the finance industry / wall street

yeah it is weird that the french havent been whining more, its unlike them xp

this if you take the logic far enough would kinda require europe to become one country

which as I understand it was the whole point in the first place/was expected to happen as the next logical step but lol sovereignty and yes, paella.

If it had been done properly then a single currency and stronger, linked economies could have given Europe a chance to have more power against the dollar and the gargantuan US economy that basically everyone had to be subservient to for a while.

yeah i guess it just keeps coming back to linked economies really require linked governments

i'm no rah rah cheerleader for capitalism but as i understand it, it is a force that desires flow and loathes national boundaries, so the notion of one large economy running through separate cultural identities etc could have been an interesting experiment for our globalised future but now i think maybe collective farming is the way to go

done properly would have meant a federal political union as well as a shonky economic one but i think they were in a bit of a hurry.

exactly, which is why they needed a tighter centralized control xpost

i do think its cool how they got countries to take some of their nastier laws off the books

having all of europe vote on one parliament or w/e would be the greatest political spectacle in the world

they do have a degree of that with the MEPs and all, it just needed more definition. given the Europeans though they might have instinctively gone back to some insane Holy Roman Empire style central power with loads of largely autonomous principalities jibing each other. if you've ever played Europa Universalis III, you'll know how messy that can get.

wwIII for sure

there could have been a way, politically, maybe, but i imagine there would be a lot of speechifying from disgruntled right-wingers, touting the horros of Bratwurst on the Champs-Elysees or Baguettes lining the Appian Way.

So what does Germany want though? Do I understand correctly that they'd basically like Greece to not need a bailout AND not default, i.e. "austerity"?

this is p good

http://www.cnn.com/2012/05/21/opinion/frum-euro-crisis/index.html?iid=article_sidebar

although I don't really like the conclusion of "no one knows...therefore...BAAAAD"

well austerity is a condition for the ongoing bailout, germany would like greece to do what it says and in return theyll continue to give them money

oh fine u hate yeglesias but u like frum *rolls eyes*

thats a p good piece actually but it kinda dances around how insane things would get if spain left the euro

like this is all spanish banks failing simultaneously: Financial institutions that have bought Spanish credit-card debt (or Spanish mortgages or whatever) may discover equally shockingly late that their bonds also will not and cannot pay off in full.

His explanation of what leaving the euro would do to local commodities like housing and labor vs. "tradable" stuff was helpful

it's kind of overstating the case when it says "shockingly late that their bonds ..." because the surprise isn't there anymore. out of that 130 billion euro bailout, 100 billion of it is from investors writing down the greek bond debt. so when they talk about building an additional 700 billion euro firewall around europe what they're talking about is preparing to write down other big chunks of debt.

I'd be very surprised if anyone owns bonds backed by Spanish credit-card debt and is not extremely aware of the risks at this point.

I wonder who was smart enought to buy up Credit Default Swaps on all this debt early on.

This is a decent article about European bank exposure to a Greek exit:

http://www.bloomberg.com/news/2012-05-22/european-banks-unprepared-for-pandora-s-box-of-greek-exit.html

a fair amount of CDS on European debt is euro-denominated, so there's that too... (wrong-way risk, they call it)

http://av.r.ftdata.co.uk/files/2012/05/Estimated-cost-of-Grexit-Nomura-1024x612.png

huh so these gargantuan cds contracts don't contain some kind of exchange risk provisions?

http://news.firedoglake.com/2012/05/25/sec-ends-probe-into-lehman-brothers-without-taking-action/

I think Hurting 2 led the investigation. Just joking (and yea its the SEC and not Justice ...)

The officials have weighed issuing a public report on their findings that would stop short of an enforcement action while highlighting the firm’s questionable conduct.

hurting: i don't know the numbers. most european cds is USD, but for a time, a fair amount was euro.

A passage that struck me in The Big Short this morning:

"One of the reasons that Wall Street had cooked up this new industry called structured finance was that its old-fashioned business was every day less profitable. The profits in stockbroking, along with those in the more conventional sorts of bond broking, had been squashed by internet competition."

