Occupy Wall Street protest in New-York

[edward]

http://seekingalpha.com/article/198197-why-derivatives-caused-financial-crisis"
April 12, 2010


http://www.gold-eagle.com/editorials_08/demeritt061608.html"
June 16, 2008

Somewhere http://hawaiinewsdaily.com/2011/07/the-horrific-derivatives-bubble-that-could-one-day-destroy-the-entire-world-financial-system/" ?



I spent the whole freakin' day studying derivatives, and still don't understand them.

Perhaps this guy was right:



How the hell can a whole lot of nothing be worth between $600 trillion and $1500 trillion dollars?

Is this why the aliens don't come and visit?

OM have you ever seen the documentary: Quants the Alchemists of Wall Street? It was made by a Dutch production company. It's 47 minutes.

http://topdocumentaryfilms.com/quants-alchemists-wall-street/

 

[OmCheeto]

Derivatives are pervasive in the market place, There are even weather derivatives.

http://new.evomarkets.com/index.php?page=Weather_Markets-Markets-Market_Players

Wow weather derivatives were created by the Koch brothers.

Weather derivatives?

http://thinkprogress.org/report/koch-oil-speculation/

This whole thing has evolved into one giant casino for the wealthy.

Wow. If half of that is true...

Charles Koch, the CEO of Koch Industries who is worth a reported $22 billion, likes to call his business an example of something he describes as the “Science of Liberty.” In reality, his company’s deregulation crusade has contributed to rolling blackouts, consolidation and monopolies in financial markets, and economy-wrecking oil price spikes. In comments to the CFTC, the reform-minded nonprofit Better Markets noted that, “the history of these markets is a history of anti-competitive, self-interested, predatory conduct that serves the interest of the exclusive few at the expense of the many and the system as a whole.”

bolding mine

the "Science of Liberty"

hmmm...

I read something at the end of the wiki http://en.wikipedia.org/wiki/Shays%27_Rebellion" article the other day that kind of reminds me of this:

Ultimately, however, the uprising was the climax of a series of events of the 1780s that convinced a powerful group of Americans that the national government needed to be stronger so that it could create uniform economic policies and protect property owners from infringements on their rights by local majorities. Men like Charles Harding helped to spread concepts created during Shays' Rebellion. These ideas stemmed from the fear that a private liberty, such as the secure enjoyment of property rights, could be threatened by public liberty - unrestrained power in the hands of the people. James Madison addressed this concept by stating that "Liberty may be endangered by the abuses of liberty as well as the abuses of power."

bolding, once again, mine

 

[OmCheeto]

OM have you ever seen the documentary: Quants the Alchemists of Wall Street? It was made by a Dutch production company. It's 47 minutes.

http://topdocumentaryfilms.com/quants-alchemists-wall-street/

Nope. But after 2 minutes, I'm already hungry.

 

[WhoWee]

Derivatives are pervasive in the market place, There are even weather derivatives.

http://new.evomarkets.com/index.php?page=Weather_Markets-Markets-Market_Players

Weather impacts the economy - insurance related to non-catastrophic weather events is not new. I worked on a project about 10 years ago to insure car washes for lost income on rainy days.

 

[edward]

Nope. But after 2 minutes, I'm already hungry.

Hungry for oysters? lol

I read a version of Shays rebellion that stated that at one point there were so many men in debtors prison that the state could not defend itself against an Indian uprising. That was one thing that brought about change.

 

[John Creighto]

Are you sure you are top 10%?

I have never been in top 10% but I can pay all my school loan right now and still graduate from the school with some savings.

I recall reading today that if you make over 65 000 per year you are in the top 10% in Canada. That is only 31.25 per hour which a what a lot of people make who do trades. We pay about 1100 a month in rent and car costs are about 600 a month. Perhaps you were able to spend less or earn more while at school but it is not uncommon to finish school with a large debt especially if one doesn't live at home.

I was able to live on a cheaper income as I was unemployed and underemployed for the first two years of the downturn but that was with eating a lot of bread, sharing a place with two other people, and not being able to pay my student loan. I know someone can survive on a low income but even what is considered quite a good income can still mean quite a modest lifestyle.

