Counterparties

By Felix Salmon
November 18, 2010
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A big infographic on how banks sold themselves CDOs — MortgageRates

“I dislike arguments that disparage moral intuition while inviting the clever to delight in the counterintuitive” — Interfluidity

Pre-roll ad views more than doubled in six months — AdAge

Max out your credit cards: even evil card companies only want a tiny fraction of the return that VCs do — Dash

The Washington Independent, RIP — Washington Independent

New York City proposes extending subway to New Jersey — Reuters

There’s no point in appointing a Wall Street type to the NEC if Wall Street doesn’t trust him — TNR

BofA’s seizure of $500 mln Lehman deposits unauthorized — Reuters

Cookbook writers are terrible at estimating how long it will take to cook a recipe — Slate

Peter Eavis has an elegant solution to the Ireland crisis, and he even manages to squeeze it into less than 140 characters — Twitter

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Comments
5 comments so far

Link missing for Peter Eavis’s tweet. I’m assuming it was the following:

a solution: have the exposed banks put equity into ire banks. not gonna happen, but fair, protects txpyrs, and avoids default.

(http://twitter.com/petereavis)

Posted by bmozaffari | Report as abusive

Number of comments on the CDO piece:

1) The piece implies that AIG nearly went bankrupt because of losses on CDS contracts. It didn’t. It got into trouble because of collateral triggers in those contracts – which would have been manageable – but also because it decided to loan out liquid assets it had and invest the cash in illiquid assets, mostly ABSes.
2) Following on from that, despite paying out 100 cents on the dollar and despite a punitive interest rate on the loan from the Fed, the two SIVs are showing pretty healthy profits.
3) They are happily comparing apples and oranges. From recollection the hit the pension companies took were on **equity** investments not trading positions with AIG. ALL of the equity holders got killed. Ditto with Freddie and Fannie. Ditto their debt holders got made whole.
4) The FCC(sic i think they mean SEC) didn’t sue GS for a similar instrument as what was insured by AIG
5) The “banks” were not self-dealing. Firstly, the CDOs explicitly were investments in other securitised instruments. Secondly, it is clear even from the data they provide that pretty much the only person coming close to what they claim is true was Merrills. Even there, the claim this was happening towards the end to “artificially” drive demand is clearly untrue.
6) The banks typically kept the SS portions of the debts because they were next to impossible to offload because of the derisory spread they offered.

But hey who cares when we can have faux outrage?

Posted by Danny_Black | Report as abusive

Again, Danny_Black, thanks for your comment. Felix, if you really are moderating, please don’t let my comments knock off Danny_Black’s visibility.

Posted by walt9316 | Report as abusive

walt9316, don’t think even at my most obnoxious have I been censored….

Posted by Danny_Black | Report as abusive

Danny black obviously knows more then some of us about what wallstreet is doing, but I daresay more as a Wallstreet (Goldman) insider and apologist.

If there was a way for AIG to sue much as the SEC did (they had to give up that right in the bailout…) I think you would have to eat a lot of your words on here and elsewhere. Sadly, many former Goldman cronies were all too willing to forgive Wall-street of this mess.

That the banks were stuck with the hot potatoes were merely because they couldn’t offload it fast enough. That they built the house of cards in the air, by trading it amongst themselves should no longer be in dispute. It was a feeding frenzy of piranhas trying not to let the cards fall to the ground, lest the buyers who were still trickling in see their hand.

If anyone is willing to listen to Danny Black over the article then I suggest you read the source information to see whether there really was fake demand or believe Danny who says as usual we make a tempest in a teapot with our faux outrage…

Posted by hsvkitty | Report as abusive
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