NYU sues GMAC’s chair Merkin re:Madoff tie: US bailout GMAC

US Circumlocution Offices [1]: Federal Reserve approved General Motors (GMAC) Financial Services’ application to become a bank-holding company which will let them benefit from government bailout dollars. New York University sued Merkin GMAC chairman for feeding money to Madoff and concealing involvement from investors like NYU.

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Notes

1. Charles Dickens invented the term Circumlocution Offices to describe governmental and bureaucratic indolence and incompetence. By passing work through many hands of the Circumlocution Offices, it is easy to avoid doing anything. Dickens’ character in Little Dorrit, Mr. Merdle, who embarked on a fraudulent scheme is now being compared to Madoff and institutions such as the U.S. Securities and Exchange Commission (SEC), etc are being compared to Circumlocution Offices.

“The U.S. Federal Reserve on Wednesday approved GMAC Financial Services’ application to become a bank-holding company, a status that would give the auto-financing arm of General Motors Corp. access to government bailout dollars and the Fed’s discount window. The move complements a $17.4 billion emergency loan package the government extended to GM and (Wall Street Journal 2008-12-24)…

“Merkin, who is chairman of GMAC LLC, is named in the lawsuit brought by NYU, along with his Gabriel Capital LP fund and Ariel Fund Ltd. GMAC is the finance business owned by General Motors Corp and private equity firm Cerberus Capital Management LP. The Funds ‘feeding’ money to Madoff, including Ariel, made a conscious effort to conceal Madoff’s involvement from their own investors,” the NYU lawsuit said. “This concealment was a requirement dictated by Madoff, which was agreed to by Merkin and other ‘feeder’ funds (McCool Reuters 2008-12-24).”

Oil commodities hedge fund speculator is anything but “passive”

Ross Levin, a NYC hedge fund analyst with Arbiter Partners, who calls himself a “passive speculator in securities” met Lionel Lepine, a member of the Athabaskan Chipewyan First Nation whose family and friends living on the contaminated watershed upriver from the oil sands’ effluence are suffering from unprecedented numbers of cancerous tumours.

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A number of recent stories intersect here: Harper’s apology for past treatment of Canada’s First Nations, the pollution of the Athabaskan River north of the oil sands, the impatient development of nonrenewable resources, the meteoric rise of oil commodities market directly caused by irresponsible speculators playing with volatile, unpredictable hedge funds that play havoc with the market making a fortune for some while destroying economic, social and ecological environments all around them.

In a rapid visit to the local library yesterday I grabbed Jake Bernstein’s How the Futures Markets Work. Although it is quite old for the fast-paced risk management industry, there are certain fundamentals that ring true. He briefly traced the history futures contracts leading to the volatile environment where agricultural futures were replaced by the less predictable currency markets. Of course, his book was written long before the meteoric rise of private equity funds.

My concern remains with the absent ethical component on trading floors. Ethical responsibilities are as elastic as the regulations that govern the centuries old practice of hedging. In the period of late capitalism and the emergence of risk society, the cost of destructive unintended byproducts have created havoc in ways that far exceed the commodities/service value. The road to profits and impatient money, is paved with casualties.

Berstein’s facts of market life are telling. He encourages simple methods and systems which require few decisions and little mental conflict. Too much thought is not conducive to successful trading. Too much analysis costs lost opportunities. Keep systems simple. Control your emotions. Practice caring less so that you remain more objective. Don’t ask why. Knowing why may hinder you more than it will help you. Patterns are the best indicators available (What feeds into a “pattern” however is not a science). Timing is what makes money in the futures market (Bernstein 2000:282-3).

In other words, futures’ gurus encourage young hedge fund analysts to not think too much about factors such as displacement of peoples, the degradation of living conditions and the way in which they unwittingly contribute to making vulnerable ecologies and peoples even more vulnerable. Their gurus tell them to not think about the impact of their actions. They are told to not ask why the prices of essential commodities like fuel and food that they are playing with, are pushing certain groups into unimaginable levels of social exclusion. In the end groups at-risk to health degradation are always those least able to protect themselves. How convenient that the gurus do not factor in these social issues. They are entirely absent from finance reports.

