Posts tagged as:


A failure of all offices

September 19, 2011

UBS releases further details about their rogue trader, but fail to describe how the fraud was possible.

2 comments Read the whole post →

Too big to care

September 15, 2011

The revelation that yet another rogue trader has been pulling the levers at a major bank, this time costing UBS $2 billion, makes me wonder about all the rogue traders we're not hearing about -- the ones who aren't big, stupid or aggressive enough to get caught. It raises serious concerns about the level of risk […]

2 comments Read the whole post →

A product only a banker could love

May 25, 2010

There's a lot of excitement about just-launched startup Betterment, but I'm very wary. At best, it's an example of "bad" financial innovation. At worst, it's a straight up scam. It goes to show that it doesn't take complexity and structured products to pull the wool over investors' eyes; all you need is a website and […]

11 comments Read the whole post →

Progressive taxation

December 9, 2009

The UK's plan to tax banker bonuses at 50% is really quite clever. The tax is borne by the employer, not the employee, and so the following results: Bankers keep their bonuses, and the incentive structure (for better or worse) remains intact... Taxpayers extract value from the bank, and populist rage (somewhat) subsides... Shareholders suffer. […]

0 comments Read the whole post →

Goldman Sachs loses a month and $1B

April 14, 2009

Goldman Sachs announced stellar earnings last night of $1.8 billion, or $3.39/share.  The expected number was a mere $1.64/share, which GS more than doubled. The press went crazy, although the reported earnings were in line with the whisper.  Goldman used the positive momentum to push through a $5B equity offering, the proceeds of which will […]

1 comment Read the whole post →

Bank Holiday Ends?

March 28, 2009

Now that Dimon has admitted that "March was a little tougher," does the party end?  Can we go back to thinking of the banks as villainous institution which can't manage their own risk to save themselves (poor choice of words)? We don't always get a look into the month-by-month performance of the big banks; their […]

0 comments Read the whole post →

Economics 101: Market Failure (PPIP edition)

March 25, 2009

Back in Ec 10 we discussed the two principal forms of market failure: moral hazard and adverse selection. Both are forms of information asymmetries, and lead to a loss of surplus and general lack of efficient resource allocation. Moral hazard is the idea that if someone knows they are protected from risk, they will behave in […]

0 comments Read the whole post →

Bank of America?

February 26, 2009

Excellent graphic from the NYTimes magzine article, "More Than One Way to Take Over a Bank:"

0 comments Read the whole post →

A Few Greedy Men

February 11, 2009

Classic email I received from R (and if you don't know, now you know): I picture the following dramatic scene unfolding later today: Barney Frank: What did Paulson tell you? Ken Lewis: [stonefaced] Barney Frank: WHAT DID PAULSON SAY TO YOU IN YOUR MEETING IN MID-DECEMBER? Ken Lewis: You want answers? Barney Frank: I think […]

1 comment Read the whole post →

"It is better to be roughly right than precisely wrong."

January 31, 2009

Despicable though his character may have been, Keynes said some remarkable things, the title of this post among them. He also uttered the cliched investing mottos regarding animal spirits and beauty contests -- true statements all, but widely abused by financial textbooks. My favorite, which remains somewhat unknown despite its enormous relevance, is: The market […]

1 comment Read the whole post →