The Quiet Coop by Simon Johnson

[RBM]

The Quiet Coop (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.)

The author:
Simon Johnson, a professor at MIT’s Sloan School of Management, was the chief economist at the International Monetary Fund during 2007 and 2008. He blogs about the financial crisis at baselinescenario.com, along with James Kwak, who also contributed to this essay.

The article:
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

This is in a broad base view, by someone who was 'in the business' of which exemplifies the US financial position at this time.

It offers further corroboration beyond that of one person, such as George Soros, that there is a problem.

[Indy]

Good read. As a student of international econ and finance, emerging market crisis, etc, I've often encountered the paradigm as described as well. Financial regulation was at one point defined as financial 'repression', with the negative connotation associated with it. The interlinkages between Goldman Sachs, Citigroup and the like, and public policy making had astounded me before. The frame of reference of those individuals has to be somewhat out of whack with the real economic interests of taxpayers and the country.

The urgency by which measures have been taking has undoubtedly led to huge benefits for exactly those people that were responsible for the trouble in the first place. The scale of it, the countless billions, make this a real systemic problem, it is not just a populist cry against rich bankers. The incentives have been disastrously misaligned. I don't believe in the conspiracy theories too much; it was far more incompetence than malice. But there have been some screwed up deals these past months.

[RBM]

@ Indy

As a layman, to hear Johnson claim that emerging markets behaviors are being exhibited in the US financial system is remarkable to me.

Malice - a legal term describing the intent to harm. I think a good lawyer could parse this for a conviction.

Check this out from Naked Capitalism (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.):

For those to whom this is merely a lot of mumbo-jumbo, let me explain in layman's terms:
AIG, knowing it would need to ask for much more capital from the Treasury imminently, decided to throw in the towel, and gifted major bank counter-parties with trades which were egregiously profitable to the banks, and even more egregiously money losing to the U.S. taxpayers, who had to dump more and more cash into AIG, without having the U.S. Treasury Secretary Tim Geithner disclose the real extent of this, for lack of a better word, fraudulent scam.

With your background I'm feel confident you can slog through the mumbo-jumbo that precedes this excerpt.

Malice ?? I don't think a lawyer would have to work to hard to make a case.

[qwerty123]

Malice ?? I don't think a lawyer would have to work to hard to make a case.




should not have to work hard... in reality... good luck

The US was founded where there is a benevolent government which fears the people (some reference to 2nd amendment), I don't want to submit to the fear mongers, but when you look at all that goes on (financially, and torture, and creepy government secrets), I'm increasingly afraid of the government.

Just look forward and don't ask questions..

[RBM]

should not have to work hard... in reality... good luck

The US was founded where there is a benevolent government which fears the people (some reference to 2nd amendment), I don't want to submit to the fear mongers, but when you look at all that goes on (financially, and torture, and creepy government secrets), I'm increasingly afraid of the government.

Just look forward and don't ask questions..


LOL ! Right after I posted that I wondered WHERE such a lawyer could POSSIBLY be found ?

Maybe in New York ?

NY pension advisers charged in kickback scheme: (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.)

NEW YORK (Reuters) - The former New York state comptroller's top fund-raiser and pension investment chief on Thursday were arrested and charged with taking millions of dollars in kickbacks from money manager firms.

More than 20 investment deals made by the state's $122 billion pension fund were "tainted" by the kickbacks, and five of the investments involved The Carlyle Group, one of the world's largest private equity funds, New York Attorney General Andrew Cuomo said.

Henry Morris, who was the fund-raiser for former comptroller Alan Hevesi, and David Loglisci, who was the state pension fund's top investment officer, were charged with securities fraud, bribery, money laundering and other crimes in a 123-count indictment.

The two men were also charged in a civil complaint by the U.S. Securities and Exchange Commission.

[Indy]

@ Indy

As a layman, to hear Johnson claim that emerging markets behaviors are being exhibited in the US financial system is remarkable to me. .

In the article it emphasises the agency problems in the ruling political-financial nexus, these happen everywhere. Public choice theory has useful things to say about this. A problem is that many of those guys are (still) considered the most capable people of solving this mess. The people who really know how those financial products work, how it affects the system, how to fix the system, would more than likely work in an investment-bank, rather than at the Treasury. It might be hard to people that aren't somehow connected to these investmentbanks, yet have the experience to fix the problem. But then again, that was the whole point in having investmentfirms regulate themselves and that certainly did not work.


