It seems so obvious: of course John Bird and John Fortune should simply appear directly on FT.com. Go watch their latest George Parr interview, it’s fantastic:

GP: You can’t have it both ways. Everybody says that banks have got to be boring. Well, you’ve got to have an incentive to be boring.

There’s also a wonderful explanation of how securitzation works, at about 5:30.

GP: We thought we’d found a way where even if house prices didn’t go on rising forever, we wouldn’t have to worry about it.

Q: This is securitization.

GP: Securitization. You see, the problem about lending money who don’t have a glimmer of a chance of paying it back is that there’s a risk.

Q: That they won’t be able to pay it back?

GP: That’s not a risk, that’s a cast-iron certainty. No, no, the risk is that in some very complicated way the bank will lose money. Now what happens with securitization? You see before securitization, we could see the risk. It was there. We had it. And then, after securitization, what that did was, whooooo. The risk was sort of out there. Somewhere. Nobody knew. Then we looked back, and my god, it was still there after all!

Clever, that.

My friend Matthew Rose has written a wonderful financial edition of the Devil’s dictionary. A taster:

PPIP, or PUBLIC-PRIVATE INVESTMENT PARTNERSHIP, v.t. Orig: Gladys Knight. To use a form of hypnotism in which merely saying you intend to fix a problem has the effect of making everyone forget about the problem. Usage: “We really peepipped Congress on those AIG bonuses.” See ASSETS, TOXIC.

QUANTITATIVE EASING, n. A regulatory approach based on the point in Western movies when the sheriff, having fired all available bullets, in an act of final desperation throws his gun at the bad guys. See also INFLATION, HYPER.

As they say, go read the whole thing.

The photo of the day comes from Wall St Cheat Sheet, which has put together this wonderful picture to illustrate a piece entitled “Is Nouriel Roubini a False Prophet?”.

From left, we can see Tim Geithner, in the background, followed by the garlanded Nouriel himself, followed by Brad Setser (sadly no longer blogging), who looks over the shoulder of CNBC’s Joe Kernen. Over to the right, in black and white, is Stephen Mihm, who wrote a long profile of Roubini for the NYT magazine. Larry Summers is conspicuous by his absence; maybe he’s in the sky above, pulling all the strings.

How fabulous is Ecocomics, a new blog about the economics of comic books? Well, here’s a taster:

In the world of comic books any individual who has more than 5 million dollars in saving or assets immediately becomes bat-shit insane. It’s a strange rule, but it seems that every independently wealthy individual in superhero comics decides that fighting/committing crime is the best way to spend their free time. They ignore possible hobbies like golfing, yachting, and collecting antique cars and go straight into wearing a mask and creating a global organization designed to save/destroy/conquer the world. The examples in comic book fiction are nearly limitless.

Of course, the author ignores the problem of sampling error: millionaires in comic books cannot be considered a representative sample of millionaires in the alternative worlds they inhabit. But still, he has a point.
(Via)

The Epicurean Dealmaker has invented a new parlor game: match financial-market participants to Russian national stereotypes circa 1865! Can I play too?

Incidentally, the stereotypes age well. Have you met a French investment banker? A Bank of England technocrat? Nouriel Roubini (who counts as Italian for these purposes)? Josef Ackermann?

But of course there’s still a burning question: Why is the American self-assured?

If you haven’t subscribed to The Epicurean Dealmaker’s twitter feed, do so now. This morning he decided he was going to go all Chuck Norris Facts on us, and came up with some absolute classics:

# Little-known Chuck Norris Fact: Chuck Norris does not mark to market. The market marks to Chuck.

# More: Chuck Norris does not go bankrupt. Chuck Norris ruptures banks.

# Source of hedge fund survivorship bias?: Funds that pay Chuck Norris 2 and 20 survive; others don’t.

# Private equity: Chuck Norris does not believe in leverage. Chuck Norris believes in crowbars.

# Investment banking: No-one defers Chuck Norris’s compensation.

# Capital structure: No-one subordinates Chuck Norris. All his equity is preferred.   

# If Chuck Norris devised the bank stress tests, not even the Treasury Department would survive.

Feel free to add your own in the comments, but it’ll be hard to beat these.

Update: Check out Jeff H’s comments, they’re rather fabulous too, for instance:

Chuck Norris’ tears would solve all the banks’ liquidity problems. Too bad he’s never cried. Ever.

Only Chuck Norris can issue secured debt. The rest is at his mercy.

I love this chart, from The Big Money:

The good news, of course, is that it’s not just the Legacy Assets which are rising in value — the Unlimited Metrocards are, too! A few more fare hikes, and Citi will surely be solvent again.

(Via Cottrell, who also links to a startling list of vacant Treasury communications positions. These things don’t need Congressional approval, why are they all empty?)

Reprinted from Portfolio.com

Jeremy Denk notes the crisis spreading:

In what is now a familiar story, Lee Ellen Jo Public, of Loma Vista Boca Loca, AZ, found herself at a piano recital, where the pianist had just concluded the exposition of the G major Schubert Sonata. Having invested some 7 minutes of very serious listening, she felt she could not abandon the equity she had built up, even though the prospect of paying off the rest of the development and recapitulation was daunting. Fellow audience member Ronald McGrumpy was much less sympathetic. "After the first two bars, I said to myself, are you kidding me, what kind of sucker do you think I am, I’m not going to stick around and wait for Schubert to develop that. If she got caught upside down on this deal, it’s her fault and her fault alone." Commenter Claude D., mainstay of the well-regarded financial blog Prelude to the Afternoon of a Fund, suggests many people are wondering whether to accept the damage to their listening credit and walk out. "Now, you see, Mozart’s solution to this problem, which is introducing a new theme in the development, carries its own risks; but Mozart seems to think you should look at the crisis as an opportunity and innovate your way out."

Someone (Tyler Cowen, of course) needs to teach Lee Ellen about sunk costs, sharpish.

Reprinted from Portfolio.com