 

[edward]

Weather impacts the economy - insurance related to non-catastrophic weather events is not new. I worked on a project about 10 years ago to insure car washes for lost income on rainy days.

Weather insurance has been around forever. Not so with weather derivatives they originated with Koch and Enron in 1997.

 

[LaurieAG]

the "Science of Liberty"

hmmm...

That James Madison is a real gem OmCheeto.

http://www.whitehouse.gov/about/presidents/jamesmadison/

In Congress, he helped frame the Bill of Rights and enact the first revenue legislation. Out of his leadership in opposition to Hamilton's financial proposals, which he felt would unduly bestow wealth and power upon northern financiers, came the development of the Republican, or Jeffersonian, Party.

http://en.wikiquote.org/wiki/James_Madison

Of all the enemies to public liberty war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few. In war, too, the discretionary power of the Executive is extended; its influence in dealing out offices, honors, and emoluments is multiplied; and all the means of seducing the minds, are added to those of subduing the force, of the people. The same malignant aspect in republicanism may be traced in the inequality of fortunes, and the opportunities of fraud, growing out of a state of war, and in the degeneracy of manners and of morals engendered by both. No nation could preserve its freedom in the midst of continual warfare.

 

[WhoWee]

Weather insurance has been around forever. Not so with weather derivatives they originated with Koch and Enron in 1997.

I think Bill Clinton and Congress deserve the real credit - not Koch.

Evolution Markets touts their executive prowess with this information:
http://www.wrma.org/wrma/library/file382.pdf

"Joining Mr. Young on the weather desk is Nicholas Ernst a specialist in the development of
emerging markets and risk management. Mr. Ernst is a Director of Weather Markets at
Evolution Markets. Prior to joining Evolution Markets, Mr. Ernst was with ENRON
Corporation, where he established the company's market-making capabilities in the newly
developed trading market for flat-rolled carbon steel products. Prior to ENRON, he was a
Risk Specialist for Bethlehem Steel Corp., where he managed the company's price exposure
for base metals purchases, as well as energy purchases.
“We are very pleased to have Bill and Nick as the basis of our weather desk,” said Mr. Ertel.
“They have a strong knowledge of the weather market’s fundamentals, as well as excellent
experience in developing commodity markets.”
The over-the-counter market in weather derivatives began in 1996 when Koch Energy (now
Entergy-Koch) and Enron completed a heating degree-day (HDD) swap for the winter of
1997 in Milwaukee, WI. Principals from Evolution Markets facilitated this landmark trade.
The market continues to demonstrate impressive growth. According to a Price Waterhouse
urvey, the market has since grown into a $4.2 billion notional market value with
approximately 4,000 contracts traded in 2001. "

They are the market makers (not Koch).my bold
http://new.evomarkets.com/index.php?page=Catastrophe_Derivatives

"Evolution Markets is a leader in the development of the catastrophe derivatives market, which provides innovative, market-based tools for insurance and financial companies seeking to manage weather risk. The firm's brokers assisted in the launch of this global market, and Evolution Markets is committed to its growth through market transparency, counterparty education, and efficient trade execution."

 

[OmCheeto]

Hungry for oysters? lol

Always. Fortunately I had shrimp in the freezer as a substitute.

I read a version of Shays rebellion that stated that at one point there were so many men in debtors prison that the state could not defend itself against an Indian uprising. That was one thing that brought about change.

hmmm... If the 1.5 quadrillion dollars worth of notional derivatives comes due one day, is the world going to put a big fence around us, and tell us we're in debtors jail?

I did finish the video.

I took a few notes. All were quotes by Paul Wilmott.

19:35 "Taking risks with other people's money"

He said it was OK for people to take risks for profit. It's just not OK to do that with other people's money.

32:50 "Economists. They think they are scientists."

I laughed out loud when he said that. I said something very similar a few years back. https://www.physicsforums.com/showpost.php?p=2318849&postcount=106", still stands in my mind.

35:25 "If people don't complain now, then, it serves them right, when the next financial crisis happens".

This comment struck me as a predictive support for the OWS crowd.

39:15 "Now we are talking about trading at the speed of light".