Check this out from Naked Capitalism (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.)

Damn Chinese government, not letting me read interesting economic sites :thumbsdown:
Cannot even access Youtube these days... oh well.

!Stop Chinese Internet censorsh........ :ninja: (suddenly a masked SWAT team invades my appartment, drags me to be waterboarded) :faint:

[RBM]

@ Indy

Sorry, I didn't catch your location - at first.

The preceding text:

Submitted by Tyler Durden, publisher of Zero Hedge

Zero Hedge is rarely speechless, but after receiving this email from a correlation desk trader, we simply had to hold a moment of silence for the phenomenal scam that continues unabated in the financial markets, and now has the full oversight and blessing of the U.S. government, which in turns keeps on duping U.S. taxpayers into believing everything is good.

I present the insider perspective of trader Lou (who wishes to remain anonymous) in its entirety:

"AIG-FP accumulated thousands of trades over the years, all essentially consisted of selling default protection. This was done via a number of structures with really only one criteria - rated at least AA- (if it fit these criteria all OK - as far as I could tell credit assessment was completely outsourced to the rating agencies).

Main products they took on were always levered credit risk, credit-linked notes (collateral and CDS both had to be at least AA-, no joint probability stuff) and AAA or super senior portfolio swaps. Portfolio swaps were either corporate synthetic CDO or asset backed, effectively sub-prime wraps (as per news stories regarding GS and DB).

Credit linked notes are done through single-name CDS desks and a cash desk (for the note collateral) and the portfolio swaps are done through the correlation desk. These trades were done is almost every jurisdiction - wherever AIG had an office they had IB salespeople covering them.

Correlation desks just back their risk out via the single names desks - the correlation desk manages the delta/gamma according to their correlation model. So correlation desks carry model risk but very little market risk.

I was mostly involved in the corporate synthetic CDO side.

During Jan/Feb AIG would call up and just ask for complete unwind prices from the credit desk in the relevant jurisdiction. These were not single deal unwinds as are typically more price transparent - these were whole portfolio unwinds. The size of these unwinds were enormous, the quotes I have heard were "we have never done as big or as profitable trades - ever".

As these trades are unwound, the correlation desk needs to unwind the single name risk through the single name desks - effectively the AIG-FP unwinds caused massive single name protection buying. This caused single name credit to massively underperform equities - run a chart from say last September to current of say S&P 500 and Itraxx - credit has underperformed massively. This is largely due to AIG-FP unwinds.

I can only guess/extrapolate what sort of PnL this put into the major global banks (both correlation and single names desks) during this period. Allowing for significant reserve release and trade PnL, I think for the big correlation players this could have easily been US$1-2bn per bank in this period."

[Indy]

I found the article by googling parts of the text, on a Ron Paul forum actually. They seem to be naturally focused on finding conspiracy related things, I guess.

This could have been used as another way to recapitalise banks, but without any oversight, discussion or public scrutiny and make them look more attractive. Or better yet, to put make-up on a pig.

[Visum]

In the article it emphasises the agency problems in the ruling political-financial nexus, these happen everywhere. Public choice theory has useful things to say about this. A problem is that many of those guys are (still) considered the most capable people of solving this mess. The people who really know how those financial products work, how it affects the system, how to fix the system, would more than likely work in an investment-bank, rather than at the Treasury. It might be hard to people that aren't somehow connected to these investmentbanks, yet have the experience to fix the problem. But then again, that was the whole point in having investmentfirms regulate themselves and that certainly did not work.


Check this out from Naked Capitalism (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.)

Damn Chinese government, not letting me read interesting economic sites :thumbsdown:
Cannot even access Youtube these days... oh well.

!Stop Chinese Internet censorsh........ :ninja: (suddenly a masked SWAT team invades my appartment, drags me to be waterboarded) :faint:

Have you heard of Xerobank (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.)? Quick explanation (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.)

I have no idea if it will work well, or actually cause that SWAT team to visit, so at your own risk.





Visum added to this post, 33 minutes and 12 seconds later...

The ISDA allowing OTC order manipulation is outrageous. It makes my gold thread palatable.