Michael Lewis "The Big Short"

[mike777]

Winston my concealing negative information ...often very often is not fraud. I just have information you don't have when selling stocks or bonds in the secondary market.

 

Notice the words Should be disclosed

 

Again guys I am not saying there was never any fraud...just at some point everything is not fraud and at some point you make selling impossible without a lawyer by your side.

 

Please notice banks are run by lawyers now..not bankers.

 

to be fair if you are in the securities business you must be prepared to be sued that is the business today.

[blackshoe]

As far as "there should be a fine", I would prefer a more up-front resolution. If your actions (or inactions, in some cases) harm someone (or lots of someones) then you pay whatever it takes to repair the damage to that person/those people. Paying a fine to the government does nothing to help those you harmed.

[PassedOut]

Again guys I am not saying there was never any fraud...just at some point everything is not fraud and at some point you make selling impossible without a lawyer by your side.

If you need a lawyer by your side, you should rethink what you are selling.

[kenberg]

Winston my concealing negative information ...often very often is not fraud. I just have information you don't have when selling stocks or bonds in the secondary market.

 

Notice the words Should be disclosed

 

Again guys I am not saying there was never any fraud...just at some point everything is not fraud and at some point you make selling impossible without a lawyer by your side.

 

Please notice banks are run by lawyers now..not bankers.

 

to be fair if you are in the securities business you must be prepared to be sued that is the business today.

 

Yep, it's only fraud if you can prove it. If you can't, it's just business as usual. The problem is that it used to be that I could avoid these problems by avoiding bankers, stockbrokers, and other such folks. Now they seem to have figured out how to get rich by screwing people (not usually by provably fraudulent means of course, but screwing nonetheless) and then sticking the general public with the cost of fixing the wreckage.

[mike777]

so guys if I sell a stock to you in the secondary market and it goes down I caused harm since my research said it was going down and I said nothing, my inaction, my silence caused harm. Guys keep in mind it is the public selling the stock, they are the owners in my example...not the big bad corporation.

 

People forget that retirement plans, your pension plans, own roughly 70% of stocks and bonds...they are the ones selling.

 

But yes, listening to you guys you seem to see fraud everywhere if there is a loss.

[kenberg]

so guys if I sell a stock to you in the secondary market and it goes down I caused harm since my research said it was going down and I said nothing, my inaction, my silence caused harm. Guys keep in mind it is the public selling the stock, they are the owners in my example...not the big bad corporation.

 

People forget that retirement plans, your pension plans, own roughly 70% of stocks and bonds...they are the ones selling.

 

But yes, listening to you guys you seem to see fraud everywhere if there is a loss.

 

I am not saying fraud. That's up to the lawyers. But there is good reason for distrust, and I do distrust. I have to live in the modern world, I don't have to like all aspects of it.

 

The fact that the viability of my pension is dependent upon the market is unavoidable. Scary, but unavoidable. The only upside is that since there isn't a damn thing I can do about it, i just ignore it. If you live on the side of a volcano, it's best not to dwell on that fact.

[mike777]

ya it is possible very possible that many posters here have a ret/pension plan and they are owners of these companies. The owners are the ones paying these fines for the fraud, etc.

[hrothgar]

so guys if I sell a stock to you in the secondary market and it goes down I caused harm since my research said it was going down and I said nothing, my inaction, my silence caused harm. Guys keep in mind it is the public selling the stock, they are the owners in my example...not the big bad corporation.

 

People forget that retirement plans, your pension plans, own roughly 70% of stocks and bonds...they are the ones selling.

 

But yes, listening to you guys you seem to see fraud everywhere if there is a loss.

 

Mike, I understand your desire to create straw men to argue against...

Its part and parcel with all those voices in your head that you deal with daily.

 

No one is talking about fraud charges against pension plans or anyone in the secondary market.

The discussions about criminal charges for fraud have been made with respect to the banks creating the CDOs, not individuals reselling them in the open markets.

 

I, and others have raised very specific examples like the following quote from earlier in the thread

 

I want to focus specifically on the Abacus 2007-AC1 CDOs:

 

This set of mortgages that were included in this CDO were deliberately selected to have a very similar set of characteristics.

 

The chance that these mortgages were independent of one another was significantly less than a randomly selected group of mortgages, or, alternatively, one that was engineered to try and ensure that the mortgages were independent of one another.

 

If you are too stupid, lazy, or mentally impaired to follow a simple conversation, don't post...

[FM75]

Mike, I understand your desire to create straw men to argue against...

Its part and parcel with all those voices in your head that you deal with daily.