I remember when I first discovered high frequency trading. I didn't like the sounds of it. Still don't. I think I learned it all from http://www.zerohedge.com/taxonomy/term/140" . They don't like it either:

9/13/2011
and a whole lot of other "experts" ridiculed our views of HFT as liquidity extracting, because yes they are, rebate chasing, sub penny frontrunning parasites

 

[OmCheeto]

That James Madison is a real gem OmCheeto.

http://www.whitehouse.gov/about/presidents/jamesmadison/

http://en.wikiquote.org/wiki/James_Madison

I've been hesitant to put that quote up, as I found the full document, and could barely follow it.

http://press-pubs.uchicago.edu/founders/documents/v1ch4s27.html"
CHAPTER 4 | Document 27
James Madison, Federalist, no. 63, 422--29
1 Mar. 1788

...

To this general answer the general reply ought to be sufficient; that liberty may be endangered by the abuses of liberty, as well as by the abuses of power; that there are numerous instances of the former as well as of the latter; and that the former rather than the latter is apparently most to be apprehended by the United States.

I believe he was saying we should be more fearful of the abuses of liberty.

hmm... I wonder what he meant by that.

 

[Skins]

Oh wow, I could not disagree more here. For one, the issue of inequality. Inequality of outcome is a natural outcome of a free society.

No it isn't.

During periods of major wealth creation, you will often see a lot of very wealthy people created. But usually, this also results in huge increases in society's standard of living (because the way those people got very wealthy in the first place was by creating products and services that people wanted in large quantities). If a society tries to create an equality of outcome, then it will infringe on freedom.

This may have once been partially true. But we are not talking about "a lot of wealthy people", we are talking about only a few extremely wealthy people who control of the majority of the worlds wealth. At the same time we are looking at a declining standard of living, Fewer jobs, increased debt, increased bankruptcy, rising unemployment, lack of quality affordable health care particularly for those in lower income brackets, those who have lost there jobs, etc.

. If a society tries to create an equality of outcome, then it will infringe on freedom.

Not sure what you mean by "equality of outcome"

When you have a greater equality of income the people living in that society generally have more freedom. When you have large disparities of income you have more people locked into a socio-economic class that becomes more and more difficult to escape the greater the disparity grows.

 

[WhoWee]

Perhaps this is what the OWS people have been looking for - clarity - look at the 3 year chart.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aF9swlfXBR6o
http://www.bloomberg.com/apps/quote?ticker=USHEYOY:IND
***

Next, a look back to an article written in 2009 - about the "tax and spend Democrats" returning to their roots under President Obama.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aF9swlfXBR6o

"Of course, the Clinton budget office never forecast those surpluses. The 1997 reduction in the capital gains tax in conjunction with a stock-market bubble conspired to produce an April tax surprise for several years running.

The surpluses did go a long way toward helping the Democrats shed their label as the party of tax and spend.

President Barack Obama is wasting little time returning his party to its roots.

“He has grand plans and no revenue to pay for them,” says Joe Carson, chief economist at AllianceBernstein.

No revenue? No problem. Taxing the wealthy, and eventually the not-so-wealthy, seems to be the new revenue avenue. In fact, everyone who pays taxes will probably pay more in the near future.

And there’s an increasingly small number that do. An estimated 47 percent of tax filers will pay no income tax in 2009, according to an analysis by the Tax Policy Center. That’s perilously close to a majority. When half the population is on the receiving end of government programs and has no skin in the cost, they will encourage their elected representatives to vote “yes” on every new benefit that comes down the pike.

Universal health care? Slap a surtax on the rich. Exact a penalty fee from companies that don’t provide health insurance to workers. And if the promised cost savings don’t materialize? Just increase the surtax on income and capital gains.

Stakeholders vs. Beneficiaries

What about that aging infrastructure in need of an update? Get businesses to pay for it. A bill introduced in the House of Representatives earlier this week would tax corporate profits to pay for “repairing America’s corroded pipes and overburdened sewer systems,” according to Congressman Earl Blumenauer, Democrat of Oregon, the bill’s chief sponsor. “The $10 billion annual fund will create more than 250,000 jobs.”

That would be in addition to the (fill-in-the-number) million jobs Obama says the $787 billion fiscal stimulus will save or create. (The number keeps changing, which doesn’t really matter since the effect can’t be quantified.)