But then a lot of information is purposely not included in financial and business reports. Bernstein argues that the simpler systems that take fewer things into consideration will lead to more profits. Yet when he lists off all the potential factors in operation in even a simple fundamental analysis, it is not at all simple. It begins with the highly complex. The algorithms involved may appear to be simplified through the use of databases that seem to generate accurate, objective hard facts. In reality, the accuracy of any query depends on what was fed into it.

Futures trading, also known as commodities trading, the final frontier of capitalism, became a popular speculative and investment vehicle in the US in the 1960s (Bernstein 2000:1). These financial instruments offer unlimited profit potential with relatively little capital. Speculators are drawn to the possibility of quick money or what I like to call impatient money. The great wealth accumulated from speculative financial instruments has spawned careers in brokerage, market analysis, computerized trading, computer software and hardware, accounting, law, advertising which themselves subdivide into more recent opportunities such as those related to risk-management.

While gurus such as Bernstein argue that gambling is for anyone but speculation is for professionals, the chaos and unpredictability of the current global economy have been linked to a growing culture of gambling in futures trading rather than level-headed professionalism. Gamblers create risk simply by placing a bet; professional speculators “transfer risk from the hedgers to the speculators” and it therefore called risk management instead of gambling.

“It rained last night so the price of soy beans will be down today.” Although the basis of fundamental analysis in economics is supply and demand, the actual fundamental analysis of specific markets that might generate accurate price predictions are complicated as numbers of factors overlap and massive quantities of data need to be considered. The simple equation involves how much of a commodity or service are buyers willing to pay at a given time and place. There used to be a correlation between price and consumption. Factors that impact on price of commodities include the state of the economy (local, regional, national and international – inflationary, recessionary with rising or falling employment), availability of alternate products or services, storage possibilities, weather, seasonality, price cycles, price trends, government subsidies, political influences, protectionist attitudes, international tensions, fear of war, hoarding, stockpiling, demand for raw materials (sugar, petroleum, copper, platinum, coffee, cocoa), currency fluctuations, health of the economy, level of unemployment, housing starts. Most technical systems are not effective in making traders money.

In spite of this there is still a persistent belief that there is an invisible hand that guides market correcting imbalances like a living organism or finely-tuned machine.

“Markets work perfectly as they respond to the multiplicity of forces that act upon them. It is our inability to find, parse, and correctly weight the impact of these factors that limits our results and success of our fundamentally based forecasts (Bernstein 2000:162).”

The bottom line is that wealth disparities continue to intensify and that these inordinate extremes of wealth and poverty destabilizes society. These distorted economic relationships deprive us of any sense of control over economic forces that threaten to disrupt the foundations of our existence. National governments have been either unwilling or unable to deal effectively with this situation in which we live where the deplorable superfluity of great wealth exists alongside the acute suffering of those living in miserable, demoralizing and degrading abject poverty even in countries like Canada.

Social equality is an entirely impracticable chimera. Even if equality could be achieved it could not be sustained. Wages and income should be unequal and should correspond to different efforts, skills and capacities. However, equal justice for all is not only necessary but urgently needed.

As long as those involved in the financial and energy industries remain in denial of their role by hiding behind economic and ideological polemics and simply dismissing concerns from others there can be no productive change. A fresh look at the problem should involve people like Lionel Lepine who are directly involved with decisions, along with experts from a wide spectrum of disciplines. There will not be a voluntary ethical turn so for now we desperately need public policies that will regulate industries.

Selected Timeline of Critical Events

1710 The first modern organized futures exchange began with the Dojima Rice Exchange in Osaka, Japan. The Japanese feudal landowners began to use certificates of receipt against future rice crops. As these futures certificates became financial instruments in the general economy the value of the certificates would rise and fall as the price of rice fluctuated. The Dojima Rice Exchange emerged as the world’s first futures market where speculators traded contracts for the future delivery of rice or “certificates of receipt.” The Japanese government outlawed the practice when futures contracts (where delivery never took place) began to have no relationship to the underlying cash value of the commodity leading to wild and unpredictable fluctuations (Bernstein 2000:30).