 

No one is talking about fraud charges against pension plans or anyone in the secondary market.

The discussions about criminal charges for fraud have been made with respect to the banks creating the CDOs, not individuals selling them in the open markets.

 

I, and others have raised very specific examples like the following quote from earlier in the thread

 

 

 

If you are too stupid, lazy, or mentally impaired to follow a simple conversation, don't post...

 

If you want to talk specifically about it, why not post a link to the prospectus. Otherwise, we don't have any facts to discuss with respect to the issue. So we will expect the usual "feelings based" biased statements.

 

Of course, even if you do that, we are likely to do a lot of resulting. :)

[mike777]

Anyway guys this is a good book and I strongly recommend it. I think it lays out its case well.

[hrothgar]

If you want to talk specifically about it, why not post a link to the prospectus. Otherwise, we don't have any facts to discuss with respect to the issue. So we will expect the usual "feelings based" biased statements.

 

Of course, even if you do that, we are likely to do a lot of resulting. :)

 

http://av.r.ftdata.co.uk/files/2010/04/30414220-ABACUS-Offer-Document.pdf

 

The reference portfolio is documented in schedule A

[y66]

U.S. finalizes Volcker rule, curbing Wall Street's risky trades

 

(Reuters) - U.S. banks will no longer be able to make big trading bets with their own money after regulators finalized on Tuesday a rule shutting down what was a hugely profitable business for Wall Street before the credit crisis.

 

The measure known as the Volcker rule was a late addition to the 2010 Dodd-Frank Wall Street reform law and seeks to ensure that banks can't make speculative trades that are so large and risky that they threaten individual firms or the wider financial system.

 

Banks had hoped to substantially soften the rule, but JPMorgan's (JPM.N) $6 billion trading loss in 2012, dubbed the "London Whale" because of the huge positions the bank took in credit markets, motivated regulators to devise a tough version.

 

After more than two years crafting the complex reform, five regulatory agencies signed off on the roughly 900-page rule with new narrower exemptions for legitimate trades.

 

Former Federal Reserve Chairman Paul Volcker had promoted the restriction on proprietary trading as a simple measure to reduce risk, and U.S. officials acknowledged the final version was not as streamlined as they had hoped.

 

Banks said they were still poring over the details, but did not immediately expect to make further major changes to their operations. Large banks such as Goldman Sachs (GS.N) and Morgan Stanley (MS.N) have already wound down parts of their trading desks in anticipation of the rule.

 

But experts said the reform could still erode revenues, depending on how forcefully regulators police banks to make sure they are not trying to mask speculative bets as permissible trades.

 

"At some point someone is going to have to write up a manual for examiners on what to look for and ... how to enforce that stuff. That's going to be a really important document," said Bradley Sabel, a lawyer at Shearman and Sterling.

 

Another outstanding question is whether banking groups will mount a legal challenge. Wall Street banks have long warned that an overly restrictive rule could damage market liquidity and limit their ability to hedge against risks.

 

Better Markets, a Washington-based group critical of large banks, reacted positively to the final rule, calling it a "major defeat for Wall Street."

 

Bank of America (BAC.N) Chief Executive Brian Moynihan said at a conference on Tuesday that it cost his bank up to $500 million of revenue per quarter when it exited the trading activity banned under the Volcker rule.

 

But he said the final text should not force the bank to make any further significant adjustments. "I don't think it changes anything dramatically," Moynihan said.

 

The Volcker rule applies only to banks that have access to the Federal Reserve's discount window or other government backstops. Financial firms that do not have access, such as Jefferies, can continue to own hedge funds or engage in proprietary trading.

Who said this?

 

Paul Volcker by his own admission has said he doesn’t understand capital markets. He has proven that to me.

 

Jamie Dimon to Fox News, 3 months before JPMorgan’s massive $6 billion trading loss on credit default swaps engineered by Bruno Iksil, the London Whale.

 

[PassedOut]

Michael Lewis weighed in on the current hot topic: The Secret Goldman Sachs Tapes

 

I don't want to spoil the revelations of "This American Life": It's far better to hear the actual sounds on the radio, as so much of the meaning of the piece is in the tones of the voices -- and, especially, in the breathtaking wussiness of the people at the Fed charged with regulating Goldman Sachs. But once you have listened to it -- as when you were faced with the newly unignorable truth of what actually happened to that NFL running back's fiancee in that elevator -- consider the following:

 

1. You sort of knew that the regulators were more or less controlled by the banks. Now you know.

 

2. The only reason you know is that one woman, Carmen Segarra, has been brave enough to fight the system. She has paid a great price to inform us all of the obvious. She has lost her job, undermined her career, and will no doubt also endure a lifetime of lawsuits and slander.

