James Galbraith spent eight days in February traipsing around Europe with Yanis Varoufakis.
“I stayed with the tech teams, from the 11th to the 17th, including the Brussels meeting,” says Galbraith. “I was in the boiler room with the Greek guys, the working stiffs.”
He’s shared the experience via an article in Fortune. The frequent lack of professionalism and coordination on the European side shocked him. Continue reading
Interesting interview with David Stockman about the many malformations brought about by decades of monetary and fiscal mismanagement. Since the crisis official intervention has been relentless and extreme. In Stockman’s view, the room for manoeuvre is narrowing rapidly.
The fundamental error throughout has been official unwillingness to allow creditors to suffer. It’s led them, and therefore us, into a terrible cul-de-sac. Continue reading
In the years following the financial crisis many have wondered (with varying degrees of incredulity) why no senior banking executives were criminally prosecuted.
Instead, as John Cassidy writes in the New Yorker, there’s been a succession of monster settlements between financial institutions and the US Justice Dept.
“We seem to have stumbled into a new form of corporate regulation,” I noted at the time of the JPMorgan settlement [November 2013], “in which nobody in the executive suite is held personally accountable for wrongdoing lower down the ranks, but the corporation and its stockholders are periodically socked with huge fines for past abuses.”
To the extent explanations for the failure to prosecute have been offered, they usually come down to two things.
First, although foolishness and cupidity were ubiquitous in the years leading up to the crisis, proving intent to defraud can be a tricky business as the Justice Dept discovered in its attempt to prosecute two Bear Stearns bankers in 2009.
Second, there’s the “we might end up destroying a systemically important bank” excuse. In other words, the Justice Dept version of “too big to fail”. Continue reading
America’s control of US dollar international settlements is a potent weapon. For financial institutions, exclusion from that system would be crippling, possibly fatal. The mere threat is generally sufficient to bring transgressors into line.
The issue hit the headlines recently when BNP Paribas reached an “agreement” with US authorities. As punishment for having violated US sanctions against doing business with various nations including Cuba, Iran and Sudan, BNP will pay a fine of $8.97 billion, cop a guilty plea on various charges and be partially excluded for one year from conducting US dollar transactions.
Each use of this power increases the incentives for other countries and institutions to build effective alternative settlement systems. Given the U.S. dollar’s continuing ubiquity, that may be a long time coming. Still, because it’s the first time a major international bank has been so squarely in the crosshairs this latest case definitely raises the stakes: Continue reading
An engaging economics site written by two asset management veterans.
“Our blog is based on our portfolio management experience and F.F.’s ongoing research, and motivated by our respective midlife crises. Most people drive around in convertibles and reinterpret their wedding vows. We made up new names and started the blog.”.
They do good work. No nonsense, clear, aligned with reality (to the extent anyone nowadays can work out what that is) and enjoyable. Their latest (“Planning for Future Rate Hikes: What Can History Tell Us that the Fed Won’t?”) is as good a point of introduction as any. Have a look and perhaps, like me, you’ll also work your way through some of their back catalogue.
Michael Lewis’ bestseller on HFT triggered a frenzy of interest in this arcane subject.
Of the many reviews and commentaries, the sanest I’ve seen so far is a long piece by Felix Salmon.
Lewis has succeeded in shocking millions of people with the news that the stock market has violated their code—that it isn’t fair. Wall Street insiders, and those of us who knew about HFT already, have been generally underwhelmed by this revelation, because we’ve known that the Wall Street code has always favored a small group of rich and well-connected institutions who can afford to pay enormous sums of money to maintain their edge in the market. The advent of HFT just created new entrants into that charmed circle, while causing many incumbents to lose their gilded meal tickets.
Without multiplying examples further, my point is that the Department of Justice has never taken the position that all the top executives involved in the events leading up to the financial crisis were innocent, but rather has offered one or another excuse for not criminally prosecuting them – excuses that, on inspection, appear unconvincing. So, you might ask, what’s really going on here? I don’t claim to have any inside information about the real reasons why no such prosecutions have been brought, but I take the liberty of offering some speculations, for your consideration or amusement as the case may be.
via Judge Rakoff: Why Have No High Level Executives Been Prosecuted In Connection With The Financial Crisis? | The Big Picture.