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Black: Why CEOs haven’t been busted

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“Unless you imprison the fraudsters, sophisticated financial scams grow ever more destructive. It seems as if we have forgotten this lesson,” writes William K. Black for Bloomberg News May 10 in an article headlined “Why CEOs avoided getting busted in … Continue reading

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Trade press tackles tri-party repo

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Freelance business journalist Katherine Heires of MediaKat LLC gives us a rare chance to hear directly from inside the changing world of tri-party repo in a Securities Technology Monitor report May 4. Business is growing even as the interworkings of the … Continue reading

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Why couldn’t experts see the coming financial crisis in their data?

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In the years leading up to the financial blowout in 2008, the two most important sets of missing data that could have helped experts spot looming trouble were measurements of (1) mortgage quality and (2) repo volumes and collateral quality, … Continue reading

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Tri-party repo reform seen as helpful but will not avert 2008-style panic

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JP Morgan Chase and Bank of New York Mellon are making good progress in protecting themselves from the tri-party repo risk that threatened their survival in 2008, but little progress is being made in protecting taxpayers who may have to pick … Continue reading

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The underbelly of securitized banking is emerging

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The underbelly of securitized banking is showing, as investors and traders fight over the scraps left after the financial crisis of 2007-2008. One battle that has gotten media attention is a class action against JP Morgan Chase, where pension funds that were clients … Continue reading

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Kling doubts repo can be completely fixed, puts focus on interest-rate risk

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Arnold Kling Since the next financial crisis is not likely to mimic the last one, how might RepoWatchers use their understanding of shadow finance to spot the next trouble area? Economist Arnold Kling, a scholar at the Mercatus Center at … Continue reading

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Repo fraud “happens all the time,” says convicted Farkas

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Securitized banking has its first 21st century crook. Lee B. Farkas, chairman of one of the largest privately owned mortgage lending companies in the U.S. when it collapsed in 2009, was convicted by a jury April 19 of a $2.9 … Continue reading

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Thoma: “Critical vulnerabilities remain”

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Get ready for the next financial crisis, cautions University of Oregon economist Mark Thoma in his April 23 blog Economist’s View. That’s because we have not taken, and are not likely to take, the needed steps to prevent runs on … Continue reading

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How will the FDIC unwind repos?

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The Dodd-Frank Act gave the FDIC the job of resolving systemically important financial institutions when they are in financial trouble.  How will the FDIC handle that company’s repos? An FDIC report April 18 gives the answer. It will sell them … Continue reading

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Will ‘ring-fencing’ work better than ‘firewalls’ did?

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We’re hearing a lot about “ring-fencing” these days. That sounds suspiciously like “firewalls” to some of us who covered the S&L calamity 20 years ago. Sheila Bair, chairman of the Federal Deposit Insurance Corp., thinks bank holding companies should ring-fence their investment banking operations … Continue reading

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Russia conducts first survey of its repo market

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The Russian Repo Council conducted it first biannual survey of the Russian repo market December 1, 2009, to May 31, 2010. The survey was designed with the help of the European Repo Council, which has conducted biannual repo surveys since … Continue reading

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Economists: Finance needs to be measured in new ways

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A new paper by three economists shows how far finance has come from the days when banks took in deposits and used the money to make loans. Today that same bank might augment those deposits by borrowing on the repo market … Continue reading

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An idea for enforcing ‘skin in the game’

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Joining the growing chorus of economists who are calling for financial institutions to finance themselves with more equity and less debt, a new study recommends two levels of capital. To the core capital requirements already applied to banks today, the … Continue reading

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Accountants failed again in the financial crisis

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A U.S. Senate subcommittee held a hearing April 6 on “The role of the accounting profession in preventing another financial crisis,” and hardly anyone paid attention, probably because no one believes accountants are financial watchdogs anymore. Certainly they don’t seem … Continue reading

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Securitized banking fueled by myths

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Four myths made securitized banking seem safe before the financial crisis, Eric S Rosengren, president of the Federal Reserve Bank of Boston, said in a speech at Boston University February 28. Securitized banking is securitization financed mainly with repo loans. This is … Continue reading

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Basel rules let equity vary widely among banks

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JP Morgan CEO Jamie Dimon claims European banks are calculating their risk more leniently than U.S. banks do. This makes U.S. banks have to run their operations with more equity than do European banks, and that eats into profits. Now … Continue reading

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Repos and shadow banking system still need reform

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While the new Financial Stability Oversight Council tries to identify and then supervise systemically important financial institutions, as required by the Dodd-Frank Act, two other important issues still need attention, said Federal Reserve Board member Daniel K. Tarullo in a … Continue reading

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Basel’s weak repo-related ratios get little attention

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While much attention seems to be focused on setting higher equity requirements for financial institutions, in hopes they can better survive a financial crash, little attention is being paid to the two rules that would deal directly with the financial panic of 2007-2008 and the run on … Continue reading

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Economists offer ways to measure and monitor systemic risk

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Economists have produced several studies showing ways the new Office of Financial Research and other experts might measure systemic risk and identifying useful data to spot rising risk. The important point is that regulators were not collecting needed data before the financial criis of 2007-2008, … Continue reading

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A list: Experts who want to break up the big banks

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(last updated:  February 5, 2013) A growing chorus of economists, analysts and other observers are calling for the mega-banks to be broken into smaller pieces. Whatever the cause of the finanical crisis of 2007-2008, the first step toward a solution … Continue reading