Felix Salmon

How to regulate CDS

Felix Salmon
Mar 10, 2010 15:03 UTC

Go read CFTC head Gary Gensler’s speech on regulating credit default swaps: it’s by far the best thing written on the subject to date. He’s absolutely right about pretty much everything, and it would be amazing if the Europeans, who seem much keener to start regulating these animals than we are in the US, were to use it as a blueprint for their own CDS reform.

I’m in a little bit of a rush this morning so can’t go through the speech in much detail, but there are a few things worth picking out, starting with this statement:

A comprehensive regulatory framework governing over-the-counter derivatives should apply to all dealers and all derivatives, no matter where traded or marketed. It should include interest rate swaps, currency swaps, foreign exchange swaps, commodity swaps, equity swaps, credit default swaps and any new product that might be developed in the future.

This seems to have been forgotten in a lot of the rhetoric surrounding Greece, but if you crack down on CDS while allowing all manner of other OTC derivatives to remain unregulated, any behavior you don’t like will simply move elsewhere in the OTC market.

Gensler says, rightly, that regulation of derivatives dealers is key to doing this effectively, since you can never wipe out the OTC market entirely, no matter how many derivatives are moved onto exchanges. And standardized OTC derivatives — which is the vast majority of them — should be cleared by clearinghouses. Moving to exchanges and clearinghouses isn’t a panacea, but it is likely to help.

And it makes sense that single-name CDS should be regulated by the SEC, along with corporate stocks and bonds: if investors have long since reached the point at which they write credit protection interchangeably with buying bonds, the SEC should catch up with them. (And for that matter, the SEC should be policing the corporate bond markets much more strongly that it does right now as well.)

Gensler makes a strong case that empty creditors should not be allowed to mess around with bankruptcy proceedings; I suppose the alternative here is to say that writers of credit protection should be given a seat at the table. But Gensler’s solution is more elegant, if arguably harder to implement.

As for bank capital, in the wake of the financial crisis it’s a no-brainer to reduce the degree to which banks can use the CDS market to engage in regulatory arbitrage. If you need capital, you should, as a rule, have capital: you shouldn’t be able to get away with buying CDS protection on some of your assets instead.

The CDS market grew very quickly, without any adult supervision, and it’s inherently a much riskier market than most other derivatives. As Gensler says,

While the value of interest rate or commodity derivatives generally adjusts continuously based on the price of a referenced asset or rate, credit default swaps operate more like binary options. A seller of CDS could one month collect its regular premium with little expectation that the insured company may default and in the next month be on the hook for billions if the insured company goes bankrupt. A credit default swap can quickly turn from a consistent revenue generator into ruinous costs for the seller of protection. This “jump-to-default” payout structure makes it more difficult to manage the risk of credit default swaps.

As a result, CDS do pose systemic risks, and should be carefully regulated. But let’s not unhelpfully oversimplify matters by banning them — or banning “naked” CDS — entirely. For one thing, that won’t ever happen, and it’s a much better idea to try to implement something which can actually work in reality.


“While the value of interest rate or commodity derivatives generally adjusts continuously based on the price of a referenced asset or rate, credit default swaps operate more like binary options. A seller of CDS could one month collect its regular premium with little expectation that the insured company may default and in the next month be on the hook for billions if the insured company goes bankrupt.”–The above describes the asymmetric nature of credit risk in general: loans, bonds, not just default swaps. There is nothing riskier about writing $10MM of protection than in buying $10MM of a bond. If this ‘jump to default’ risk is too tricky for institutions to manage, then they shouldn’t own credit portfolios either, yet noone seems to have a problem with that.

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Felix Salmon
Mar 10, 2010 06:06 UTC

Shahien’s en fuego. Here he finds a damning HAMP statistic on page 17 of a boring Treasury PDF — HuffPo

Mark Thoma is five years old — Economist’s View

In which Fox Business decides to fisk the NYT on CDS — Fox Biz

The hypocrisy of Gawker Media’s RSS switch — Lifehacker

The hypocrisy of HuffPo — Gawker

4,000-word profile of Stevie Cohen — Bloomberg

I almost took this “mesofacts” article seriously until I got to the frog-boiling bit — Boston Globe

Great article on Spanish labor markets. Echoes of the US public/private divide — Qorreo

Why Geithner went on background

Felix Salmon
Mar 10, 2010 06:00 UTC

Kevin Drum asks a good question about the background blogger briefing at Treasury:

Having read a few posts from the bloggers in question, what I want to know is: Did they really learn anything? Did Geithner and the anonymous SAOs say anything interesting that they wouldn’t have said on the record? Or was it just a pure spin session?

