rc whalen's blog
Bernanke Fed Drives Deflation With Zero Rate Policy
Submitted by rc whalen on 08/29/2010 16:36 -0500While many economists are worried about whether or not the Fed should increase quantitative easing, my concern has been and remains the toxic effect of the Fed’s intervention on what remains of the private financial markets. Fed officials and members of the Obama Administration wring their hands over individuals and companies saving too much, but perhaps they should ask why. It starts with zero interest rate policy.
US Banks on the Mend? Q1 2010 Bank Stress Index Results
Submitted by rc whalen on 05/10/2010 10:15 -0500Preliminary ratings for Q1 2010 for US banking institutions from the professional version of The IRA Bank Monitor are rolling in at a good pace. With 7,240 bank units reporting, the preliminary aggregate Bank Stress Index (BSI) rating is currently just 5 vs. 21.5 in Q4 2009. The benchmark year is 1995 which equals "1" on the BSI. This suggests that the US banking industry is officially on the mend in terms of building reserves, but the credit cleanup continues even as new events climb over the horizon.
OTC Derivatives and the "Buffett Amendment" (Update 1)
Submitted by rc whalen on 04/26/2010 20:30 -0500Now we know why BRK, CAT and the other big corporates came oozing out of the woodwork last year to defend the OTC derivatives market. JPMorgan (JPM), Goldman Sachs (GS) and the other OTC dealers let Warren Buffett's Berkshire Hathaway (BRK) and the other "AAA" corporates play at the roulette table w/o any chips. Isn't this the man who called OTC derivatives weapons of mass destruction?
Why is the President's Working Group Oppossing the FDIC Reform Proposals on Residential Mortgage Securitization by Banks?
Submitted by rc whalen on 03/14/2010 20:42 -0500This week in The IRA, we remind one and all about the impending FDIC rule-making process on bank securitizations. Then we ponder whether zombie love won't bring together Barclays Bank and Citigroup in an unholy but politically fortuitous union. And we feature an interview with derivatives market veteran Bill King about OTC derivatives and earnings fraud. The rant on the President's Working Group follows below. -- Chris
The Newest Scam from Wall Street: Investing in Private Equity Funds that Acquire Failed Banks
Submitted by rc whalen on 03/02/2010 09:09 -0500There is a great buzz in the marketplace about new private equity funds being raised to invest in failed banks. The story goes something like this: We are organizing a fund led by the former heads of federal regulatory agencies with big time connections in Washington. These DC players are going to get a front-row seat to play in the sales process for failed banks being run by the FDIC. These funds claim that FDIC Chairman Sheila Bair is giving assets away for nothing and we are all going to make a lot of money in that old fashioned Washington way, namely slopping at the public trough. Unfortunately none of the above is true and many of these "offerings" are misleading or fraudulent.
Financial Economics, Deregulation and OTC Derivatives: Interview with Yves Smith of Naked Capitalism
Submitted by rc whalen on 02/22/2010 07:33 -0500We ran an interview with our friend Yves Smith of Naked Capitalism today. She has done an excellent job of describing how the intellectual ghetto that was once financial economics has helped to destroy the world of investing and involuntarily turn us all into day traders. The full text follows below. -- Chris
Audio File: Speech to New York Quantitative Finance Seminar: "Zombie Banks and The Real Economy: Are the Two Compatible?"
Submitted by rc whalen on 02/17/2010 09:46 -0500I thought the folks at ZH who could not attend last month's talk by yours truly sponsored by the Columbia University Center for Financial Engineering & NYU Courrant Institute of Mathematical Sciences would like to listen to the audio file. The link below downloads an 8MB WAV file, so don't try to listen on your PDA/cell phone.
OTC Derivatives: Is the DTCC Too Big To Fail?
Submitted by rc whalen on 02/09/2010 08:06 -0500At our firm we frequently receive calls from clients and readers asking about the likelihood of the passage by the Congress in Washington of reform legislation regarding over-the-counter (OTC) derivatives, financial regulation and/or mortgage securitization. Our answer is small to none given the political trends and the state of the lobbies in Washington, most specifically the large bank lobby that protects the Sell Side monopoly in OTC derivatives and securities. The fact that Senator Richard Shelby (R-AL) is still apparently not comfortable with the entirely watered down House proposal to reform OTC derivatives, for example, tells you all you need to know. Stick a fork in it.
CIBC Covered Bond Deal Terms
Submitted by rc whalen on 02/04/2010 18:35 -0500The first covered bond deal of 2010 is very simple in its terms and still, alas, a 144A deal. Notice four ratings firms were retained to provide ratings.
2010 Financial Services University (FSU) Educational Series – February 4 & 5, 2010
Submitted by rc whalen on 02/03/2010 13:09 -0500Just when all seemed hopeless, the good people at the Financial Services Roundtable are here to educate one and all. Members of the ZeroHedge community should all attend. Who Should Attend? All new congressional staffers and Capitol Hill staffers who have recently added financial service issues to their portfolio, as well as, the seasoned staffer and who wants to learn more about the major areas of importance impacting our nation and economy. Hurrah! RSVP for one or the entire FSU educational series contact Vince Randulov vince@fsround.org or 202.589.2421. Questions may be directed to Brenda Bowen brenda@fsround.org or 202.589.2420.
Political Risk: The Bernanke Nomination and the Return of American Populism
Submitted by rc whalen on 01/27/2010 21:58 -0500Bottom line: A "yes" vote for Chairman Bernanke raises the likelihood of defeat for every member of the Senate standing for election in 2010 and 2012. And in any event, the rising tide of popular unhappiness with Washington and Wall Street promises to remake the American political landscape in a way not seen in the post WW II era. The comfortable assumption of stability in American political life is about to be replaced by instability and change, but that is what democracy is all about.
Bernanke Nomination Still Not A Done Deal, Say GOP, Democratic Sources on Capitol Hill
Submitted by rc whalen on 01/25/2010 11:26 -0500I thought the readers of ZeroHedge would like to see excerpts from the note we put out for clients of the IRA Advisory Service earlier today. Despite the confidence of Treasury Secretary Tim Geither, who is well known for his keen political instincts, the Bernanke nomination is far from a done deal.
Is Paul Volcker the Father of "Too Big To Fail?"
Submitted by rc whalen on 01/25/2010 07:26 -0500The difference between the world when Volcker was Fed chairman and today is the end of Glass Steagall. Instead of bailing out simple lenders, the Fed now faces the task of managing and saving giant securities and securitization platforms that are too big to manage in a rational fashion. Don't fool yourself into thinking that JPM chief Jamie Dimon or any CEO of a TBTF bank has the slightest idea what is really happening within their enterprise.
The Volcker Rule & AIG: It’s Not About Prop Trading
Submitted by rc whalen on 01/21/2010 16:27 -0500If you accept situations such as AIG and other cases where Buy Side investors (and, indirectly, the US taxpayer) were defrauded through the use of OTC derivatives and/or structured assets as the archetype “problems” that require a public policy response, then the Volcker Rule does not address the problem. The basic issue that still has not been addressed by Congress and most federal regulators (other than the FDIC with its proposed rule on bank securitizations) is how to fix the markets for OTC derivatives and structured finance vehicles.
Option Adjusted Duration and the VIX: Are You Really Hedged?
Submitted by rc whalen on 01/06/2010 18:47 -0500Watching the VIX hit a 16-month low, I am beginning to believe that Uncle Ben and the other members of the FOMC have created a 1980s style interest rate trap for banks and other leveraged fixed income investors via the Fed's asset purchase program. It's all about OAD, if you know why I mean. Unfortunately, nobody on the FOMC does.