Blumenauer and his colleagues should read what the Congressional Budget Office has to say about the effect of various proposals on jobs.

‘Play or Pay’

When it comes to health care, employers may pay for insurance, but employees bear the cost -- in the form of lower wages, for example. Imposing “play-or-pay requirements” on employers, as the House’s version of the health-care bill does, could have a negative impact on minimum-wage workers because businesses can’t pass the additional cost along, the CBO says.

Raising the cost of doing business is not an incentive to hire.

“It’s not creating jobs,” says Michael Aronstein, president of Marketfield Asset Management in New York. “It’s not creating businesses. As far as I can tell, there’s not a single thing in the thousands of pages of legislation that would encourage anyone to start or expand a business in the U.S.”"

 

[WhoWee]

No it isn't.

Care to elaborate?

 

[WhoWee]

But the main reason why I replied is that you said something specifically about credit.

Given that you currently are in your own business, I wanted to get your feedback on something: what do you think is an optimal way for determining credit worthiness of businesses (by this I mean how to judge whether you should extend credit) as well as the terms (interest rate, period, credit caps etc) that would help encourage serious entrepreneurs to get off the ground, but to filter out the people who would otherwise waste resources that could go to people who would otherwise create businesses that would contribute and hire people?

The thing is that credit is an indirect form of resource allocation, and my feeling is if business people like yourself actually had a voice on this issue, then there might be opportunity for real change.

Here's a look into the world of Government backed loans for projects driven by ideology - rather than on it's business/finance merits.
http://www.businessweek.com/news/2011-10-31/beacon-power-backed-by-u-s-loan-guarantees-files-bankruptcy.html

"Beacon Power Corp., an energy- storage company that received $43 million in backing from the U.S. program that supported failed solar-panel maker Solyndra LLC, filed for bankruptcy after struggling to raise private financing.

The money-losing company, which makes flywheels that manage energy moving through a power grid, had sought to avoid the fate of Solyndra, which entered bankruptcy last month after receiving a $535 million loan guarantee from a U.S. Energy Department program designed to spur alternative energy development. Beacon faced delisting of its shares by the Nasdaq Stock Market and warned in an Aug. 9 regulatory filing that it might not remain a “going concern.”

“The current economic and political climate, the financing terms mandated by DOE, and Beacon’s recent delisting notice from Nasdaq have together severely restricted Beacon’s access to additional investments through the equity markets,” Chief Executive Officer F. William Capp said in papers filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware.

Beacon, based in Tyngsboro, Massachusetts, listed assets of $72 million and debt of $47 million in its Chapter 11 petition. Two affiliates also entered court protection.

Beacon’s first grid-scale plant, with 200 flywheels, began operating in January. The 20-megawatt facility in Stephentown, New York, was funded using the $43 million Energy Department loan guarantee issued in August 2010. About $39.1 million is currently due under the loan, Capp said."

 

[mheslep]

How the hell can a whole lot of nothing be worth between $600 trillion and $1500 trillion dollars?

That's the point, they are not assets, they do not have "worth" of those amounts at a point in time. At least you tried to understand the issue.

 

[LaurieAG]

I believe he was saying we should be more fearful of the abuses of liberty.

hmm... I wonder what he meant by that.

I left this quote out of my last post.

Of all the enemies to public liberty war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few. In war, too, the discretionary power of the Executive is extended; its influence in dealing out offices, honors, and emoluments is multiplied; and all the means of seducing the minds, are added to those of subduing the force, of the people. The same malignant aspect in republicanism may be traced in the inequality of fortunes, and the opportunities of fraud, growing out of a state of war, and in the degeneracy of manners and of morals engendered by both. No nation could preserve its freedom in the midst of continual warfare.

 

[gravenewworld]

Look at that, MF Global goes out of business yesterday on none other than what...their derivative gamblings on Europe. That's exactly what BoA just moved onto the books of the FDIC and tax payers to insure. Looks like BoA isn't stupid and is taking proactive measures to make sure their huge losses that they will take once Europe tanks will be insured by the tax payers. It's also interesting to note that JP Morgan was a huge investor in MF Global and JP Morgan too has moved $80 T in derivative exposures to their FDIC insured branches. I wonder if they'll get some taxpayer money back to cover their losses on MF Global.