First it’s worth noting that HuffPo’s Sam Stein made a formal protest at the beginning of the meeting, asking that at least we be allowed to quote “senior administration officials” directly instead of being forced to paraphrase. And I don’t think any of us were particularly happy about the ground rules.

That said, I think there are a few ways in which these briefings can provide something that an on-the-record briefing can’t. The Treasury secretary, in particular, has to be very careful what he says in public; his statements can and do move markets and even cause minor diplomatic incidents. Going offline allows the public official to relax a little and even have something approaching a real conversation, as opposed to simply reciting talking points.

It’s also worth noting that the audience for this briefing was pretty newsy, as bloggers go. There were quite a few people around the table — Stein included — who consider themselves reporters first and foremost. When sessions with Treasury officials are on the record, they (the sessions, I mean, not these individuals) have a tendency to descend into unhelpful dynamic where the journalists try to get the official to say something specific, and the official repeatedly talks around the subject and doesn’t give them what they want. Banning quotes altogether does solve that problem at a stroke.

Geithner in particular has a way of getting a little tongue-tied and angst-ridden (this is new, I think, since he became Treasury secretary, I never saw it before), and no one at Treasury has any interest in that becoming news. He did show some flashes of humanity in this session, cracked a few jokes at his own expense, and was surely less self-conscious than he would have been had the briefing been on the record.

And as Matt Yglesias rightly says, it’s hardly as though on-the-record briefings are spin-free zones.

It’s true that I can’t think of anything which was said by Gene Sperling or Michael Barr or Alan Kruger which couldn’t easily have been put on the record, but it’s also true that the one bit of the meeting which actually was on the record — a briefing by Neal Wolin about internet technology in Iran, Sudan and Cuba — was so far removed from newsworthiness that all of us were quite happy when it was over.

Of course, you can’t put Sperling et al on the record and then have just Geithner being the only “senior administration official” in the room — that kinda gives the game away. So you see how Treasury ends up where it does — just as you can also see how the likes of Drum end up asking if we’re not all being sucked into the age-old Washington game.

The fact is that if I thought it would serve any purpose at all to boycott background briefings, I’d be happy to do that. But it wouldn’t. And in many ways these briefings are the closest that people like Geithner ever come to having a friendly drink with the press, not having to worry about how they might get quoted. Most of us would become very quiet very quickly if every word we said was scrutinized in the way that Geithner’s public statements are. Obviously the ground rules serve him more than they serve us. But insofar as we basically just wanted to talk to the guy, I think we came away reasonably happy.

So while Drum is absolutely right that these meetings “allow government officials a chance to peddle their spin in person without really being held accountable for what they say”, I think that sometimes it’s good to talk to someone without holding them accountable for what they say. I’d say that the walk-forwards-walk-back that we saw on the subject of principal write-downs, for instance, is more revealing than an accountable on-the-record statement would have been. Mixing things up a bit is usually a good idea; I’m generally suspicious of absolutism in these matters. After all, it’s not as though the press corps and Congress never get to ask Geithner lots of questions on the record as well.

And on top of all that, I’m very happy that I got to thank Gene Sperling personally for Treasury’s latest CDFI initiative. (I’m on the board of a credit union which will probably be one of the recipients.) It’s a really good idea and it probably ought to have gotten more play than it did. A lot of really useful lending will come as a result of it.


{Salmon: Going offline allows the public official to relax a little and even have something approaching a real conversation, as opposed to simply reciting talking points.}

I think you may have missed several factors regarding the different media outlets:
* The TV is the mainstay media by which most American obtain their information.
* We can argue about how “free” those outlets are in terms of their journalistic outlook – but we, the people, are largely powerless to reshape it.
* The blogosphere is a parallel but very unprofessional means of affecting public opinion. Much of it is populated by individual who prefer to polemicize rather than participate in the political process. Why? Because Americans are largely disaffected with that process. Besides, polemicizing is comparably effortless.
* American TV is so saturated with sensationalism, that any balanced reporting is relegated to the Dustbin of Boredom — the proverbial Black Hole of journalism. So, politicians go on TV with “sound-bites” because the American public cannot assimilate more than (often tendentious) trite statements. This is particularly the case when a debate — such as Health Care — must go into some very dreary details for a more comprehensive understanding.
* The blogosphere is a reflection of the above point. Bloggers generally can neither go into detail nor articulate well a point-of-view, so one is left with Mindless Vituperation at worst and Simplistic Reasoning at best.
* Which means that Adversarial Exchange, according to the best rules of Formal Debate, is too easily reduced to blathering. Adversarial Debate is typically well reasoned, dispassionate, concise and polite. All the above combined are a rarity on the blogosphere — which is employed far too much as a means of Individual Catharsis.

