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Posts Tagged ‘Brooksley Born’

Deciphering Joe Cassno’s Lies Before The Financial Crisis Inquiry Commission

Courtesy of Tyler Durden of Zero Hedge 

Submitted by David Fiderer

Deciphering Joe Cassno’s Lies Before The Financial Crisis Inquiry Commission

Joe Cassano is a very good liar, which is why it would be so hard to prosecute him for perjury. When testifying before The Financial Crisis Inquiry Commission, the former head of AIG Financial Products kept blending in half-truths with his audaciously dishonest claims, so that the overall effect was nonsensical. For instance, to justify his outrageous claim that, "the books were generally considered fully hedged," he explained that "we were using it basically in actuarial basis …[so] it’s not hedged in the conventional sense." (Translation: The book was never hedged in any sense. Nor was there any actuarial analysis, only a reliance on triple-A credit ratings.) These rhetorical tricks were designed to throw sand in everyone’s face. But his tactics seem to have worked. The staunchly unregenerate Cassano framed a media narrative that deflected away from his dishonesty and gross incompetence.

Here’s a reality check on some of his more ridiculous claims, in order of appearance:

1. Cassanos’s Claim: AIGFP never compromised its high underwriting standards.
The Truth: AIGFP had no underwriting standards pertaining to the most important risk, which affected AIG’s liquidity
.

Commission Chairman Phil Angelides asked Cassano if he understood the subprime risks he insured. Cassano stonewalled with a lot of doubletalk:

Angelides: I want to talk to you about this, that these were represented as multisector CDOs. But if you look at — we did a sample of some of these in 2004, 2005, 2006, they were almost overwhelmingly residential-backed and very substantially subprime. For example, in the survey we did of some of these CDOs that you issued protection on, 84 percent were backed by RMBS residential mortgages in ’05, 89 percent in ’06. And just as an example, while you indicated you decided to stop writing on subprime instruments in January of ’06, for example, you backed an instrument called RFC III where that CDO was 93 percent subprime and seven percent HELOC home equity loans.

My question for you, Mr. Cassano, is was there — you said you did thorough due diligence. Were you aware of the quality of the mortgages? Do you do direct analysis of the loan data? Were you confident that you had a full understanding of the nature of what you were backing?


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David Viniar Walks A Thin Line Between Truth And Perjury At Today’s FCIC Hearing

David Viniar Walks A Thin Line Between Truth And Perjury At Today’s FCIC Hearing 

Courtesy of Tyler Durden

Today, during the FCIC’s second day of hearings, Goldman CFO David Viniar was forced to provide additional data about the firm’s AIG CDS trades. Luckily the firm kept a record of all entry and exit points, and thus will be able to confirm just what the P&L of the associated trades is (and if not, we are happy to teach Goldman’s risk department how to use the Bloomberg CDSD function in conjunction with RMGR run scraping to build a real time CDS portfolio tracker)… Which is ironic, because when asked by Brooksley Born why the firm has not yet provided a break down of its derivative revenue Mr. Viniar by all accounts perjured himself. As Bloomberg reported: “We don’t have a separate derivatives business,” Viniar told the panel. “It’s integrated into the rest of our business.

Uh… what?

Every evening, a firm’s back office (and that most certainly includes Goldman) takes the EOD CDS and cash marks from every single prop trader, be they equity, fixed income, mortgage, FX, etc. and using its own integrated pricing system or an outsourced one, compiles a daily P&L which is immediately sent to the head of the risk division, the head of trading, and other various listserv participants. And most certainly the traders, who have every interest of knowing just how they did in any given day as they prepare their bonus speech at the end of the fiscal year. Traders, who combine cash and CDS trading simply look at a consolidated P&L on the basis of DV01 exposure, which makes the form of product used completely irrelevant, and is a process whereby every change in 1 basis point in interest rates is equivalent to a profit or loss. Every single derivative is presented in Goldman’s daily risk summary on a DV01 basis to show not only maximum possible loss, but what the daily profit or loss may have been. This makes the tracing of both revenue from derivatives and cash products seamless.

