More on Morals

This article in today’s Arizona Republic talks about Brent White’s paper (U of A Law Prof) on the double standard regarding the “moral” conversation surrounding strategic defaults on home mortgages.  I’ve cited his article in a previous post.  He also quotes my friend and colleague Don Loeb, with his thoughts on the subject.  One other […]

Why Hedge AAA?

Investments in AAA bonds are supposed the opposite of this type of high yield investment. It makes absolutely no sense that a AAA investor should need the same high tech models to make his investments or that if he fails to properly use his models he will be completely blown up and his investment will be worthless.

This “highly sophisticated investor” argument has been used by Goldman, other banks and a remarkably high number of journalists (in my opinion just repeating the crap they have been fed by their sources) as a way of getting the banks off the hook. But it is a fundamentally flawed argument. The CDO bonds that AIG insured were rated AAA. If you have to be a rocket scientist to understand the investment and if anything short of perfect analysis of the bonds means you will be blown up – then by definition the bonds are not AAA.

AAA = easy and low yield. BBB = complex, high yield. This is a pretty simple and bright light distinction. And yet it has been blurred and ignored throughout the discussion of this asset, as recently as two days ago by Goldman.

Pushing Back

I do like this renewed spark in Obama. He got downright feisty on that devastating new Supreme Court opinion decimating campaign finance reform.   He claims to finally listening to Volcker again, like he represented during the campaign.  Volcker’s moving back out of political Siberia…   I do not even care if  Obama’s sparkiness is primarily in response to the […]

Brooksley Born: Foresight Thwarted

Wouldn’t it have been heroic if someone had thought to warn the bigwigs of the disasters brewing from the giant regulatory gap in the “dark market” of OTC derivatives?  I’m sure that Greenspan, Rubin, and Levitt would have been so grateful for this wisdom.  They would have immediately set themselves to the worthy task of implementing her suggestions, thereby […]

Arizona 2nd in Foreclosures for 2009

More than 163,000 Arizona properties received foreclosure notices in 2009, or about 6.12 percent of homes.  Phoenix Business Journal. Nevada won first place. There were a record 41,000 foreclosures in the Phoenix area alone last year. So the Cards may have lost today but Arizona is really kicking ass on those foreclosure numbers.