My point: One must have faith nonetheless in a natural attribute of most people — called Common Sense. Which is the objective, I submit, that should be addressed by journalists regardless of the subject or the context of forum debate.

It would also help if journalists were more willing to enter the cauldron of debate. Yes, the exchange of adversarial opinion is a Hot Place. But it is also a formative one — one can learn a lot …

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The Climate Desk

Felix Salmon
Mar 10, 2010 04:09 UTC

I’m a little scared and more excited to kick off a serious and ambitious exercise in collaboration across a spectacular range of websites, including Center for Investigative Reporting, Grist, Mother Jones, Reuters, Slate, The Atlantic, Wired, and WNET. (Update: the Nation Institute is also involved.) It’s called The Climate Desk, and although its website isn’t up and running yet, it does have a mission statement:

The Climate Desk is a journalistic collaboration dedicated to exploring the impact — human, environmental, economic, political — of a changing climate.

My job is to look at the corporate side of things: whether and how big companies are preparing themselves for the downside of climate change. Already the SEC has decreed that companies have to disclose the effect of climate change in four different areas: actual and potential laws and legislation; international accords and treaties; regulatory and business trends, including changes in demand for goods with high or low emissions; and, finally, this:

Companies should also evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business.

Of course, disclosing risks is a very different thing to actually doing something about them. So what I want to have a look at is two main questions: how should companies be managing their climate-change risks, and how are they managing their climate-change risks?

Some companies (like property insurers in coastal regions) I suspect are already reasonably sophisticated about these matters. Others, of course, simply aren’t set up to think deeply about long-term strategy regarding risks which will unfold over decades; it would be silly for most small tech start-ups to waste management time on that kind of thing. But I suspect there are some very interesting and surprising stories out there which are worth exploring: when, for instance, does an asset start to look more like a liability?

If the public sector can do this — the Pentagon has, unsurprisingly, already started thinking along these lines — then the private sector should be able to do so as well.

Helping me out in looking at all this will be a group of great bloggers and journalists, including Alexis Madrigal of Wired, David Roberts of Grist, Mark Schapiro of CIR, Kevin Drum and Kate Sheppard of MoJo, and Nicole Allan of The Atlantic. But I want your help too: email me on felix at felixsalmon.com with your ideas, and I’m even welcoming PR pitches on this one.
There are two things I don’t want. I’m not interested in the green-tech story, or in companies which are trying to position themselves to benefit somehow from climate change. I really want to focus on the way that companies are managing downside risks, here, as much as possible.

And I’m absolutely not interested in having a debate about whether climate change is real, or anthropogenic, or overhyped, or anything along those lines. If you think that the downside risks of climate change are zero, then that’s a different story, not this one.

Eventually I’m going to write this all up in a self-contained piece. But right now, I’m starting at zero. Help me out here!


Several years ago I did some research on the re-insurance industries take on climate change. I focused on Swiss RE and Munich RE. I was suprised to learn that they both had depts. dedicated to the issue and were contemplating the possibility of refusing to insure CEO’s that put stock values at risk by ignoring the necessary changes required by a changing climate. Their websites have changed over the years and much of the detailed research may no longer be available but these links should provide some insight into what corporate interests are taking steps to begin mitigation.

http://www.munichre.com/en/ts/climate_ch ange_and_insurance/strategy_and_policy/d efault.aspx

http://www.theclimategroup.org/programs/ the-climate-principles/

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Lies and truth on sovereign CDS

Felix Salmon
Mar 9, 2010 22:47 UTC

It’s not just the NYT: now the BBC is printing “explanatory” articles about credit default swaps which are simply wrong. Check out the factbox:

Government bonds come with an insurance policy, called a credit default swap (CDS).

Hedge funds have been buying up vast quantities of CDSs linked to Greek bonds in the hope or belief that Greek government will either default on a bond interest payment, or have its credit rating lowered.

This is because in both cases, the seller of the CDSs – typically banks or insurance firms – would have to pay a penalty fee to the buyer of the CDS contract.

