Counterparties

By Felix Salmon
March 15, 2011
Shame the Banks


" data-share-img="" data-share="twitter,facebook,linkedin,reddit,google" data-share-count="true">

American Homeowner Preservation Buying Pools of Defaulted Mortgages & REO’s: An intriguing and hopeful development — Shame the Banks

Angelo Mozilo’s settlement with the SEC: $67.5 million — SEC

The SEC Saw Gupta as a Clear and Present Danger to Shareholders — CNBC

Surowiecki explains why the NFL players should win the current dispute — TNY

More From Felix Salmon
Post Felix
The Piketty pessimist
The most expensive lottery ticket in the world
The problems of HFT, Joe Stiglitz edition
Private equity math, Nuveen edition
Five explanations for Greece’s bond yield
Comments
4 comments so far

Breaking news: Angelo Mozilo settles with SEC for $67.5 million. Next up: midterm election results

Posted by johnhhaskell | Report as abusive

AHP is doing an excellent job of “putting their money where their mouth is”. If they can make this model profitable, it may also cause other institutions to rethink their practices (or other small groups to imitate them).

One of the main concerns of the big banks appears to be the “moral hazard” of allowing some homeowners writedowns. They fear that *all* underwater homeowners will then want them (bankrupting the banks). Their present policy is designed to delay recognition of the losses until (they hope) something changes.

AHP doesn’t face that obstacle.

Posted by TFF | Report as abusive

If there is a good reason for salary caps, I think a reasonable solution would be to say that the salary cap in each season will be 15% (or thereabouts) higher than the average team payroll the previous season; salaries then keep rising until several teams no longer find the cap binding, but they continue to serve their stated purpose of keeping spending less variable between teams. Of course, this would also thwart teams’ efforts to collude to keep salaries overall down, which wouldn’t go over well with them.

A good free market will, except possibly during a strong recovery, always have a firm or two on the brink of bankruptcy, and it would be worth it, if the NFL is going to a more free-market model, for them to have a plan as to what to do if a team does go bankrupt. I’m not sure the NHL has provided a great model for that.

Posted by dWj | Report as abusive

I would, though, like to push back against Surowiecki’s explanation why “owners and players don’t benefit equally when football becomes more profitable.” In saying “the values of the franchises increase”, he’s presumably capitalizing anticipated increases in profit in the future that accrue to the owners, while ignoring future increases in profit that will accrue to future players.

Posted by dWj | Report as abusive
Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/