Obviously even the FCIC panel was fully aware of this: 

When you tell us that you don’t know how much you make in your derivatives business, nobody here really believes it,” [Commissioner Byron] Georgiou told Viniar. “Nobody here believes that you don’t know how much money you’re


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Frontline Special On Brooksley Born’s Attempt To Tame Derivatives

Frontline Special On Brooksley Born’s Attempt To Tame Derivatives 

Courtesy of Tyler Durden

Think Blanche Lincoln’s attempts to tame derivative trading are new? Think again. During the 1990′s, its was the CFTC’s  Brooksley Born who was the original crusader, attempting to warn about the dangers posed by an unregulated and out of control explosion in synthetic exposure. And just like Lincoln’s current role reprisal will likely end up being neutered by the Dodd-Frank tag team, so Born’s warnings continuously fell on deaf and conflicted ears. To see how 12 years ago one person was predicting precisely what may happen if JPM got its way to drown the world in $1.2 quadrillion of derivatives, watch this Frontline video "The Warning" from late last year: a fascinating hour-long adventure into the shadowy Over The Counter world which everyone has an opinion on, yet so few understand.

 

h/t TwentypercentTV


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The Warning: Brooksley Born’s Battle With Alan Greenspan, Robert Rubin And Larry Summers

If you missed "The Warning," watch it here, thanks to John. – Ilene

The Warning: Brooksley Born’s Battle With Alan Greenspan, Robert Rubin And Larry Summers

Courtesy of John Carney at Clusterstock

alangreenspan closeup tbiLast night PBS’s Frontline aired a new documentary called The Warning. If you missed it, you are in luck. We’ve got it right here. 

Here’s how Frontline describes the documentary.

"We didn’t truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency — the Commodity Futures Trading Commission (CFTC) — who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country’s key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"

In The Warning, airing Tuesday, Oct. 20, 2009, at 9 P.M. ET on PBS (check local listings), veteran FRONTLINE producer Michael Kirk (Inside the Meltdown, Breaking the Bank) unearths the hidden history of the nation’s worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

"I didn’t know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton’s powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group — former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin — convinced him that Born’s attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."

Born’s battle behind closed doors was epic, Kirk finds. The members of the President’s Working Group vehemently opposed regulation — especially when proposed by a Washington outsider like Born.

"I walk into Brooksley’s office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She’s hanging up the…
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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!

 
 

Zero Hedge

Russia is de-dollarizing

Courtesy of ZeroHedge. View original post here.

Submitted by Gold Standard Institute.

 

The ruble and other currencies do not compete against the dollar. They are dollar derivatives.

The dollar is headed to ruin, but that doesn’t mean that any other paper currency can replace it. The others will fail first.

The dollar will fail last.

 

The failure of the dollar, and the transition to gold happens to be the theme of an event The Gold Standard: Both Good and Necessary, in New York on Nov 1. There hasn’t been a real recovery from the crisis of 2008, and there won’t be until we return to the use of g...



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Chart School

Time for the Pullback?

Courtesy of Declan.

Sellers were going to make an appearance at some point and today was the day they paid a visit. Whether a larger pullback emerges will depend on events over the coming days, but today's selling did emerge at some natural attack points for shorts.

The S&P finished with a 'bearish cloud cover,' but it did manage to hold declining resistance turned support, and the 20-day MA has entered the fray as an area for bears to work. But this wasn't the most bearish of the indices, and today's finish actually gives bulls a long play tomorrow (for a bounce off support).  Technicals also suggest a bounce.


While the S&P may give bulls something tomorrow, th...