 

[OmCheeto]

...
(two whole days ago!)
This whole thing has evolved into one giant casino for the wealthy.

Sorry for the necro-post, but once again, headlines are triggering my memory neurons.

http://dealbook.nytimes.com/2011/10/31/regulators-investigating-mf-global/"
October 31, 2011, 6:57 pm

Federal regulators have discovered that hundreds of millions of dollars in customer money has gone missing from MF Global in recent days...
...
By midmorning on Monday, the firm filed for bankruptcy.

I noticed this yesterday, as all of my stocks were plummeting on the news.

hmmm... What's this? It was all the government's fault?

http://www.reuters.com/article/2011/10/31/us-mfglobal-idUSTRE79R4YY20111031"
Mon Oct 31, 2011 7:52pm
...
In the court filing explaining what went wrong, MF Global pointed a finger at regulators. The bankruptcy was hastened by pressure from the CFTC, SEC and the Financial Industry Regulatory Authority, wrote Abelow, the COO.
...

Oh! Here's some more fodder for those clueless OWS idiots:

According to a July proxy filing, Corzine would be entitled to $12.1 million in severance, prorated bonus and other benefits upon being terminated without cause. Two other executives would be entitled to more: retail operations chief Randy MacDonald could get $17.9 million and Abelow could get $13.7 million.

"without cause"...

I hope they have a trial, filled with OWS clueless idiots as the jury.

Mummy, when I grow up, I want to be the head of a big corporation, drive it into bankruptcy, and then get ten million dollars.

And which planet do you suppose you'll be able to do that on?

Daddy told me last week that he got a new job, and we're moving to Earth.

hmmm...

 

[OmCheeto]

Look at that, MF Global goes out of business yesterday on none other than what...their derivative gamblings on Europe. That's exactly what BoA just moved onto the books of the FDIC and tax payers to insure. Looks like BoA isn't stupid and is taking proactive measures to make sure their huge losses that they will take once Europe tanks will be insured by the tax payers.


It's also interesting to note that JP Morgan was a huge investor in MF Global and JP Morgan too has moved $80 T in derivative exposures to their FDIC insured branches. I wonder if they'll get some taxpayer money back to cover their losses on MF Global.

Excellent timing for many of us though.
It's first Tuesday!
I'll be investing another $100 in the market today.
And there should be some bargains.
The market's only been open 3 minutes, and here's a snapshot of the change in my stocks:
-16.36%
-12.83%
-11.22%
-6.07%
-5.25%
-4.91%
-4.09%
-3.34%

hmmm... That one looks good. 12% annual dividends. Positive cash flow. And best of all, it's not a bank-brokerage-investment-insurance chimera...

 

[Diracula]

When these derivatives are "triggered" and financial institutions like MF Global and potentially Bank of America lose all this money, who profits from it?

 

[OmCheeto]

When these derivatives are "triggered" and financial institutions like MF Global and potentially Bank of America lose all this money, who profits from it?

That would appear to be the "Quadrillion Dollar Question", that outsiders like us can't figure out, and which insiders want to keep secret.

[what I'm sensing]
It kind of reminds me of a sweater, made up of multiple layers. If you pull a thread, one of the layers starts to unravel, but beneath, you find more layers of sweaters. And threads from one layer are interconnected to other layers.

Even funnier than my above sweater analogy is that the entire sweater complex has nothing to do with the wool, or the sweater. It's all based on whether or not some chicken in Uzbekistan drops dead.
[/what I'm sensing]

I will have to work on a better analogy than the sweater, as I've had someone explain derivatives to me, and he used the term "tranche", which he described as a piece of a pie.

Ok then, imagine a thousand trillion pieces of pie...

 

[gravenewworld]

Actually I missed this one about BoA's move.

http://www.bloomberg.com/news/2011-10-27/bank-of-america-derivatives-transfer-attracts-lawmaker-scrutiny.html 40 members on board to reinstate Glass Steagall. We need to press our representatives hard to get more on board, that is of course unless you like to give banks money out of your wallet to bail them out when their gamblings backfire.

