under the bill, hedge funds could start sponsoring sporting events and begin advertising their funds in print, the lawyers said.

    The shift is “significant” and could provide a boost to small hedge funds trying to raise capital but that lack brand-name recognition or wide contacts, says Steve Nadel, a hedge-fund lawyer with Seward & Kissel LLP in New York; larger, more established firms sometimes have investors waiting to invest.

    The Journal goes on to talk about the free speech aspect of this, and I did that too, so yay, now you can tell strangers how awesome your hedge fund is, AND OF COURSE YOU WILL DO JUST THAT, and you probably are already and are surprised to learn that it’s illegal*? Also, and more importantly, soon you will be able to give people money to induce them to tell strangers on the internet how awesome your hedge fund is, so, y’know, consider giving us some of that money, because we like money.

    / Mar 28, 2012 at 6:42 PM
  • News

    Happy Volcker Day!

    I guess this is a thing? Today is the last day to submit comments on the Volcker Rule so hurry!* No less than Paul Volcker himself was roused from 25 years of slumber to submit his own comment, and while he was up he laid a gleeful smackdown on European governments. You may recall that […]

    / Feb 13, 2012 at 4:07 PM
  • News

    Jamie Dimon Will Not Have His Employees’ Balls Examined Every Time They Want To Make A Trade, No Matter How Bad Paul Volcker Wants It

    I understand the goal to make sure these companies don’t take huge bets with their balance sheets. But market making? Just like these stores down the street, when they buy a lot of polka dot dresses, they hope they’re going to sell, they’re making a judgement call. They may be wrong! So protecting the system […]

    / Feb 13, 2012 at 4:02 PM
  • Banks, News

    Volcker Rule Will Be Bad For European Governments, Say European Government Ministers Who Were Told By Banks That The Volcker Rule Would Be Bad For Them

    I’ve been pretty skeptical of the whole Volcker Rule thing because I don’t really understand the conceptual division between “making bets with your own money” and “market making,” and I’ve been gratified to see that paid financial industry mouthpieces are on the same page. Now it’s nice to see unpaid mouthpieces agreeing too: Yet finance […]

    / Jan 31, 2012 at 12:29 PM
  • News, Private Equity

    Steve Schwarzman Is Not Above Shuffling A Few Pieces Of Paper To Keep Nosy Regulators In The Dark About His Personal Fortune

    Unlike some private equity famewhores, Steve Schwarzman is a modest, retiring type who shuns all ostentation and just wants to be left alone with his crabs. So it’s not surprising that he doesn’t want those gossip hounds at the Fed all up in his personal finances, and that he’s willing to go to extreme lengths […]

    / Jan 20, 2012 at 1:49 PM
  • News, Regulation

    Volcker Rule Is Bad For Securities Industry, Says Guy Paid By Securities Industry To Say Volcker Rule Is Bad For Securities Industry*

    We’ve talked a bit before about the Volcker Rule and how it’s going to have creepy unintended consequences because it is really hard to distinguish “market making,” which is what bank-broker-dealers are supposed to do, from “proprietary trading,” which is evil and destroyed the world. Today we have an excuse to talk about it again […]

    / Jan 17, 2012 at 6:06 PM
  • Banks

    Not That He’s Volunteering

    JPMorgan earnings this morning were a bit disappointing, with investment banking revenue down 30% y/o/y in what may be a bad sign for the rest of the industry, but the Jamie & Doug In The Morning Show remains finance’s top-rated program in its time slot and it did not disappoint today. This is in part […]

    / Jan 13, 2012 at 12:43 PM
  • Banks, News

    But What Would We Do For Entertainment If Banks Were Boring?

    Here is a standard set of moves in talking about bank riskiness: 1. Banks take too many bad risks! 2. Regulators should only let them take good risks! 3. All better now! There is, like, a problem there, because actually bankers tend to have compensation structures that are more directly tied to their success, and […]

    / Jan 4, 2012 at 4:19 PM
  • Banks, News

    What We Talk About When We Talk About Bank Capital

    Boy, those new Fed regulations, they are long. They have lots of things. Like stress tests, and liquidity buffers, and the thing where you can’t have credit exposure of more than 10% of your regulatory capital to one bank.* But the thing that they mostly have are capital requirements, which are kind of not that […]

    / Dec 21, 2011 at 4:27 PM
  • News

    Maybe Banks Should Be Rewarded For Making More Bad Loans?

    Ooh look a chart: That’s from this quite punchy paper by Patrick Slovik of the economics department at the OECD. It shows you that, in 1992, big banks had risk-weighted assets, which determine how much capital they’re required to have, of over 65% of their total assets, which measures how much lending and investing and […]

    / Dec 14, 2011 at 3:26 PM
  • News

    Sheila Bair Doesn’t Know What The Volcker Rule Prohibits

    Sheila Bair, former head of the FDIC and cartoon-klutz-villain of Too Big to Fail, comes in for the occasional gentle ribbing on Wall Street, and her column in Fortune today is well set up for another round of gentle ribbing, which I will get to in just a minute, so you might think that that […]

    / Dec 9, 2011 at 2:35 PM
  • News

    CFTC Makes Sure That MF Global Won’t Be Able To Lose Any Customer Money Other Than The $1.2bn It Already Lost

    I find the “MF Global rule” confusing, and to understand it I have to start with some very basic basics. Let’s say I put money in my account at MF Global, which I want to hold as cash or a cash-like thing, because I need it to provide margin for my futures positions. That money […]

    / Dec 6, 2011 at 3:32 PM
  • Banks, News

    NY Fed Researchers Want To Make You Mark Your Potential Bonus Clawback To Market

    The Fed has three basic functions: central banking, bank regulation, and calling down police brutality on Occupy Wall Street protesters. While the first function is getting all the attention today, the New York Fed’s blog is spending some time on the second. Specifically, they’re trying to figure out how bankers should get paid. Optimal design […]

    / Nov 30, 2011 at 11:16 AM

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