 

So what are you going to do about it? At this moment the Fed is probably telling itself that, like the financial crisis, this, too, will blow over. It shouldn't.

It's definitely worth downloading the episode, which can be found with Jake Bernstein's Pro Publica article: Inside the New York Fed: Secret Recordings and a Culture Clash

 

As ProPublica reported last year, Segarra sued the New York Fed and her bosses, claiming she was retaliated against for refusing to back down from a negative finding about Goldman Sachs. A judge threw out the case this year without ruling on the merits, saying the facts didn't fit the statute under which she sued.

 

At the bottom of a document filed in the case, however, her lawyer disclosed a stunning fact: Segarra had made a series of audio recordings while at the New York Fed. Worried about what she was witnessing, Segarra wanted a record in case events were disputed. So she had purchased a tiny recorder at the Spy Store and began capturing what took place at Goldman and with her bosses.

 

Segarra ultimately recorded about 46 hours of meetings and conversations with her colleagues. Many of these events document key moments leading to her firing. But against the backdrop of the Beim report, they also offer an intimate study of the New York Fed's culture at a pivotal moment in its effort to become a more forceful financial supervisor. Fed deliberations, confidential by regulation, rarely become public.

She was fired because she didn't accept that it was the appearance of regulation that was required, not actual regulation. They'll be careful not to hire anyone like her again.

[Winstonm]

Showing once again that the "job creators" and "risk takers" don't really create any jobs or take any risks. The only thing that creates jobs is demand; demand comes from increased spending; the only way to increase spending is to redistribute some income from the top 10% to the bottom 90%.

[mike777]

Showing once again that the "job creators" and "risk takers" don't really create any jobs or take any risks. The only thing that creates jobs is demand; demand comes from increased spending; the only way to increase spending is to redistribute some income from the top 10% to the bottom 90%.

 

 

Not sure how to do this, some suggestions if this is your goal:

 

1) 80% tax on gifts and close loop holes. Loop holes include charity deductions, insurance, estate taxes, trusts, and of course tax all gifts.

2) roughly 2-3% annual wealth tax.

 

Note this has nothing to do with capital gains or income tax rates.

[mike777]

Michael Lewis weighed in on the current hot topic: The Secret Goldman Sachs Tapes

 

 

It's definitely worth downloading the episode, which can be found with Jake Bernstein's Pro Publica article: Inside the New York Fed: Secret Recordings and a Culture Clash

 

 

She was fired because she didn't accept that it was the appearance of regulation that was required, not actual regulation. They'll be careful not to hire anyone like her again.

yes regulators are captured by the industry. I have told this story often in this forum.

 

 

I interviewed with the SEC, they asked me about how to handle the people we regulate.

 

I stopped the question as it seemed weird and answered...I am the government answer my questions or I put you out of business why in the world am I intimidated.....I intimidate./ I shut you down. The point being the SEC was worried about the industry not the other way around.

 

 

BTW I note that the SEC basically said that everyone..I mean everyone failed their audit....over and over again over years and years. When everyone fails...and they fail all the time......there is problem yet the SEC did not know that basic fact or they know and no one cares that all audits fail.

 

to put it another way ..when everyone fails...no one fails.....

[kenberg]

No doubt some regulators are honest, courageous and wise. Equally without doubt, some in a position of great regulatory power lack one or more of those virtues. What to do? Tough question. Consider tis quote from a few posts up: "After more than two years crafting the complex reform, five regulatory agencies signed off on the roughly 900-page rule with new narrower exemptions for legitimate trades". I haven't seen this report. If I saw it, I could not stand to read it. If I read it, I would not understand it. This is not some false modesty, I am not claiming that I am stupid (others can do that well enough) rather I just know myself. We are at the mercy of people doing very important things that I, and many, do not understand at all. This is always risky, but when there are huge amounts of money at stake,it's a miracle that the system works at all.

 

So get rid of regulation? Hardly. There really are reasons for setting limits on what people can do. I don't think you have to be a raging liberal to be wary of banks being able to manipulate the market as they please.

[mike777]

Showing once again that the "job creators" and "risk takers" don't really create any jobs or take any risks. The only thing that creates jobs is demand; demand comes from increased spending; the only way to increase spending is to redistribute some income from the top 10% to the bottom 90%.

 

btw we need not wait for Congress to do this. One can have their local city and county and state tax authorities do this now.

[barmar]

1) 80% tax on gifts and close loop holes. Loop holes include charity deductions, insurance, estate taxes, trusts, and of course tax all gifts.

