Opinion

Ben Walsh

from Felix Salmon:

Counterparties: Bits of laundry

Ben Walsh
May 29, 2013 21:21 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.

Even criminals need financial intermediaries. Yesterday federal prosecutors shut down Liberty Reserve, a currency exchange and payment processor, and indicted seven people connected to the company. The indictment called the company a “financial hub of the cybercrime world... including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking”, and alleges it laundered $6 billion via 55 million illegal transactions for one million users over the last seven years.

The Tico Times has a detailed article on the history of the Costa Rica-based business, not to mention “flashy cars, lavish gifts, multiple identities and armed Russian henchmen”.

The criminal attraction to Liberty Reserve is obvious. An email address was all that was needed to to set up an account -- some accounts had oh-so subtle names like “Russian Hackers” -- and paper trails were nonexistent. The principals seemed aware of who used their services: in an IM conversation, they referred to the company as a “money laundering operation that hackers use”.

Speaking of things hackers like that can be used to launder money, what does Liberty Reserve’s indictment mean for Bitcoin? Kevin Roose says that while both Liberty Reserve and Bitcoin offer users anonymity, “in Bitcoin's case, there's nobody to arrest, no entity to prosecute for the sins of the system ”. Bitcoin is vulnerable, Roose notes, to enforcement that targets the exchanges and processors which the currency relies on to function. Timothy Lee thinks that any attempt to shut down, or even regulate, Bitcoin would only drive the currency further underground (assuming that’s possible), making it all the more attractive to criminals.

from Felix Salmon:

Counterparties: Europe’s longest recession

Ben Walsh
May 15, 2013 22:37 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.

Europe is in the midst of its longest recession since it began keeping records in 1995 -- even surpassing the calamity that hit the region in the financial crisis of 2008-2009. While the German economy grew 0.1% from the fourth quarter of 2012 to the first quarter of this year, just about everyone else in the eurozone is shrinking.

France’s economy shrank 0.2% quarter on quarter, and is now officially back in recession after just one quarter of positive growth. It’s not alone: Cyprus, Finland, Italy, Greece, the Netherlands, Portugal, and Spain are all in recession right now. And while the UK managed to just barely avoid a triple-dip recession by growing 0.3% in the first quarter, its economy is still 2.6% smaller than it was 5 years ago.

from Felix Salmon:

Counterparites: Split personalities

Ben Walsh
May 6, 2013 22:11 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.

Institutional Shareholder Services’ message is clear: no one man should have all that power.

More specifically, ISS has declared Jamie Dimon shouldn’t be JP Morgan’s chairman and CEO. The firm, which advises shareholders on corporate voting, is also recommending that its clients not support the reelection of three of the bank's directors. Each of those directors -- David Cote, James Crown and Ellen Futter -- sits on the bank’s risk committee. The proposal to split the roles of chairman and CEO is non-binding; the re-election of board members is binding. It’s unclear whether either measure will pass.

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”.

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:

  •