A Secretive Banking Elite Rules Trading in Derivatives

[DJofSD]

People that promote popularity over performance are terrible people to have as your manager. Their opinion is as variable as the wind.

Stick by your guns. It often is the individual that is offended by the way the message is delivered that has a problem, not the person delivering the message. First and foremost, to be offended is a choice -- most often an unconscious one but a choice nonetheless. They can grow and learn to separate their emotional response from their rational understanding of the issue at hand, or, they can stay in a mode of being ruled by their lizard brains, easily manipulated.

[bigmack]

Originally Posted by Robert Goren

Slewis, thank you, that is what I understood. A credit default swap is a fancy term for an insurance policy.

They structured CDS's to be like insurance but not regulated as such. Clever fellows.

CDS contracts have been compared with insurance, because the buyer pays a premium and, in return, receives a sum of money if one of the events specified in the contract occurs. However, there are a number of differences between CDS and insurance, for example:
The buyer of a CDS does not need to own the underlying security or other form of credit exposure; in fact the buyer does not even have to suffer a loss from the default event.

In contrast, to purchase insurance, the insured is generally expected to have an insurable interest such as owning a debt obligation;
the seller doesn't have to be a regulated entity; the seller is not required to maintain any reserves to pay off buyers, although major CDS dealers are subject to bank capital requirements; insurers manage risk primarily by setting loss reserves based on the Law of large numbers, while dealers in CDS manage risk primarily by means of offsetting CDS (hedging) with other dealers and transactions in underlying bond markets; in the United States CDS contracts are generally subject to mark-to-market accounting, introducing income statement and balance sheet volatility that would not be present in an insurance contract.

[Robert Goren]

I could sell a CDS to Tom on Boxcar's car even though I have no money to pay off if Boxcar wrecks his car. There are no laws against doing this. Is that right? No wonder the whole thing blew up.

[boxcar]

Originally Posted by slewis

But if you regulate, and prosecute, well then Boxcar calls you a Socialist and "anti business".

This isn't a fair representation of my position. It comes nigh to making me appear to be a anarchist, which I'm not. I'm not anti-government. Nor am I anti-government regulation per se. However, I am very much anti-over-regulation. I'm anti-authoritarianism. I'm anti-government oppression. I'm anti-tyranny. In short, I'm for as limited government as possible.

So which way do you guys prefer?

This guy prefers what I just stated. But admittedly, I am biased about my own carefully thought out positions, informed opinions, etc.

Boxcar

[DJofSD]

RG, as a guess, I believe each state has laws that prohibit selling insurance where there is not any underwriting. In essance, you are commiting a fraud.

Also, if you recall, part of the initial debate back when all of the CDS and housing melt down started was whether or not the states had any skin in the game.

[slewis]

Originally Posted by Robert Goren

I could sell a CDS to Tom on Boxcar's car even though I have no money to pay off if Boxcar wrecks his car. There are no laws against doing this. Is that right? No wonder the whole thing blew up.

Not quite that simple Bobby. Remember, AIG at the time was triple AAA rated with enormous assets to cover most windfalls. I used to hear that bull sh#t from them everytime we turned them down in the trading markets.
They'd call us an complain, with "Why cant you increase your crdit lines to us, do you know what our assets are, blah blah blah"? And they were right.
They were huge. But they were NOT bankers.

Goldman got cozy with them and if Bernanke didn't bail out AIG, Goldmans exposure to them would have bankrupted them too!

You're not talking bout some rinky-dink operation in AIG.

Let me remind everyone that the SWAPS themselves are not evil, nor is the concept. It's when you dont use them PRUDENTLY they create disaster.

Kinda like a gun

[DJofSD]

Originally Posted by slewis

Not quite that simple Bobby. Remember, AIG at the time was triple AAA rated with enormous assets to cover most windfalls. I used to hear that bull sh#t from them everytime we turned them down in the trading markets.
They'd call us an complain, with "Why cant you increase your crdit lines to us, do you know what our assets are, blah blah blah"? And they were right.
They were huge. But they were NOT bankers.

Goldman got cozy with them and if Bernanke didn't bail out AIG, Goldmans exposure to them would have bankrupted them too!

You're not talking bout some rinky-dink operation in AIG.

Let me remind everyone that the SWAPS themselves are not evil, nor is the concept. It's when you dont use them PRUDENTLY they create disaster.

Kinda like a gun

But without a clearinghouse or some agency providing oversight, how do you know if the assests that are being used to underwrite the derivatives are not being overpledged?

[slewis]

Originally Posted by boxcar

This isn't a fair representation of my position. It comes nigh to making me appear to be a anarchist, which I'm not. I'm not anti-government. Nor am I anti-government regulation per se. However, I am very much anti-over-regulation. I'm anti-authoritarianism. I'm anti-government oppression. I'm anti-tyranny. In short, I'm for as limited government as possible.



This guy prefers what I just stated. But admittedly, I am biased about my own carefully thought out positions, informed opinions, etc.

Boxcar

Yes, the question(s) is/are, how "informed" those opinions of yours are.

When people like Mosty and Hcap produce statistics and graphs that constantly expose your position as "un-informed' you dismiss those facts instead of addresing the truth.

When I posted Carly Fiorina outsourced 80,000 jobs, BIGMACK was all over me with the correct statistics. I have no problem admitting the error..(although my conceptual belief on the subject remains intact).
That's a point we could debate going forward.

You rarely (if ever) back up your statements with facts, just your theories of solving society's problems through your bible.

[boxcar]

Originally Posted by slewis

Yes, the question(s) is/are, how "informed" those opinions of yours are.