 

[mheslep]

...

40 members on board to reinstate Glass Steagall. We need to press our representatives hard to get more on board, that is of course unless you like to give banks money out of your wallet to bail them out when their gamblings backfire.

When advocating the above did you considered the following:
1. Do other countries have a laws similar to GS, i.e. Canada, Europe? Why not?
2. What would reinstating GS do about recent BoA's derivatives action?
3. Why did the Dodd-Frank act, passed under Democratic control of Congress not reinstate GS?

 

[Diracula]

When advocating the above did you considered the following:
1. Do other countries have a laws similar to GS, i.e. Canada, Europe? Why not?
2. What would reinstating GS do about recent BoA's derivatives action?
3. Why did the Dodd-Frank act, passed under Democratic control of Congress not reinstate GS?

Why are these specific questions important when it comes to whether Glass-Steagall should be reinstated or not?

1. I'm not sure if they do or not (I don't think Europe does?). Do other countries have identical financial systems to the U.S.? If not, should this be evidence for whether or not the U.S. should reinstate it?

2. My understanding is that it would not allow Bank of America Corp. to transfer the derivatives to their federally insured commercial bank. It removes the conflict of interest generated by allowing the holding company to gamble on derivatives then transferring all the risk to the federally insured commercial bank that they own. Moral hazard removed and whatnot.

3. I'm not sure anyone can be expected to accurately speculate on all the motivations for all the individuals involved in writing and passing Dodd-Frank. Do you know why?

 

[gravenewworld]

When advocating the above did you considered the following:
1. Do other countries have a laws similar to GS, i.e. Canada, Europe? Why not?
2. What would reinstating GS do about recent BoA's derivatives action?
3. Why did the Dodd-Frank act, passed under Democratic control of Congress not reinstate GS?

1.) There have been proposals in Europe now for something like Glass Steagall to reform Europe's banking system, especially after UBS got rocked in a $2b scandal. Europe's economy and banking system was decimated after WWI and once again after WWII; it took decades for the continent to rebuild, so although they've never had anything Glass Steagall like, it still isn't quite a fair comparison to the US banking system when they've only been up and running for less time than we have. Canada also doesn't have anything Glass Steagall like either, however, there are now calls too in Canada to have something like it. Canada's banking system is also much more regulated , their business culture is more conservative, and they are less on risk taking. Again, not a fair comparison when culture is completely different. I would agree, however, that GS is not the be all and end all. Another major problem is the Commodities Futures Modernization Act, which really just allows derivatives to go unregulated. No amount of regulation is going to prevent abuse, someone will always find a way to skirt the law. Culture has to change too. As long as you have fractional reserve banking, you cannot allow financial institutions that can borrow at near 0% to leverage to 60:1 in pure speculation. That is when you end up with too big to fail. Limit leveraging to 12:1 AND prohibit commercial banks from becoming investment banks. Or eliminate fractional reserve banking. You can't do it both ways. GS is a start on the road to recovery. 2.) BoA can invest in derivatives, let's just not have their investment risks FDIC insured and prevent them from being too big to fail. What was wrong during the days when we had JP Morgan separated from Chase Manhattan?

3.) Frank Dodd is watered down garbage that was changed radically from its original version. It was passed with hordes of financial lobbying dollars attached. The Volcker Rule was never put into effect, and to this day the financial industry is still lobbying with tons of cash to prevent it from being put on the books. Frank Dodd was going to face a Republican filibuster and the Dems were desperate to find the votes needed to get around it. The Republicans that supported it were Scott Brown (R-MA), Olympia Snowe (R-ME), and Susan Collins (R-ME). Brown pushed for removal of the Volcker Rule and removal of a tax that would have raised $19 billion to pay for implementation of the law, and both of Brown's demands were agreed to in order to get around the filibuster.

You can read about the tons of money that poured into Brown's treasure chest as he negotiated to water down Frank-Dodd:

http://www.boston.com/news/nation/a..._donations_soared_as_brown_negotiated/?page=1A watered down version of Frank Dodd just narrowly avoided a filibuster, how in the world could anyone expect a huge, massive overhaul like Glass Steagall to pass along with it if it were attached?