Sort of set off a light bulb for me. Wall Street would rather have the predictable profits from its old-fashioned businesses -- the old "make other people's money work for you" adage. Profits whether the market goes up or down. Profits from transaction costs. It's when that model is put at risk that Wall Street starts thrashing around and doing crazier, more risky things. It's almost like a gambler doubling down.

Can you give me a timeline here? Does old-fashioned mean when Glass-Stegall still existed?

alphaville iama on reddit. good reading: http://www.reddit.com/r/IAmA/comments/uflwl/iama_reporter_on_the_financial_times_alphaville/

When E-trade (or Scotttrade, Ameritrade, Fidelity, Schwab, etc.) advertise $9.99 for unlimited share amount transaction fees, its worth noting that Merrill Lynch et. al. in the 70s used to make around $150 for the first 100 shares traded and a sliding percentage of total dollar amount thereafter. Trading was expensive, investors had to buy and hold, and brokers went out of their way to seek new clients and sometimes even keep them happy to ensure future commissions.

Additionally, stock prices used to be quoted in 1/4th, 1/8th and sometimes 1/16th of a dollar, ensuring that the spread between bid and ask that the brokerage could pocket if they were doing a interclient trade was at least $0.06 and usually more like $0.25, per share. With decimalization of share prices, the spread on liquid securities has dropped to fractions of a penny.

The disintermediation of discount, and later, internet trading totally destroyed the business model of the brokerage industry.

But to detail what went wrong in the CIO, Dimon has repeatedly promised to be an “open kimono” — a phrase that we hope he will wean himself off.

http://ftalphaville.ft.com/blog/2012/06/22/1056901/jpm-to-host-face-to-face-analyst-meeting-after-q2-earnings/

oh lord

sooo what do we think of the LIBOR SCANDAL?

huge deal in the UK, not a blip stateside

yeah super big deal here, which seems fair enough?? affects a lot of things (it seems)

Barclays apparently planning to strip Bob Diamond of most of his stock options and such that generally soften the blow of being run out of town.

The LIBOR scandal hasn't taken off here (USA) as a story, but it is getting some play. It's this kind of casual manipulation of the market that destroys trust in banks and bankers, and someone needs to point out that without a certain amount of trust to grease the wheels the whole financial system would freeze up as solid as a rock. The punishments for such abuses should be commensurate with the damage they do to the whole system.

It's this kind of casual manipulation of the market that destroys trust in banks and bankersIt's this kind of casual manipulation of the market that destroys trust in banks and bankers

destroys what now?

er, didn't mean to paste that twice

cheap joek. if people really had no trust in banks, bank assets would evaporate so fast you could hardly blink twice.

Libor should really be getting more play in the US. There's $500trn based on it in one way or another, and a lot of public money (via states and cities) made or lost via it. Be surprised if there aren't fraud investigations and a shit-ton of lawsuits from the US over this.

i think people assume everybody holding their money is a blood-drinking bandit, probably gives them a lot of room to maneuver in shit like this, perversely enough.

if the fdic didnt exist banks assets might dry up over night

Libor getting virtually no coverage on US cable news outlets. Nor on the PBS Newshour yesterday.

At least that I've seen.

Didn't realise that half of all US floating mortgage rates are directly based on Libor http://www.lrb.co.uk/v30/n18/donald-mackenzie/whats-in-a-number

this, and the economist article it links are pretty good: http://blogs.reuters.com/felix-salmon/2012/07/06/barclays-first-mover-disadvantage/

my sense is that libor basically was always a big lie packaged up as an actual number, and everyone who actually interacted with it and knew how it was generated must have pretty much known that.

basically, bankers are not stupid when it comes to considering how people might attempt to break the rules to screw them over. and so when you have a rate that everyone knows is the average of people just saying whatever numbers they want to, every trader and banker must have understood that this never was something at all meaningful or reliable, or only was to the extent that it was an average of what different people wanted it to be in the first place.

Ah, yes, another incarnation of the she-was-asking-for-it defense.