Is there anything here which is actually true? No, bonds don’t “come with” a CDS attached. No, there is no evidence of hedge funds (or anybody else) “buying up vast quantities of CDSs linked to Greek bonds”. No, a downgrade of Greece would not result in the seller of the swap having to pay out on it. And no, a swap payout is not “a penalty fee”.

The important thing here is not the inaccurate reporting so much as it’s the way in which heated political rhetoric has been unquestioningly accepted by journalists who simply don’t have a grounding in this stuff. If a lie can get halfway around the world before the truth has got its boots on, this one has circumnavigated the planet twice while the truth is still slumbering in bed. No one wants to be seen as defending banksters, so even those who should know better are happy to stay complicit in the lies.

That said, I was invited to a media lunch hosted by Loomis Sayles today, and I took the opportunity to ask David Rolley, their international fixed-income guru, whether CDS had been or could be used for nefarious purposes. And he unhesitatingly said yes, on both counts, saying that Brazil, for one, has paid as much as $1 billion in extra funding costs thanks to hedge fund types who use CDS to drive up the country’s bond spreads ahead of new issuance.

Of course, the hedge funds in question are likely long Brazilian debt anyway, so a ban on naked CDS wouldn’t prevent that kind of activity. In fact, they’re trying to get even longer Brazilian debt, and trying to manipulate the price at which they’ll be asked buy it on the primary market. So I wouldn’t necessarily say that they’re trying to destroy the country. They’re just trying to get a bit more out of them, in terms of interest payments.

Still, that kind of activity — front-running new issuance in the CDS market — is undoubtedly a little bit distasteful. I just don’t think that it deserves to be talked about people expressing “the hope or belief that the government will default”.

(HT: Coldwell)


While the BBC as a whole is pretty decent news organisation (particularly for things like range of foreign affairs coverage), the website is shockingly bad, especially when it comes to technical or specialised subjects such as science or finance. It’s scarcely more reliable than the Daily Mail.

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Roger Lowenstein vs the CFPA

Felix Salmon
Mar 9, 2010 20:47 UTC

Roger Lowenstein has a column up on Bloomberg with the headline “Smart Banks With Dumb Customers Don’t Exist” — which just goes to prove that smart writers with dumb ideas do exist. Ryan Chittum has already done a good job dismantling the piece, but I feel the add to add my own two cents with respect to his characterization of the Consumer Financial Protection Agency:

The new watchdog, wherever it goes, is the linchpin of the emerging financial-reform bill, and its premise is that greedy bankers exploiting dumb consumers essentially caused the credit crisis. Stop bankers from selling toxic mortgages and other harmful loans and we won’t have any more meltdowns.

Even though bankers were greedy, and many borrowers were naive, this is a simplistic way of viewing the financial crisis and one that misses its underlying cause. Since mortgage bankers make money from loans, it’s tempting to think of them as parasites that prey on customers. But there is no such thing as a smart bank with a dumb customer; if the loan turns sour, the banker was dumb, too.

Where did Lowenstein get the idea that the premise behind the CFPA was to prevent a systemic meltdown? Has he never heard Elizabeth Warren or anybody in the Obama administration talk about it? I’ve made the case that the CFPA might have beneficial secondary effects, from a systemic perspective, but from day one its primary role and raison d’etre has been to protect financial consumers. As you might guess, from its name.

The CFPA was first proposed in its present form by Elizabeth Warren in the summer 2007 issue of Democracy. Clearly she’d been thinking about it a lot before that article appeared, and equally clearly, if you read the article, preventing meltdowns is simply not there. Partly because the meltdown hadn’t actually happened at that point. So Lowenstein is simply wrong on his “premise” statement.

As a result, when Lowenstein starts attacking the “simplistic way of viewing the financial crisis”, he’s really attacking no one at all. But then he goes on to pooh-pooh the idea that mortgage bankers are “parasites that prey on customers”, using the argument from his headline.

The problem here is that Lowenstein’s argument is based on three very shaky foundations. The first is that if a bank preys on a customer, that makes the customer dumb. But being preyed upon is not a sign of stupidity. This is an important point, because one often hears, when it comes to things like overdraft fees, that they’re all the fault of those dumb customers, and that therefore (and this is a logical step I’ve never really understood) we don’t need to worry about them. What’s undeniable is that calling ripped-off consumers dumb serves to stigmatize them, and make them less sympathetic.

Lowenstein also seems to think that the CFPA cares mostly or entirely about mortgages, when in fact its remit is far broader and more important than that. It will regulate all manner of debt products, from credit cards to payday loans — and it will also regulate non-loan products as well, like checking accounts, pre-paid debit cards, and even (maybe, this is unclear) certain retirement and savings products.

