Felix Salmon

Yes, the SEC was colluding with banks on CDO prosecutions

Back in 2011, I asked whether the SEC was colluding with banks on CDO prosecutions. And now, thanks to an American Lawyer Freedom of Information Request, we have the answer: yes, they were.

Annals of captured regulators, NY Fed edition

Peter Eavis has a worrying story today: the chairman of the New York Fed, William Dudley, has effectively, behind the scenes, managed to delay the implementation of an important new piece of bank regulation.

The bank tax rises from the dead

Back in January 2010, Barack Obama — flanked by Tim Geithner, Larry Summers, and Peter Orszag — unveiled a new tax on big banks, or a “financial crisis responsibility fee”, as he liked to call it. Of course, this being Washington, the initiative never got off the ground, and was largely forgotten — until now:

You won’t have broadband competition without regulation

Tyler Cowen isn’t worried about the cable companies’ broadband monopoly. His argument, in a nutshell: if you can’t afford broadband, that’s not the end of the world: you can always go to the public library, or order DVDs by mail from Netflix. And if the cable companies’ broadband price is very high, then that just increases the amount of money that alternative broadband providers can potentially make in this “extremely dynamic market sector”. Indeed, he says, if regulators were to force cable companies to decrease their prices, then that would only serve to decrease the amount of money that a competitor could make, and thereby lengthen the amount of time it will take “to reach a more competitive equilibrium”.

When disruption meets regulation

Why Zions needs to bite the bullet and sell its CDOs

It’s hardly news that in the run-up to the financial crisis, some banks created highly-toxic collateralized debt obligations, and other banks bought those highly toxic CDOs and put them on their balance sheets. The result was that when the crisis hit, and the CDOs plunged in value, a lot of banks needed to take a lot of write-downs.

The invincible JP Morgan

When JP Morgan paid its record $13 billion fine for problems with its mortgage securitizations, the bank came out of the experience surprisingly unscathed, in large part because Wall Street reckoned that the real guilt lay mainly in the actions of companies that JP Morgan had bought (Bear Stearns and WaMu) rather than in any actions undertaken on its own watch. There was a feeling that the bank was being unfairly singled out for punishment — a feeling which, at least in part, was justified.

The $5 trillion dilemma facing banking regulators

Last month, I wrote about bond-market illiquidity — the problem that it’s incredibly difficult to buy and sell bonds in any kind of volume, especially if they’re not Treasuries. That’s a big issue — but it turns out there’s an even bigger issue hiding in the same vicinity.

Bad bank of the day, RBS edition

Here in the US, the bank-related scandals pertaining to the financial crisis invariably focus on the go-go years before everything fell apart, when the originate-to-distribute model created horribly skewed incentives across most of the privately-owned financial sector. In the UK, however, the latest big scandal is in many ways the exact opposite: it governs the behavior of RBS, one of the largest banks in the world, after the financial crisis, and after it was effectively nationalized by the UK government.