Ben Walsh

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On August 23, the NY Fed successfully unloaded the last of its toxic AIG mortgage-backed securities. Now, the US Treasury is selling $18 billion of its AIG shares to the public, with an additional $2.7 billion available to cover investor demand. (Citi, Deutsche Bank, Goldman and JPMorgan are carrying Uncle Sam's water as joint global coordinators.)

The sale will bring the government's stake down from 53% to as low as 15%, as Damian Paletta, Erik Holm and Serena Ng write in the WSJ:

A near-exit by the government from one of the most controversial bailouts is both a significant accomplishment for the Obama administration and a sign of how far the markets have come in four years, thanks in part to the rescue of financial companies and the Fed's efforts to support the economy by reducing interest rates.

But the sale could also renew complaints that Treasury still hasn't outlined a concrete strategy for exiting other large financial-crisis investments... The government remains in the red on its investments in Fannie and Freddie, which have received $188 billion in taxpayer support. The US continues to hold sizable stakes in General Motors and Ally that it spent $68 billion on and may not fully recover.

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Mario Draghi has made his leaked proposal official: the European Central Bank will buy unlimited amounts of troubled euro zone debt on the open markets in an effort to push down sovereign borrowing costs. The NYT's Jack Ewing and Steven Erlanger write that the plan puts the ECB's "unlimited financial clout behind an effort to protect Spain and Italy from financial collapse" and "effectively spreads responsibility for repaying national debts to the euro zone countries".

The plan, called "Outright Monetary Transactions" (OMT), will purchase bonds maturing in the next three years, after countries have made a request to the euro zone's bailout fund and fully agreed to its conditions. If countries renege on their promises in areas like banking reform or fiscal policy overhauls, the ECB will terminate the bond purchases. Importantly, the ECB will not have seniority over private bondholders.

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The sovereign debt crisis has put European money market funds in an intolerable position. Many European MMFs promise not to "break the buck" -- or let the net asset values of their holdings fall below 1 euro per share. At the same time, these funds are following their US counterparts by avoiding an ever-growing pool of risky (and high-yielding) continental assets.

Unfortunately for funds obliged to invest inside the euro zone, short-term assets are increasingly moving toward negative yields. This, of course, is bad news for fund managers and investors alike. Fund managers, the FT's Ajay Makan writes, are now becoming a lot less willing to swallow their losses:

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We might not have reached Skynet-like levels of disaster, but stories of technology biting back continue to pile up. Reuters' Jessica Toonkel, Lauren Tara LaCapra and Ashley Lau write that a group of Morgan Stanley advisers, including four who manage a total of $47 billion, may leave the company because "widespread technology problems have made it very difficult for them to do their jobs".

It's not just the financial workplace, the machines have taken over the stock market, and when things go wrong, they go horribly wrong – to the tune of $10 million in losses, every minute for 45 minutes. Technology companies themselves aren't immune: Facebook's IPO was delayed by faulty Nasdaq software that then caused buy and sell orders to go unfilled, while trade cancellations were ignored.

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Of all the bad practices of the mortgage boom and collapse, robo-signing was among the worst. Unsubstantiated and at times fraudulent foreclosure documents submitted by banks affected more than a 138,000 US homeowners. Following the great series by the American Banker's Jeff Horwtiz, the NYT's Jessica Silver-Greenberg reports that some of the same tactics are being employed collecting credit card debt:

As they work through a glut of bad loans, companies like American Express, Citigroup and Discover Financial are going to court to recoup their money. But many of the lawsuits rely on erroneous documents, incomplete records and generic testimony from witnesses, according to judges who oversee the cases.

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Barclays has a new centurion: David Walker will take over from Marcus Agius as Barclays chairman on November 1. Walker is a former regulator who served in the UK Treasury and Bank of England. That background will give Walker's credibility as he tries to overhaul the bank's culture, operations and reputation in the wake of the Libor scandal.

As lead author of the eponymous 2009 report on corporate governance at UK banks, Walker has already committed to the standards he – and other board members – should act on:

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It's now five years since August 2007, which means that the US is now halfway into its very own lost decade. There is, however, a bit of good news coming from the housing market, as the WSJ's Nick Timiraos reports:

Prices rose by their largest percentage in at least seven years during the second quarter, propelled by low inventories of properties for sale and high demand for bargain-priced foreclosures... Prices rose by 2.5% in June from a year ago, and by 6% from the previous quarter, said CoreLogic Inc., a Santa Ana, Calif., data firm. The quarterly jump was the largest since 2005... Separately, Freddie Mac, which uses a different methodology, said home prices during the second quarter jumped by 4.8% from the previous quarter. That was the largest jump since 2004.

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Five days after Businessweek gave him the Bob Dylan treatment on its cover, Ben Bernanke has gotten existential. Or at least relatively so for a former academic economist and current central banker. On Monday, he supported including well-being and quality of life in "economic measurement":

Economics as the study of the allocation of scarce resources... may indeed be the "what," but it certainly is not the "why." The ultimate purpose of economics, of course, is to understand and promote the enhancement of well-being. Economic measurement accordingly must encompass measures of well-being and its determinants...

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Over the last decade, Amtrak has lost $834 million selling food and drinks, its president and CEO admitted Thursday in front of the House Transportation and Infrastructure Committee. The NYT reports that those losses were "largely because of waste, employee theft and lack of proper oversight".

All of this comes on top of Amtrak’s complex status as perennial political football, anecdote fodder for pundits aiming to outdo their own previous attempts at self-parody, and of course vital national infrastructure. But never mind that: losing more than $80 million on food an beverage service a year is offensive to "anybody who's ever boarded a train hungry and been forced to cough up the better part of $20 for a burger and a beer".

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When your business model is to execute trades profitably, it's pretty hard to destroy your franchise more effectively than contriving to lose $10 million a minute trying to do just that on the New York Stock Exchange. That's how much Knight Capital lost yesterday morning when its electronic trading algorithms malfunctioned, causing "the firm’s computers to rapidly buy and sell millions of shares in over a hundred stocks for about 45 minutes after the markets opened".

The damage in total: about $440 million. That's more than the $289 million in revenue the company earned last quarter; it's four times its annual profit. That's 40% of tangible book value. How bad is that? With its shares down 63% on the day, and more than 75% since the error, Knight is now trading at valuations similar to Morgan Stanley, Citigroup and Bank of America. It's now exploring that most ominous of financial euphemisms, "strategic alternatives".