But Lowenstein’s deepest error here is to think that if you do business with a “dumb customer” then the loan will invariably go sour and you’ll end up losing money. This is clearly not true if you’re working within the originate-to-distribute business model, where you can pass the losses on to an end investor after taking your cut up front. But it’s also not true even when you hold on to the loan yourself. The millions of Americans who were eligible for a prime mortgage but ended up being sold a subprime mortgage instead were undeniably ripped off, even when they made all their payments in full. The people who get put in the credit card “sweat box” — something designed to extract the maximum amount of money from them before they inevitably go bust — are highly profitable for lenders. And people who regularly pay multiple $34 overdraft fees on a single day are always going to be a gold mine for bankers.

Lowenstein indeed seems to be opposed to the very purpose of the CFPA:

A sound economy needs healthy financial institutions. Rather than stop lenders from hurting consumers, the first priority should be to keep the banks from harming themselves. In the short run, solvency is often at odds with what consumers want (or with what they think they want).

To which I only say that if you need to gouge consumers in order to remain solvent, you shouldn’t be banking in the first place. And no one will miss you when you go away. Yes, a sound economy means healthy financial institutions. But that never has to mean unhealthy customers.


OK Nadjorf, please provide a link to my plain vanilla free/12% card with the one page card agreement – no arbitration, predictable – and fair- fees structure with no unilateral ability to change terms, etc. You won’t find it offered by any major commercial bank. That’s why regulation is needed.

“Regulation” means that the government does have to involve itself in writing card agreements, or- in writing regulations that override unfair agreements.

You really need to avoid the fantasy marketplace and learn about the one that actually exists. try this:

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The problem with municipalities buying swaps

Felix Salmon
Mar 9, 2010 14:20 UTC

Gretchen Morgenson, take note: this is how to write a good article about municipalities dabbling in derivatives.

I didn’t write about the main thrust of Morgenson’s article when I attacked her comprehension of credit default swaps, mainly because it was incredibly unclear to me what she was trying to describe. But if you want to see someone do a good job of trying, I’d highly recommend checking out Bond Girl, who has a second installment today attacking the hypocrisy of municipalities who are happy to lock in fixed interest rates through interest-rate swaps, only to complain loudly when rates fall and they realize they would have been better off doing nothing.

But the fact is that municipalities around the world have been ripped off by fast-talking derivatives salesmen for years, and the whole business really is very sleazy. In their excellent FT article, Rachel Sanderson, Guy Dinmore and Gillian Tett show how Italian municipalities are losing money even on fixed-to-floating interest-rate swaps, which you’d think would be pretty hard in today’s low-interest-rate environment. They’re also losing money on sinking funds — pools of money which were meant to shore up municipal finances, but which inevitably attracted an entire aquarium’s worth of vampire squids, sticking their blood funnels into anything they could invest in high-yield instruments.

The FT talks to Antonietta Dominici, the treasurer of a tiny village called Baschi, deep in rural Umbria:

Ms Dominici does not know what assets are in the sinking fund or why the swap is still carrying losses – currently about €90,000 – in a low-interest rate environment. She says attempts to get information from BNL on this have proved unsuccessful. BNL would not comment.

And they do a great job of explaining how bankers exploited greedy Italian politicians:

In 2006, for example, Baschi was persuaded to undertake a more complicated restructuring of its debt. The swap’s value rose to €2.5m; the maturity extended to 2034; and a sinking fund was established. The bank structured the deal so that the village received an “upfront” payment of €25,000 – in effect an advance on its loan. In return for the upfront, rates would be tougher in the longer term…

It was the upfront that caused many local authorities to get high on derivatives, say experts. In the revolving-door world of Italian local politics, each new administration wanted its own upfront, so asked their bankers to restructure the deal to release more cash in advance. The terms of the swap tended to become more restrictive each time.

Some banks covered the cost of the upfront fee by pricing the interest rate swap more aggressively, so that only in unusual circumstances would the entity receive more each period than it paid out, say people familiar with the deals. In other cases, upper and lower limits on the movement of interest rates ensured the upside for the local authorities was reduced and downside risks were magnified.

I can guarantee you that every time a swap was sold, the person selling it got a nice fat up-front commission, and the unsophisticated small municipality buying it wound up getting a very unattractive deal. And the more complex the swap, and the higher the up-front payment to the town, the more the municipality was likely to be ripped off.

