Afternoon Links 4-12
MUST READ — How One hedge fund kept the bubble going (Eisinger/Bernstein, ProPublica) Yves Smith broke open the Magnetar story in Chapter 9 of her book. Bottom line, one hedge fund called Magnetar was able to use a little bit of cash to sponsor the creation of ultra-toxic CDOs, which they turned around and bet against via credit default swaps. Imagine building a house on top of a fire-pit and then over-insuring it. (This is why I’ve argued CDS should be regulated as insurance.) Meanwhile, the CDO departments at banks were happy to do the deals because it meant bigger bonuses for them. Bank executives and risk managers higher up the chain hadn’t the first clue how these exotic instruments were structured so they agreed to warehouse some of the riskiest parts of the securities on their own balance sheets in the name of getting the deals done.
Financials seek to soften Basel stance (Jenkins/Masters, FT) Hopefully regulator backbones stay stiff in the face of banker protests regarding tough new capital and liquidity requirements.
The DTA dodge (Alloway, Alphaville) Speaking of bank capital, Alphaville has an updated chart from Barclays showing deferred tax assets for the top U.S. banks.
Walking against Australia’s housing mania (Steve Keen) Keen lost a bet that Australian property prices would crater. Turns out he didn’t anticipate his government’s resolve to prop up the market. As a result he has to complete a 225km trek. It may take a few years, but I think Steve will have the last laugh…
CoCo goes to cable (Carter, Media Decoder)
VIDEO — After pitching 3 innings of scoreless relief in his second appearance, reliever Chan Ho Park explains to the media why his first appearance was terrible (YouTube)
2010 Pulitzers (Pulitzer.org) National Enquirer absolutely deserved one for breaking open the John Edwards sex scandal.
Hallucinogens have doctors tuning in again (Tierney, NYT)
10 Google tricks (Mackie, NYT)
Doing a barrel roll while pouring ice tea…(at end of video, though whole thing is entertaining)