June 17, 2012 Leave a comment
- South Bend Seven says algorithm design is free speech and I agree.
- South Bend Seven two-fer: on those studies purportedly showing Smart people being stupid. Maybe you should just read that blog not this one.
- Chicago Boyz on why Obamacare is worse than you can possibly imagine. (HT Bore Patch) That didn’t stop Smart People from favoring it, of course, because they didn’t really know fuck-all about what was in it in the first place. On the contrary, those of us who didn’t want it were dumb-ass mouth-breathers for opposing their benevolent reforms about which they didn’t know jack diddly squat.
- Deus Ex Macchiato says the mystery of the JP Morgan trade/loss/risk mis-measurement has to do with CRM, and I still don’t understand, but it’s worth thinking about.
- Good piece by Jeffrey Gordon on JP Morgan & Volcker Rule. No new territory for longtime RWCG readers (hi there!), c.f.
Banks are always adjusting their credit position in light of their views about credit risk, in deciding who to extend credit to and their mix of assets. We want banks to do this to assure their solvency. The Volcker Rule’s focus on proprietary trading simply misses this underlying reality: extending credit and holding credit risk is a proprietary business and it’s hard to limit hedging such activity in a mechanical way. Because the hedged position is the bank’s, this hedging activity will be, at its core, “proprietary.”
Again: no such thing as prop trading, unless all of modern banking is prop trading.
- Same source, The Volcker Rule Distraction, asks why the Maiden Lane auctions weren’t ‘prop trades’:
In April, the New York branch of the Federal Reserve decided to sell some of the mortgage-related securities it had purchased in 2008 as part of its effort to rescue the insurer AIG. The buyers of the Fed’s assets were major investment banks. The banks bought the securities from the Fed because they expected to sell the securities to their own customers and earn a profit. The draft language for the Volcker Rule does not make it clear whether such purchases would violate the provision once it goes into effect.
Hmm where have I heard that point raised before.
- Free Association: “They [Obama/the left] approve of what caused the financial and housing debacle: easy money and easy housing.” Indeed.