In the context of proposed legislation to tax Wall Street bonuses at 90%, Goldman Sachs head Lloyd Blankfein is reportedly going to return $10b in TARP funds his firm received. Another unnamed Goldman exec said “It’s just impossible to run our business in this environment,” which is an understatement given the shortsighted proposal for such
Credit Default Swaps
Remember when the heat of the credit crisis was the worst and AIG just needed time to sell assets? That plan is now being scrapped according to Bloomberg: AIG said Sept. 16 it will sell assets to repay an $85 billion loan from the Federal Reserve. Liddy has now concluded that plan won’t work, said
Since Mary Shapiro was named head of the SEC and Gary Gensler was named head of the CFTC, speculation has been that the two groups would be combined. The SEC has taken hits for everything from Lehman to Bear to Madoff. Meanwhile, the CFTC was “modernized” under the leadership of then Senator Phil Gramm, if
Obama has picked Mary Shapiro to succeed Chris Cox as head of the troubled SEC. The securities industry regulator has taken hits over lax oversight of Lehman Brothers and Bear Stearns and also is currently getting slammed for missing (or perhaps ignoring) the $50 billion in fraud committed by Bernard Madoff. Shapiro is now the
In the midst of a crisis, there’s rarely time to question what caused the crisis. But it’s useful to know who helped get markets to where they are so we can avoid mistakes as we get through the triage and begin formulating policy solutions. Below are two stories that discuss a key player in the
Top hedge fund executives testified about the financial crisis before the House Committee on Oversight and Government Reform today, summarized by the FT. The execs didn’t fight the need for regulation but warned against excessive regulation. Standard, and justified, fare for market participants. It’s always the same thing with financial regulation: you need enough regulation
Back on October 9, AIG added $38b to their $85b Fed loan. Today the government bailout of AIG has been completely restructured and greatly increased. It involves help from the Treasury under the Troubled Asset Relief Program, and also help from the Fed that comes in multiple tiers. Most notably, the Fed’s original loans to
The utterly unregulated $55 trillion market for credit default swaps is getting closer to transparency as regulators are expected to approve a clearing house for the securities during November. The CME and Citadel Investment Group have played a key role in this process by creating an exchange for CDSs, which is a topic we covered
As the Lehman collapse showed us, the market for credit default swaps can wreak havoc on markets, since investment banks and hedge funds were making these markets in private. CDSs are insurance contracts on bonds and other credits that are a $62 trillion market, making it four times larger than the stock market, and utterly
Four days ago, AIG had used $61b of it’s $85b Fed loan to meet cash needs in the short term and buy time for them to sell off some divisions of the company to raise longer-term money and regain some stability. Today, the New York Fed allowed AIG to tap $37.8b for additional short-term liquidity:
Finally CDSs start to make their way into the mainstream press. This video is worth watching for anyone who wants to know more about this. Also click on the credit default swaps tag below for more of our coverage.
The NY Times reports that AIG has used $61B of its $85b Fed loan. And the Financial Times reports that, as they sell divisions to pay back the loan, AIG revenues could be cut in half by asset sales. In mid-September, AIG came under extreme short-term pressure as an untold number of claims on credit
We’ve said before that Gretchen Morgenson of the NY Times is perhaps the only major journalist covering credit default swaps with any level of detail. She’s been covering this issue and this weekend, she continues with a large piece on how AIG got so wound up in the derivatives mess. Worth a read. For some
Back in June, Portfolio.com released tournament brackets where users can vote on who killed the economy. Even though blame can’t rest with a single person or entity, this is a fun tool that’s still on their most-read list. Interestingly, former senator and current UBS investment banking executive Phil Gramm was not even on the list.
On Friday afternoon, Treasury Secretary Henry Paulson briefly outlined his proposal for helping banks move through the credit crisis that began in summer 2007 and flared up significantly in the last 60 days. The proposal says that all Americans are at risk: The financial security of all Americans – their retirement savings, their home values,
Yesterday the Fed and Treasury departments proposed massive financial stability measures, including a short-selling ban on financial stocks, a plan to back money market funds for consumers and institutions, and a facility under which financial firms can unload debt they can’t otherwise move to the Fed and Treasury. This last component is a way of
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