When people like Mosty and Hcap produce statistics and graphs that constantly expose your position as "un-informed' you dismiss those facts instead of addresing the truth.

When I posted Carly Fiorina outsourced 80,000 jobs, BIGMACK was all over me with the correct statistics. I have no problem admitting the error..(although my conceptual belief on the subject remains intact).
That's a point we could debate going forward.

You rarely (if ever) back up your statements with facts, just your theories of solving society's problems through your bible.

We can graph each other to death. Numbers can be massaged and/or interpreted to mean different things, as with "man-made" global warming as one great example. Another great example are sports statistics, etc., etc. Or how bookkeepers can "cook the books", etc. Statistics/numbers must be interpreted in their contexts in order to acquire a proper understanding of what is being represented. Don't misunderstand: I'm not dismissing statistics as a legitimate mode of argument or debabe. All I'm saying is that quite often I don't have the time to do the research. However, you are dead wrong when you say that I never have backed up statements with numbers. It would be more accurate to say that I infrequently do.

As far as society's problems are concerned, I find your objection to bible-based solutions to be disingenuous because the Left itself is just as guilty of appealing to the morality of public policy issues as often as the "religious right" does! Great case in point was a few months ago when a bunch of liberals went to the House to present "moral arguments" (laughably based on the bible to boot!) to congress critters for the amnesty of illegals. Or how about all the Class Bigots who incessantly preach their "social gospel" against the evils of Capitalism or the runaway greed of the "rich" who have earned their fortunes on the necks of the poor, etc.? The Left continually talks about "social justice"? And if justice isn't a moral issue, then what is?

Anyway you want to slice it or dice it, SL...at the end of the day what defines a society -- what defines a People -- are the collective morals or ethics of a nation. There's no escaping what we humans are, i.e. moral beings. Therefore, when all is said and done this nation will continue to decline or reverse its course and rise again based on the moral decisions we make as individuals and in the corporate sense within the institution of government.

Boxcar

[slewis]

Originally Posted by boxcar

We can graph each other to death. Numbers can be massaged and/or interpreted to mean different things, as with "man-made" global warming as one great example. Another great example are sports statistics, etc., etc. Or how bookkeepers can "cook the books", etc. Statistics/numbers must be interpreted in their contexts in order to acquire a proper understanding of what is being represented. Don't misunderstand: I'm not dismissing statistics as a legitimate mode of argument or debabe. All I'm saying is that quite often I don't have the time to do the research. However, you are dead wrong when you say that I never have backed up statements with numbers. It would be more accurate to say that I infrequently do.

As far as society's problems are concerned, I find your objection to bible-based solutions to be disingenuous because the Left itself is just as guilty of appealing to the morality of public policy issues as often as the "religious right" does! Great case in point was a few months ago when a bunch of liberals went to the House to present "moral arguments" (laughably based on the bible to boot!) to congress critters for the amnesty of illegals. Or how about all the Class Bigots who incessantly preach their "social gospel" against the evils of Capitalism or the runaway greed of the "rich" who have earned their fortunes on the necks of the poor, etc.? The Left continually talks about "social justice"? And if justice isn't a moral issue, then what is?

Anyway you want to slice it or dice it, SL...at the end of the day what defines a society -- what defines a People -- are the collective morals or ethics of a nation. There's no escaping what we humans are, i.e. moral beings. Therefore, when all is said and done this nation will continue to decline or reverse its course and rise again based on the moral decisions we make as individuals and in the corporate sense within the institution of government.

Boxcar

Pretty much agreed.

[boxcar]

Originally Posted by slewis

Pretty much agreed.

Christmas has truly arrived early. I could not have asked for a better present.

Boxcar
P.S. Oh...in my excitement, I nearly forgot to thank you, SL.

[delayjf]

If you read my earlier post you'll learn under no way shape or form are institutions required to include derivative exposure on their balance sheets.

So lets start regulating them, force them to list them as liabilities on the balance books.

While I am as big a capitalist as anybody, I do believe in oversight and in this case considering the amount of money and the impact on this nations economy, I believe in hefty fines, jail time, and civil liability for violations that occur at the highest corporate levels.

All this discussion about regulations, good and bad, seems vague, perhaps a tread started to specify good regulation vs bad regulation might be more informative.

[acorn54]

the whole banking mess was allowed to happen when clinton repealed the glass-siegal act, which did not allow banks to speculate in the markets. it was a concept that was the result of what happened during the great depression. i guess people never learn.

[slewis]

Originally Posted by acorn54

the whole banking mess was allowed to happen when clinton repealed the glass-siegal act, which did not allow banks to speculate in the markets. it was a concept that was the result of what happened during the great depression. i guess people never learn.

Sorry but you're quite incorrect. I was in the business in the 80's and 90's and 95% of our trading was spec and the other 5% was customer pricing.
The real spec trading started in the 70's.


But you can blame Clinton if you'd like.

[slewis]

Originally Posted by delayjf

So lets start regulating them, force them to list them as liabilities on the balance books.

While I am as big a capitalist as anybody, I do believe in oversight and in this case considering the amount of money and the impact on this nations economy, I believe in hefty fines, jail time, and civil liability for violations that occur at the highest corporate levels.

All this discussion about regulations, good and bad, seems vague, perhaps a tread started to specify good regulation vs bad regulation might be more informative.

You make great points. But until we change the way things are done in Washington, whether it's drilling off-shore for oil, health care or banking, the people have very little to say. The corporations and their lobbyists with open checkbooks trump what you (or I) believe should be regulated.