John At The Center

As early as December 2006, Goldman called a meeting to go through each of the positions on the mortgage desk. From that meeting came the decision to reduce its exposure to the housing market.

Contrast that to Merrill Lynch or Lehman or Citigroup or Bear Stearns. Merrill’s Stan O’Neal and Lehman’s Dick Fuld ignored the problems until it was too late — August 2007 for O’Neal and well into 2008 for Fuld. In both case, the firm pushed out executives that raised questions about the risks the firms were taking. (here and here) Citigroup’s Chuck Prince seemed blithely unaware of the growing distress and kept dancing until the music stopped, and then roof came crashing down. Bear’s Jimmy Cayne, meanwhile could be found on the links or at the bridge table while his firm imploded.

So why has Goldman been the target of so much backlash from the financial crisis? Many Wall Street firms, after all, did much of the same things, as the even the lawmakers pointed out at Tuesday’s hearing. The simple answer: Goldman was just more successful. No one likes it when someone profits from the pain of others. Add to that the bailout and the fact Goldman has yet to take responsibility for its role in the crisis, and it is easy to see why it is the target.

via Give Goldman Sachs Some Credit – Deal Journal – WSJ.

In The Big Short we see how a once in a lifetime trade affected these investors. The sad fact is that we don’t need a book to know what happened to everyone else on the other side of that trade. Because society at-large ended up being the ultimate counterparty and we are still living with the consequences of that trade to this date.

via The Big Short Abnormal Returns.

So let’s go back to the lost $11 trillion in wealth lamented by Senator Dodd. Where did it go? For the most part, I suspect, it just went up in smoke. It represents a loss of wealth that once exuberant folks imagined to have had and now imagine they no longer have.

True, with its clever but untoward shenanigans, Wall Street has sucked billions of dollars out of the pockets of hard-working folks on Main Street and transferred them into the financiers’ own pockets. In this connection, merely read these articles to see how it was done.

But they didn’t amass $11 trillion. The bankers did not get that rich.

In next week’s post I will explore who creates a nation’s wealth — businesses or households or government, or all of them?

via Where All That Money Went – Economix Blog – NYTimes.com.

Environmental psychology studies have found evidence that wind speed has a strong influence on mood and comfort. This study investigated the relationship between wind speed and daily stock market returns across 18 European countries from 1994 to 2004. A significant and pervasive wind effect was found on stock returns. This finding was supported by psychological literature claiming that mood affe

via Puffy Stock Market Returns — For Real.

Finally, of course, there’s the old question about incentives and executive pay. No one ever got paid a seven-figure bonus for refusing to do a bad CDO deal, while lots of people (like Fabrice Tourre and the other Goldman types we saw getting grilled yesterday) got paid millions for doing them. Including a super-senior tranche undoubtedly made it much easier to do more and bigger synthetic CDOs, and so that’s what the structured-product desks did. You can call it regulatory arbitrage if you like, or you can just call it the natural consequence of the incentives built into the bonus system. Either way, banks like Citigroup and UBS lost billions on liabilities that senior executives never really even knew that they were holding. Because no one bothered to question the models underneath them.

via Why did all those super-seniors exist? Analysis & Opinion.

Here’s a question, though. Let’s say you work at an investment bank and you’re in charge of a book which includes a $1 billion barrel of toxic nuclear waste. You know that barrel is going to zero sooner or later, and you manage to sell it to some European dupes just in time, for full face value, saving your bank from $1 billion in losses. How much of a bonus, if any, should you get on that deal, and where should the money come from? And should you feel bad about avoiding the losses and sticking them to your clients instead?

via How Goldman offloaded its toxic assets Analysis & Opinion.

RT @arnabdotorg: Amazon product review data: 6M reviews by 2M users on 1M categorized products, (7.5GB uncompressed): http://bit.ly/cjqrie

via Twitter / Peter Skomoroch: RT @arnabdotorg: Amazon pr ….

The problem in its current form, as I see it, is that the developing world is once again racing ahead and driving up the price of resources–but that this forward-macro-thrust from the developing world hurts, more than helps, the economies of the OECD.

via Pacific Story | Gregor.us.

BarCamp is an ad-hoc gathering born from the desire for people to share and learn in an open environment. It is an intense event with discussions, demos, and interaction from participants.

What is a BarCampBank?

BarCampBank is a community organized around the following mission: The aim of BarCampBank is to foster innovations and the creation of new business models in the world of banking and finance.

When and where

* At SmartCharge offices, 165 Jessie St., 4th Floor, San Francisco

* Saturday, May 8th, 2010 fromt 9:00 AM to 6:00 PM (PT)

Who should join?

If you are an innovator, a disruptor or a professional of the banking and finance industry, if you are excited by or just curious about all the innovations that the new technologies could bring to the banking and finance world, if you want to present a project, confront your ideas or just echo lively debates with your own experience, then you should definitely consider joining us on BarCampBankSF2.

via BarCamp / BarCampBankSF3.

Published: April 19 2010 17:58 | Last updated: April 19 2010 17:58

The prospect of being able to carry out share trading at the speed of light moved a step closer on Monday after a US company unveiled a system allowing trades to be done in 16 microseconds.

The development was unveiled by Algo Technologies, the British unit of privately-held Algo Engineering of the US, and will raise questions about whether exchanges, brokers, traders and regulators have systems in place to keep track of trades moving thousands of times faster than the blink of an eye.

EDITOR’S CHOICE

FT Trading Room: Global exchanges – Apr-12

Knight appoints Bankole to lead ETG sales – Apr-12

Lack of coherence on clearing reform – Apr-08

Chi-X to push for inclusion in exchanges’ indices – Feb-14

SunGard launched sponsored access in Europe – Jan-22

US broker Knight launches platform in Europe – Nov-10

A race is underway in trading technology to provide exchanges with the fastest possible trading times to cater to a new breed of electronic trader.

Such players – sometimes referred to as “high-frequency” traders – are demanding systems that allow orders to be carried out before their rivals, even if this means shaving just microseconds off the time it takes to complete a trade.

The fastest trading systems in the world now are iNet, developed by Nasdaq OMX, the transatlantic exchange operator; BATS Global Markets, an operator of trading platforms in the US and Europe; and MillenniumIT, a Sri Lankan company owned by the London Stock Exchange.

All three claim their systems can handle a trade in about 250 microseconds.

via FT.com / Markets / US – Share trades in blink of an eye just got faster.