Commentaries

from Rolfe Winkler:

Lunchtime Links 12-27

December 27, 2009

How overhauling derivatives died (Smith/Lynch, WSJ)

Debt ceiling raised $290 billion (Rogers, Politico) Another Xmas Eve vote. Dems had wanted to raise the ceiling at least $1.8 trillion to avoid having to raise it again before midterm elections, but they didn't have the votes. Congress has bought itself about 4-6 weeks of breathing room. Senate Repubs made a showing of not voting for the measure, but had they been in the majority, you can bet they'd have done the same to avert default.

from Rolfe Winkler:

Legislation coming to break up big banks?

November 5, 2009

In a note to clients yesterday, Paul Miller of FBR Capital Markets wrote:

We are hearing that discussion of breaking up large financial institutions that pose systemic risk to the market is gaining traction on the Hill. At this point, discussions are in the early stages, but we understand that an amendment addressing breaking up institutions deemed "too big to fail" could be introduced in the House over the next few days. How does one define "too big to fail" and how would the divestiture process work - these are good questions that Congress will have to address as the discussion moves forward. To our understanding, any amendment that could be introduced in the coming week would likely be vague and would give the regulators discretion to determine which institutions qualify as "too big" and how to address the risk they pose to the system.

Nothing says recovery like par

October 19, 2009

It’s not there yet, but the derivatives index that references leveraged loans – the debt of choice for big corporate buyouts during the boom – is just a few cents away from par.

Derivatives moolah

September 29, 2009

The nation’s top commercial banks are poised to generate record revenue from trading derivatives this year. And that’s as good a reason as any why no one should expect the nation’s bank to go along peacefully with a plan to regulate the trading of these sophisticated instruments.

Banking? Keep it simple stupid

September 10, 2009

In 1873, Walter Bagehot wrote that “the business of banking ought to be simple; if it is hard it is wrong.” He would have struggled to recognize today’s banking system.

Squeeze is on for investment banks

September 10, 2009

Peter Thal Larsen.jpgInvestment banks are facing a big squeeze. For an industry that was generating record revenues just months after the collapse of Lehman Brothers, this may seem unlikely. But the revival looks set to be short-lived. Increased regulation and greater competition means the super-charged returns the industry generated for most of the past decade are likely to prove elusive.

Keeping Wall Street’s hands off the collateral

August 27, 2009

The idea of prohibiting derivatives dealers from reusing and redeploying the trillions of dollars in collateral they’ve taken in from trading parnters is gathering steam.

The liquidity canard

August 25, 2009

It’s often said on Wall Street that the more liquidity there is in a given market, the better things are for investors trading stocks, bonds or commodities. And while there’s a lot of truth to that, there are times when too much liquidity can be just the wrong tonic.

Citadel’s big Lehman loss

August 24, 2009

It’s long been suspected that Ken Griffin’s Citadel Investment Group took a big blow when Lehman Brothers went bust nearly a year ago. But Griffin and his management team have been reluctant to put a number on the damage to the Chicago-based fund.

Wall Street’s $4 trillion kitty

August 24, 2009

matthewgoldstein.jpgThe Obama administration’s plan for reining in derivatives leaves unchecked one of Wall Street’s dirty little secrets: the ability of a derivatives dealer to redeploy cash collateral that gets posted by one of its trading partners.