2) roughly 2-3% annual wealth tax.

I'm mostly OK with this, but are charitable deductions really a loophole? If rich people give less money to charities, where will they get funds from? It will probably fall to the government to make up the shortfall. Instead of spending 35 cents on the dollar in tax deductions, it will have to pay the full amount.

[mike777]

ok, once you accept the evidence that job creators don't create jobs, that risk takers don't create jobs or really take risk and accept redistribution and creating demand spending is the cause of economic growth there are a lot ways to do it.

 

Again cities, counties and states can do this own their own and need not wait on Congress.

[PassedOut]

ok, once you accept the evidence that job creators don't create jobs...

Actually, job creators do create jobs. It just that the real job creators are not the people who ideologues mean when they use the phrase "job creators."

 

The phrase "job creators" is a creation of propaganda guru Frank Luntz. Lots of folks swallow propaganda. That's why Frank gets the big bucks: How Republicans are being taught to talk about Occupy Wall Street

 

The Republican Governors Association met this week in Florida to give GOP state executives a chance to rejuvenate, strategize and team-build. But during a plenary session on Wednesday, one question kept coming up: How can Republicans do a better job of talking about Occupy Wall Street?

 

"I'm so scared of this anti-Wall Street effort. I'm frightened to death," said Frank Luntz, a Republican strategist and one of the nation's foremost experts on crafting the perfect political message. "They're having an impact on what the American people think of capitalism."

 

Luntz offered tips on how Republicans could discuss the grievances of the Occupiers, and help the governors better handle all these new questions from constituents about "income inequality" and "paying your fair share."

And it was so.

[mike777]

ok I was just using Winston's words not this luntz guy, you must have missed his post which started this

[blackshoe]

Showing once again that the "job creators" and "risk takers" don't really create any jobs or take any risks. The only thing that creates jobs is demand; demand comes from increased spending; the only way to increase spending is to redistribute some income from the top 10% to the bottom 90%.

I think you have it backwards. Increased spending comes from increased demand.

 

And I think your take on entrepreneurs is bonkers.

[kenberg]

I went back to the first post and to the link http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aUpBrUJ.pIiA

 

 

I will say a few words about the complexity of modern life. I may start a thread on just this topic so as to not hijack this one, but for the moment I will focus on this original post and the linked article.

 

 

The fourth paragbraph:

If there’s one group to blame, Lewis says it’s the “people who designed synthetic CDOs at Goldman Sachs.”

I havew no idea what this means. And if I learn what it means, I have little faith that I will have a confident opinion as to whether the quoted statement is correct.

 

Let's compare it to earlier days.

 

The nation needed coal. Miners dug coal. Coal mines provided jobs for the miners, coal for our furnaces (we had a coal bin in the basement and we shoveled coal into the furnace) and profits for the owners. The job was dangerous both for dramatic dangers such as cave-ins and fires, and long term with the almost certainty of shortened life from inhaling coal dust. Anyone with an ounce of sense could understan all of this, so the country could support inreased safety, increased wages and better working conditions for miners. Sure it wasn't that simple, not at all, but the basic issues were pretty clear to everyone. Now, in order to be an informed citizen/voter I have to learn about synthetic CDOs. I am sorry to be such a laggard, but I do not have an opinion about synthetic CDOs. I wouldn't recognize one if it slapped me in the face. I am very far from unique in this, I am sure.

 

Passed Out says that a lot of people swallow propaganda. This is true.. Including me. Surely part of the reason is that the issues are often complex and distant from the experience of the vast majority.

 

Don't get me wrong. I appreciate the comments and references. By analogy, I watched The 50 year argument last night, It's an HBO documentary by Martin Scorsese and David Tedeschi about the New York Review of Books. I recommend it. I was left a little stunned by seeing how much some people know that I don't know. And they didn't even get to synthetic CDOs.

 

An aside: When I was a grad student I had a friend who, upone seeing me, would say "Do you know how dumb I am? I didn't even know that..." and then he would proceed to download all of the mathematics that he had learned since I last saw him. Very annoying. I am not doing that here with my claim of ignorance. I think I once knew what a CDO is, but I have forgotten. I don't think that I ever knew what a synthetic CDO is. And when I read this stuff, my eyes quickly glaze over. I know I should learn this so that I can invest wisely or vote wisely or do something wisely, but I can't stay focused. As I say, I think the vast majority of people are in a similar situation.

[blackshoe]

CDO stands for "Command Duty Officer". He's the senior officer in the in port duty section, and has limited authority to act for the CO in the CO's absence. Or so says my US Navy experience. :D