Lunchtime Links 4-20
Democrats likely to drop $50 billion fund to draw Republicans (Vekshin/O’Connor, BW) Republicans are right that the fund creates moral hazard, but a bigger risk may be that the cost of a large resolution will be fronted by taxpayers. “Ex-post” funding from other banks to pay back taxpayers — which had been the alternative proposed — seems more than a bit unlikely. Post the failure of any large institution, banks would scream about paying a fee for a fallen competitor: “It will reduce lending!” If regulators could be trusted to seize large banks early enough such that there’s still some capital left in them, an ex-post regime would be better. But I fear WaMu may be the exception, not the rule.
CRE prices decline 2.6% in February (Calculated Risk) Take this index with a grain of salt. There aren’t many transactions happening in the CRE world from which to determine robust pricing info.
A race to the bottom in clearing Fan/Fred interest rate swaps? (Wood, Risk Mag) Wonky, but interesting.
Inside a Goldman Sachs Abacus deal (HuffPo) Also wonky, also interesting.
Goldman was Barack’s second-largest contributor (OpenSecrets) If he’s going to use GS as a talking point to push more stringent derivatives reform, can he keep their money? I would say sure. It’s only an embarrassing political conflict if you accept money and then carry water for the donor. By taking the money and stuffing Goldman anyway, seems to me that Obama makes GS the sucker. Could be a problematic campaign issue at some point though…
Charting grade inflation over time (Economix)
The animated ash cloud (YouTube) No wonder flights are grounded.
How volcanic lightning works (ScienceBlogs) Cool photos.