Opinion

Ben Walsh

from Felix Salmon:

Counterparties: Masters of overcharging

Ben Walsh
May 3, 2013 21:25 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

JP Morgan may be going back to banking basics. Instead of losing billions in arcane, illiquid credit instruments, the bank’s latest scandal is a classic: overcharging unwitting customers.

Jessica Silver-Greenberg and Ben Protess report that JP Morgan is in some very hot water with the Federal Energy Regulatory Commission (FERC). According to an agency memo, the bank turned “money-losing power plants into powerful profit centers”.

Under other circumstances, that’d be just another win for JP Morgan’s booming commodities division. The problem is that JP Morgan’s success came through allegedly duping California and Michigan state officials into overpaying for energy by $83 million. These same allegations were included in Joshua Rosner’s comprehensive review of the bank’s regulatory lapses published in March.

When confronted by regulators, Blythe Masters, the bank’s head of commodities, made “false and misleading statements”,  FERC says. The traders working for Masters “planned and executed a systematic cover-up” of the trades,” and an email from Masters instructed an internal document to be rewritten. Importantly, the agency plans to hold both JP Morgan and individuals at the bank liable for any infractions.

from Felix Salmon:

Counterparties: To coin a phrase

Ben Walsh
Apr 12, 2013 21:24 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

“To say highly speculative would be the understatement of the century.” – Steve Hanke

“People say it’s a Ponzi scheme, it’s a bubble... We have elected to put our money and faith in a mathematical framework that is free of politics and human error.” – The Winklevii

from Felix Salmon:

Thatcher’s economic legacy

Ben Walsh
Apr 8, 2013 22:05 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

Margaret Thatcher, Britain's longest serving Prime Minister, died today at the age of 87.

Thatcher famously said “there's no such thing as society. There are individual men and women and there are families”. The BBC’s Stephanie Flanders sums up Thatcher’s economic legacy by saying that before her, there was “no such thing as the consumer. When she left, politicians spoke of little else... she helped force the rise of the individual at the expense of the collective”.

from Felix Salmon:

Counterparties: Hoard of directors

Ben Walsh
Apr 1, 2013 21:32 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

Of the 27 million Americans working part-time jobs, very few land positions that pay $488,709. That’s the average annual pay for a director at Goldman Sachs, Susanne Craig writes:

Some of the firm’s 13 directors make more than $500,000 because they have extra responsibilities... Goldman’s board is the best compensated of any big American bank and the fifth-highest paid of any company in the country... Some of its rivals are not that far behind. The nation’s biggest banks paid their directors over $95,000 a year more on average in 2011 than what other large corporations paid.

from Felix Salmon:

Counterparties: Ina the belly of the whale

Ben Walsh
Mar 15, 2013 21:56 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints toCounterparties.Reuters@gmail.com.

Last night, the Senate Permanent Subcommittee on Investigations released its 307-page report (plus a 598-page appendix) on JP Morgan’s disastrous London Whale trades. The report comes 11 months after trades were first reported, and, as DealBook notes, it details how JP Morgan “ignored internal controls and manipulated documents”, all while withholding information from regulators.

FT Alphaville’s Cardiff Garcia pulls some of the most damning excerpts. For instance, the report says that JP Morgan’s assertion that they had been fully transparent with regulators had “no basis in fact”. Or take then-CFO Douglas Braunstein’s comments on an earnings call that the CIO’s trades were a hedge against rising rates. On page 283, the report says that “none of the scenarios that Mr. Braunstein himself said he relied on indicated that the book functioned as a hedge”. Matt Philips writes that JP Morgan has lost that battle: "JP Morgan now freely admits—including Braunstein under oath this afternoon—that the CIO’s problematic position didn’t act as a hedge" and that the Senate report calls them out as proprietary trades.

from Felix Salmon:

Counterparties: Krugman-Sachs

Ben Walsh
Mar 11, 2013 22:29 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints toCounterparties.Reuters@gmail.com.

Fresh off debating the deficit with Joe Scarborough on Charlie Rose, Paul Krugman is now tangling with fellow lefty economist Jeffrey Sachs. At issue is the government’s post-crisis stimulus spending, and the basic tenets of Keynesianism. Or at least that’s what Sachs would have you believe.

Sachs and Scarborough co-authored a Washington Post op-ed titled “Deficits Do Matter”, accusing Krugman of a crude interpretation of Keynes. Specifically, they say that short-term stimulus spending hasn’t achieved increased growth. (Krugman, by contrast, has long called the stimulus too small.) Sachs and Scarborough warn that things will only get worse as the US population ages, and healthcare costs increase. Keynes wouldn’t have approved, they say:

from Felix Salmon:

Counterparties: (NO) VACANCIES

Ben Walsh
Mar 7, 2013 23:18 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints toCounterparties.Reuters@gmail.com.

Who controls how hard is it to get a job in America? The next few jobs reports, including tomorrow’s, Mohamed El-Erian says, will give us some insight into the answer to that question. If the Federal Reserve is effectively in charge, rolling “out one untested measure after the other”, that could help create new jobs. But if our dysfunctional, austerity-inducing Congress has the upper hand, expect job growth to sputter out. Neil Irwin sees things similarly, although he identifies a booming housing market, a rising stock market, and deleveraging consumers as the key forces pulling the American economy forward.

There may be, however, a simpler way to give the economy a shot in the arm: hiring the unemployed to fill vacant jobs. Sounds sensible, right? Here’s Catherine Rampell:

  •