Posts Tagged ‘yves smith’

Must-read: How Goldman Sachs secretly bet on the housing crash

1 November 2009

. . . while selling $40 billion of mortgage-backed securities that it claimed were safe.  The article, by Greg Gordon of McClatchy Newspapers, is based on a five-month investigation.

Yves Smith at Naked Capitalism has a few words on the matter and on the article, here.

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Too big to say no to

4 May 2009

Banking news of note this past week:

  • A bill to allow bankruptcy court judges to modify the terms of troubled mortgages, “cramming down” the amounts owed so as to avoid foreclosures and make these debts and troubled assets more manageable, failed in the Senate, getting just 45 votes.   En route to the bill’s failure, its chief sponsor, Sen. Dick Durbin (D-IL) said the banks “are still the most powerful lobby on Capitol Hill. And they frankly own the place.”  The NYT noted that the White House, despite backing the bill, did not go to bat for it in its final days.
  • The Treasury has delayed the release of its “stress tests” of the 19 largest banks, apparently because their credulous-looking certification that all 19 banks are currently solvent is not rosy enough for some of the banks, notably Citigroup.  Word is that Citi and Bank of America are contesting the results, even though the tests (1) appear to have used the banks’ own questionable data on the values of their toxic assets and (2) minimize the amount of hypothetical “stress” these banks might be subject to, by entertaining only fairly optimistic worst-case scenarios.  Various economists have said the tests were rigged in the banks’ favor, but evidently some banks are pushing to make them even more so.  Yves Smith offers the full bill of indictment here.

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The agony of AIG: Time to educate myself

2 March 2009

“Zombie insurance company” doesn’t exactly roll off the tongue, does it?  We shall work on a suitable epithet.

As usual, Joe Nocera of the NYT offers pith and insight into the AIG mess.

And Yves Smith at Naked Capitalism offers some sophisticated outrage.  I’m a big believer in the concept of the enlightened rant, which may be why NakedCapitalism.com is among my daily visits.

So far, my summary understanding of the AIG mess is something like this:  The company diligently acquired a AAA credit rating and then recklessly exploited it by selling “naked” (unhedged, no offsetting position) credit-default-swaps to anyone and everyone.  Unlike the failing banks, AIG wasn’t directly involved in the subprime securities business, but their problems became AIG’s problems when many of them began defaulting on their obligations — obligations which were insured by . . .  AIG.  So now AIG also has obligations that no honest financial institution can pay.  And because AIG is one of the world’s largest corporations, it accounts for huge chunks of many institutions’ stock and bond/loan portfolios.  “Too big to fail,” blah blah blah.

To be updated with more links . . .