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Option Review

LUV Options Active Ahead Of Earnings

There is lots of action in Southwest Airlines Co. November expiry call options today ahead of the air carrier’s third-quarter earnings report prior to the opening bell on Thursday. Among the large block trades initiated throughout the trading session, there appears to be at least one options market participant establishing a call spread in far out of the money options. It looks like the trader purchased a 4,000-lot Nov 37/39 call spread at a net premium of $0.40 apiece. The trade makes money if shares in Southwest rally 9.0% over the current price of $34.32 to exceed the effective breakeven point at $37.40, with maximum potential profits of $1.60 per contract available in the event that shares jump more than 13% to $39.00 by expiration. In September, the stock tou...



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Phil's Favorites

Larry Swedroe: Use Valuations for Expected Returns, Not Market Timing

Larry Swedroe: Use Valuations for Expected Returns, Not Market Timing

Courtesy of 

When forecasting investment returns, many individuals make the mistake of simply extrapolating recent returns into the future. Bull markets lead investors to expect higher future returns, and bear markets lead them to expected lower future returns. But the price you pay for an asset also has a great impact on future returns. Consider the following evidence:

The average historical P/E ratio for the market has been around 15. A study covering the period from 1926 through the second quarter of 1999 found that an investor buying stocks when the market traded at P/E ratios of between 14 and 16 e...



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All About Trends

Mid-Day Update

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To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Insider Scoop

UPDATE: Brean Capital Initiates Coverage On GrubHub

Courtesy of Benzinga.

Related GRUB UPDATE: JMP Securities Initiates Coverage On GrubHub Inc Benzinga's Top Initiations Making Money With Charles Payne: 09/25/14 (Fox Business)

Brean Capital initiated coverage on GrubHub Inc (NYSE: GRUB) with a Hold rating.

Analyst Tom Forte noted that "catalysts for the stock include an accelerat...



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Sabrient

Sector Detector: Sharp selloff in stocks sets up long-awaiting buying opportunity

Courtesy of Sabrient Systems and Gradient Analytics

Last week brought even more stock market weakness and volatility as the selloff became self-perpetuating, with nobody mid-day on Wednesday wanting to be the last guy left holding equities. Hedge funds and other weak holders exacerbated the situation. But the extreme volatility and panic selling finally led some bulls (along with many corporate insiders) to summon a little backbone and buy into weakness, and the market finished the week on a high note, with continued momentum likely into the first part of this week.

Despite concerns about global economic growth and a persistent lack of inflation, especially given all the global quantitative easing, fundamentals for U.S. stocks still look good, and I believe this overdue correction ultimately will shape up to be a great buying opportunity -- i.e., th...



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Digital Currencies

Goodbye War On Drugs, Hello Libertarian Utopia. Dominic Frisby's Bitcoin: The Future of Money?

Courtesy of John Rubino.

Now that bitcoin has subsided from speculative bubble to functioning currency (see the price chart below), it’s safe for non-speculators to explore the whole “cryptocurrency” thing. So…is bitcoin or one of its growing list of competitors a useful addition to the average person’s array of bank accounts and credit cards — or is it a replacement for most of those things? And how does one make this transition?

With his usual excellent timing, London-based financial writer/actor/stand-up comic Dominic Frisby has just released Bitcoin: The Future of Money? in which he explains all this in terms most readers will have no tr...



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OpTrader

Swing trading portfolio - week of October 20th, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Market Shadows

Falling Energy Prices: Sober Look takes a Sober Look

Falling Energy Prices: Sober Look takes a Sober Look

What do falling energy prices mean for the US consumer? Sober Look writes a brief yet thorough overview of the consequences of the correction in the price of crude oil. There are good aspects, particularly for the consumer, bad aspects, and out-right ugly possibilities. For more on this subject, read James Hamilton's How will Saudi Arabia respond to lower oil prices?  In previous eras, Saudi Arabia would tighten the supply to help increase prices, but in this "game of chicken," the rules m...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly. Just sign in with your PSW user name and password. (Or take a free trial.)

#457319216 / gettyimages.com

 

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Promotions

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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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