 

[SixNein]

Count me among those that don't get it. What do the ows expect? (I don't think they know) It seems they have a list of things they don't like. Ok...

I spent the last few days in IRC with some people from that movement (about 200). Those people were nothing more than conspiracy theorist. They acted as if the entire world was conspiring against them. If they weren't discussing how the world was trying to get them, they were talking about how the US should adopt anarchy.

I see this movement going no where fast. But when has people standing around ever accomplished anything?

 

[mheslep]

Why are these specific questions important when it comes to whether Glass-Steagall should be reinstated or not?..

Because I think they are relevant to an examination of the benefits and ill-effects of GS. Strawmen like 'identical' financial systems and 'all motivations' only avoid that examination.

 

[Diracula]

Because I think they are relevant to an examination of the benefits and ill-effects of GS. Strawmen like 'identical' financial systems and 'all motivations' only avoid that examination.

Strawmen? You don't think the kind of regulations imposed should depend on the specific financial system in place? Antarctica doesn't have Glass-Steagall and they didn't have a financial collapse, therefore... Is that the type of reasoning you're trying to employ here?

As for calling the 'all motivations' statement of mine a strawman you specifically asked why Dodd-Frank did not reinstate GS. Knowing the motivations of those who wrote and passed the bill seems slightly important to answer such a question. I didn't feel this was sufficiently answerable but it looks like gravenewworld did a good job. However, I again don't see why the political motivations for the individuals who wrote/passed Dodd-Frank have any bearing at all on whether reinstating GS is a net benefit to the U.S. financial system (not Canada's or Antarctica's).

 

[WhoWee]

This is an open question. Do any US citizens on PF feel more confident investing their money directly into an Asian or European based stock market/broker - than through a Wall Street broker? Next, do you trust US regulations to protect you more or less than foreign regulators?

In both examples - if you trust Wall Street or US regulation less - please explain why.

 

[OmCheeto]

Hungry for oysters? lol

I read a version of Shays rebellion that stated that at one point there were so many men in debtors prison that the state could not defend itself against an Indian uprising. That was one thing that brought about change.

Sorry for another retro-post, but I just had a huge platter of both raw and deep fried oysters, and it reminded me of the article by Osinski:

http://nymag.com/news/business/55687/index3.html"
How I helped build the bomb that blew up Wall Street.
...
Times were lean at Paine Webber. The mortgage market, notoriously illiquid in bad times, petered out. Mortgage refinancings dwindled. The supply of raw material, new mortgages, disappeared. We had to lay off half of research. After a day of bloodletting, one of the bosses cornered me in the hallway. Did I get a sexual thrill out of firing people, he wanted to know, because it had always worked for him, big time.

That was 1995. I had been on Wall Street for ten years.
...

That article, along with the following:

http://economistsview.typepad.com/economistsview/2011/05/the-derivatives-markets-helpful-enemies.html"
[T]oday the market for derivatives is oligopolistic, with a few banks running huge profit margins. And, regardless of whatever political motivations might lie behind the latest investigations, this market concentration is a real problem. According to a 2009 study by the European Central Bank, the five largest CDS dealers were party to almost half of the total outstanding notional amounts, while the 10 largest CDS dealers accounted for 72% of the trades. The markets for other derivatives are not much better.

A high degree of concentration distorts the market...

For some reason, made me think of the following, on my drive to work today...
"[URL
Penis-biting slugs: wild claims and confusions[/URL]

 

[John Creighto]

Canada also doesn't have anything Glass Steagall like either, however, there are now calls too in Canada to have something like it. Canada's banking system is also much more regulated , their business culture is more conservative, and they are less on risk taking. Again, not a fair comparison when culture is completely different.