The underlying problem here is that interest-rate swaps tend to be sold rather than bought. If municipal treasurers came up with these plans on their own, and then asked a few banks for bids on the exact swap that they wanted, many of the rip-offs would never have happened. But instead, like subprime borrowers encouraged to monetize their home equity, they got talked into bad deals by sleazy financial professionals working on commission.

I wonder whether the Consumer Financial Protection Agency will have the ability to police swaps sold to municipalities. It should.


Baschi’s treasurer Dominici has a degree in economics. OK, she didn’t know what derivatives were — maybe she graduated decades ago — but couldn’t she manage just a wee bit of due diligence? Does she ever bother to read the financial section of a major newspaper? The presumably torpid pace of life in rural Umbria should leave enough time for that, one would think.

The home equity reference brought back memories of a radio ad for an equity lender that fed uncreditworthy homeowners’ righteous anger at banks denying them “their” (i.e., the borrowers’) money. Amazing how people think, or not.

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Why Treasury doesn’t like principal write-downs

Felix Salmon
Mar 9, 2010 13:36 UTC

Well done to Shahien Nasiripour, who did the best job of anybody, at the Treasury blogger meeting yesterday, at getting Treasury’s officials to commit news. Specifically, he asked about Sheila Bair’s sensible idea that mortgage principal write-downs can help keep homeowners in their homes while also maximizing the value of the mortgage to the issuing bank. And he was told, quite clearly, that Treasury has been talking to Bair about this idea, and that if it makes sense at the bank level, it probably makes sense at the federal level, too, as part of the HAMP program to make mortgages affordable.

Except that once the meeting was over, its main architect, Treasury flack Andrew Williams, emailed Nasiripour to walk that particular idea back, saying that Treasury was NOT (his all caps) going to do anything “major” in terms of principal write-downs, and that any moves in that direction would be no more than “tweaks”.

At the dinner after the meeting, Williams did a good job of looking very interested while saying absolutely nothing as the assembled bloggers talked about the optimal treatment of bank balance sheets during a recession. Do you mark to market, thereby plunging the entire financial sector into insolvency, or do you delay and pray, risking a Japan-style lost decade?

It seems to me that insofar as Treasury has a problem with principal write-downs, that’s clearly a function of the fact that it’s worried about the consequences for banks’ balance sheets. We’re prosecuting a muddle-through strategy right now, where the government artificially props up house prices by providing substantially all of the mortgage finance in the country, in the hope that with economic recovery will come enough of a natural rebound in house prices to let the government slowly remove its support without them falling dramatically again.

A large program of principal write-downs would in effect ratify the view that house prices are not going to recover any time soon — and that’s not a view that anyone in Treasury wants Americans to have. A different senior Treasury official, trying to explain that the economy is doing much better than expected, told us in the meeting that house prices right now are higher than house-price futures were indicating a year ago. It’s a silly argument: house-price futures are highly illiquid, and they don’t give a remotely useful indication of where people expect house prices to be in the future, since insofar as they’re used at all, they’re overwhelmingly used to hedge existing long housing positions. Because there’s no one who naturally would want to take the opposite side of the trade, house-price futures always look very pessimistic.

In any case, it was clear that Treasury is trying to sell a message that the economy is doing much better than anybody had dared to hope this time last year. And since a program of principal write-downs would be incompatible with that message, it’s probably not going to happen.


“In any case, it was clear that Treasury is trying to sell a message that the economy is doing much better than anybody had dared to hope this time last year.”

That’s why the U-3 headline unemployment rate is well below 8%, right?

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Annie Leibovitz’s new creditors

Felix Salmon
Mar 9, 2010 13:05 UTC

Well done to Annie Leibovitz, who has managed to extricate herself from her unpleasant embrace with the aggressive and litigious Art Capital Group. Her new sole creditor — and we can only guess at how much the principal amount she owes has risen to at this point — is Colony Capital, the $30 billion private-equity shop which normally has its eye on much bigger deals.

Chances are that Colony is not going to find Leibovitz particularly easy to work with: no one else ever has. But they’re also unlikely to start foreclosing on her assets in the way that Art Capital is prone to do. Technically, this is a debt deal: Colony has bought Art Capital’s loan. But my guess is that Colony is looking at it more like an equity deal: they expect to work with Leibovitz to start generating an income stream for both of them which is going to last more or less indefinitely.

So fingers crossed on this one — but it certainly seems as though Leibovitz had much better advice this time round than she did when she was put into the Art Capital deal initially. Here’s hoping it works out.


All she needs to do is publish her autobiography for a few million upfront and everything will be peachy

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