Rolfe Winkler

Reader note: off on vacation the next few days so posting will be light. But LOTS of great links today….2 days of reading here!

Must Read – Volcker’s rules: DOA (Pethokoukis, Reuters) It appears the administration was never seriously considering a big push to get the “Volcker Rules” limiting bank size and proprietary trading added to financial reform legislation. My colleague Jimmy P. has a pithy, incisive analysis of what’s happening.

Must Read — How JP Morgan treats its clients, scandalously and in bad faith (Felix) Great find from Felix. Judge Rakoff is at it again, this time ruling against JP Morgan, which Rakoff says acted in bad faith. “The gist is that JP Morgan took one of its longest-standing clients in Mexico — Grupo Televisa — and tried to hand all of its secrets over to its biggest rival, Carlos Slim. And the way it tried to do that was by selling Slim a loan larded up with covenants which would essentially force Televisa to reveal any and all information to the holder of the debt.”

China sells Treasurys….or did they? (EconompicData) Great post. The WSJ follows their lead today.

Stripping away the disguise of derivatives (Das, FT) Explaining how derivatives can be used to mask debt. Not a long piece, but read slowly if you’re not familiar with the terms.

Treasury Secretary would lead new systemic risk council (Chan, NYT) The idea that a systemic risk council will help avert crises is foolish when you think about it. None of the regulators that will be on the council has done a very good job “leaning against the wind” in the past.  Yet together they are going to be able to not only reach consensus about systemically risk firms, but actually take corrective action?

IMF to sell 191 tons of gold on open market (Pardomuan/Wroughton, Reuters) It sold 400 tons not long ago, half of which was scooped up by India. Gold still makes sense in the long-run as insurance against a dollar crisis, but with the dollar likely to get stronger in the short run on the back of continued debt problems in Europe, it may be possible to add to gold positions below $1,000…

Ackman may make $170 million on grand-slam General Growth bet (Taub/Burton, Bloomberg) And he could make much more if Simon ups its bid or another bidder emerges at a price higher than Simon’s offer of $9. The market expects a higher price in the end, what with the shares trading near $13. Ackman bought his for 46¢! He’s said the shares are worth at least $24, but with the cash component of Simon’s offer just $6, it would make sense to take some profits…

Goldman’s Rococo PR prince (Abelson, NY Observer)

States sink in benefits hole (Merrick, WSJ) As of June 30, 2008 the 50 states collectively faced a $1 trillion funding deficit between what they’ve promised to public sector retirees and the funds they’ve actually set aside. And the data were collected before the bottom fell out of the market, so the gap is likely worse. Keep this in mind when liberal economists try to explain away the federal debt as manageable. If banks got bailouts, you can bet public sector employees will, so consider these funding gaps as obligations of the federal government…

Muni threat: Cities weigh Chapter 9 (Dugan/Maher, WSJ) It isn’t just states facing budget trouble.

Feather starfish swimming (Youtube) Wow.

Gadget Noir…

Kohn, Bair warn banks about interest rate risk at FDIC symposium (Wutkowski, Reuters) The Fed says rates will stay low for an “extended period.” But that doesn’t mean “forever” so the Fed, along with other bank regulators, have warned bankers to prepare their balance sheets for higher rates. The populist line that banks need to “lend more” to get the economy going is just foolish. Regulators know the score: banks that lend too much at these low rates, or are using too much cheap short-term funding, will be caught out when rates head back up. Text of Kohn’s speech here. PDF of Sheila Bair’s here. (Bair’s speech is shorter and less wonkish)

MS looking into legal action against ZeroHedge (Teri Buhl) Will they actually sue? Probably not. Still, ZH’s emphasis on quantity over quality means they too often lift the work of others. Blogs link to content all the time of course, but proper attribution is important. And ZH most certainly DOES NOT have permission to reprint research coming from Wall St. analysts.

Wall St. tries to put price on Volcker rule (Sanati, Dealbook) Goldman is said to be in the most trouble, since a larger piece of its business is driven by proprietary trading. But can’t they just give up the bank charter they got last year in order to avoid any new Volcker-rule regs?

Simon Johnson joins HuffPo (Felix) As part-time biz editor.

GDP grows 5.7% (Mutikani, Reuters) The guys at Variant Perception have been saying to expect blowout growth this year coming off a low number, but they warn that it’s all dependent on government largess, which is not sustainable. The market knows this. Stocks are flat on this news.

Bank sues victim to avoid replacing stolen funds (Consumerist) Hackers got away with $800,000, but the bank can’t make it all up. So it’s pre-emptively suing the victim…

Are they AIG conspiracy theories really so nutty? (Reilly, Bloomberg) Geithner, Paulson and Bernanke have all said they had nothing to do with the decision to make a full pay out to AIG’s CDS counterparties. So who was in charge??

Bin Laden rebukes U.S. on climate change (Healy, NYT) No, really.

Bunch of phonies mourn JD Salinger (The Onion)

Dog saved after floating away on Baltic sea ice (Guardian)

Baby platypi…