Cultural differences aside I think there are key differences regulatory differences :

"The U.S. leverage
ratio applies on a consolidated basis (at the level
of the bank holding company) as well as at the
level of individual banks, but it does not take into
account off-balance-sheet exposures."
...
"The Canadian “assets to capital multiple” is a
more comprehensive leverage ratio because it also
measures economic leverage to some extent. It is
applied at the level of the consolidated banking
group by dividing an institution’s total adjusted
consolidated assets—including some off-balancesheet
items[5]—by its consolidated (Tier 1 and 2)
capital. Under this requirement total adjusted
assets should be no greater than 20 times capital,
although a lower multiple can be imposed
for individual banks by the Canadian supervisory
agency,"
...
"5. Off-balance-sheet items for this ratio are direct credit
substitutes, including letters of credit and guarantees,
transaction- and trade-related contingencies, and sale
and repurchase agreements. They are included at their
notional amount. Securitized assets are not included as
off-balance-sheet items of the sponsor or originator and
thus would not be taken into account in the leverage
ratio."
http://www.worldbank.org/financialcrisis/pdf/levrage-ratio-web.pdf

That is I think Banks in Canada can't hide as much off their balance sheets.

 

[gravenewworld]

Cultural differences aside I think there are key differences regulatory differences :

"The U.S. leverage
ratio applies on a consolidated basis (at the level
of the bank holding company) as well as at the
level of individual banks, but it does not take into
account off-balance-sheet exposures."
...
"The Canadian “assets to capital multiple” is a
more comprehensive leverage ratio because it also
measures economic leverage to some extent. It is
applied at the level of the consolidated banking
group by dividing an institution’s total adjusted
consolidated assets—including some off-balancesheet
items[5]—by its consolidated (Tier 1 and 2)
capital. Under this requirement total adjusted
assets should be no greater than 20 times capital,
although a lower multiple can be imposed
for individual banks by the Canadian supervisory
agency,"
...
"5. Off-balance-sheet items for this ratio are direct credit
substitutes, including letters of credit and guarantees,
transaction- and trade-related contingencies, and sale
and repurchase agreements. They are included at their
notional amount. Securitized assets are not included as
off-balance-sheet items of the sponsor or originator and
thus would not be taken into account in the leverage
ratio."
http://www.worldbank.org/financialcrisis/pdf/levrage-ratio-web.pdf

That is I think Banks in Canada can't hide as much off their balance sheets.

Sweet short article:

http://www.law.utoronto.ca/documents/Nexus/nexus09_anand.pdf

 

[John Creighto]

Sweet short article:

http://www.law.utoronto.ca/documents/Nexus/nexus09_anand.pdf

The article first mentions how other countries planed to model their banking system of Canada then finishes by attributing a large part of the Canadian success due to culture and better management and it said that law can only do so much. If the successes was cultural then why push the Canadian model? The following quote from the article:

"For example, at the end of the third quarter in 2008,
these ratios ranged from 9.47 per cent to 9.81 per cent compared
to other global banks that were in the 6, 7 and 8 percentage
range.8"

makes me wonder, what part of this capital advantage we due to having more capital to begin with and what part was due to loss of value of assets and hits from off balance sheet items. In my previous post I mention differences between Canada and US on how off balance sheet items are used with regards to calculating leverage for the purposes of Capital adequacy. I still think this is an important regulatory difference.

Anyway, the article mentioned capital quality and this is an important point but can all the differences in capital quality really be due to culture? I doubt it. Their must be key regulatory differences.

 

[Astronuc]

I happened to catch BBC's The Bottom Line on the telie, and I thought the following was quite interesting with regard to the three perspectives offered on the Occupy Wherever movements and the financial services sector. Two of the interviewees (Ian Gorham and Julian Roberts) expressed some sympathy for those demonstrating, while the third (Ken Olisa), the one in the middle, was rather annoyed and unsympathetic with the protesters on Wall Street.

http://www.bbc.co.uk/programmes/b015zs17

Presented by Evan Davis, The Bottom Line cuts through confusion, statistics and spin to present a clearer view of the business world, through discussion with people running leading and emerging companies.

With protests continuing around the world against the financial sector, three guests from that industry swap candid thoughts about it. Evan puts to them a fundamental question: is their industry creating genuine wealth, or is it essentially parasitic, finding clever ways of distributing other people's wealth to its own workers?

Joining Evan in the studio are Ken Olisa, chairman of boutique technology merchant bank Restoration Partners; Ian Gorham, chief executive of financial advisory firm Hargreaves Lansdown; Julian Roberts, chief executive of savings and investment group Old Mutual.