1848 The Chicago Board of Trade (CBOT) was formed as a price risk occurred in the grain markets of Chicago.

1865 The Chicago Board of Trade (CBOT) organized trading of futures contracts.

1919 – 1945 The Chicago Mercantile Exchange (CME) traded futures in eggs, butter, apples, poultry and frozen eggs (Bernstein 2000:70).

1960s Futures trading, also known as commodities trading, the final frontier of capitalism, became a popular speculative and investment vehicle in the US in the 1960s (Bernstein 2000:1).

1970s There was increasing volatility in international currency exchange rates as the Bretton Woods agreement began to break down. Business people transferred risk of volatility in international markets by hedging with speculators willing to take the risk. Futures markets began to expand into foreign currencies as fluctuated wildly competing against each other and the US dollar.

1972 The total volume of futures contracts trading was 18 million and the top ten most actively traded future contracts were agricultural futures (Bernstein 2000:71).

1974 The US Congress passed the Commodity Futures Trading Commission Act and established Commodity Futures Trading Commission (CFTC) to protect participants in the futures market from fraud, deceit and abusive practices such as unfair trading practices (price manipulation, prearranged trading, trading ahead of a customer), credit and financial risks, and sales practice abuses (Bernstein 2000:32). Individual nation states have similar regulating bodies.

1982 Futures trading in the US was self-regulating and anyone in the business had to become a member of the National Futures Association (NFA).

1986 The total volume of futures contracts trading was 184 million and the T bonds were among the most actively traded future contracts (Bernstein 2000:71).

1990 The price of crude oil rose dramatically when Hussein invaded Kuwait.

1999 The most actively traded future contracts were interest rates, futures, stock index futures, energy futures, currency futures and agricultural futures (Bernstein 2000:72).

2000 The Chicago Mercantile Exchange (CME) trades futures in livestock futures, currency futures, interest rate futures, stock index futures (Bernstein 2000:70).

2000 More than 90 foreign futures exchanges emerged with the ever-increasing demand for new financial instruments “to hedge against fluctuating interest rates, changing foreign exchange rates and institutional securities portfolios (Bernstein 2000:46).

2008 Calgary has a high percentage of young millionaires with lots of disposable income. There are also c.4000 homeless people in Calgary, the oil capital of Canada. c. 40% of the homeless are working poor who are unable to afford housing.

Webliography and Bibliography

Bernstein, Jake. 2000. How the Futures Markets Work. New York Institute of Finance.

UK Bank Bail-Out: Private-Equity-Generated-Credit-Chaos Costs Rising: Public Pays

“The Bank of England will announce Monday a scheme which will see it lend money to banks in return for collateral in a bid to help the troubled U.K. mortgage market, U.K. Chancellor of the Exchequer Alistair Darling said Sunday Wall Street Journal . Following Business and Financial News in 2008 has been an exciting, mind-boggling, incredulous (mis)adventure. It has become difficult to choose those stories that will remain relevant in the future as part of the social and economic history of this chaotic period. See also http://snurl.com/25asj and http://snurl.com/25aus

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“Nice deal… nationalize risk, privatizes profit.”

digg users comments are themselves very revealing. I don’t think active digg users represent a broad spectrum but I am not sure? Are the demographics on digg similar to other services offering trendy tech tools? young male techies writing for young male techies?

Along with evangelical Ron Paul supporters, there is a very active core group writing anarchist, anti-government, minimal government, avoid-banks-buy-gold, avoid-banks-cash-only diggs with some nasty digg between digg users.

Timeline of Social Events Related to Mortgage Meltdown

work in process

CC 2008 Flynn-Burhoe

“Mortgage Meltdown” a digitage on Flickr

see also related webliography

1965-2005 Between 1965 to 2005 there was no national US real-estate bust as home prices surpassed inflation by a percentage point or two on average. However local reversals have taken place and some cities have never recovered (Christie 2005).

1973-5 US investors in the S&P 500 lost 14% in 1973 and 26% in 1974 but gained 37% in 1975 (Mann 2000).

1970s “The additional grades or risk have arisen from the willingness to underwrite mortgages for more risky borrowers, encouraged by the democratization of credit since the 1970s. Lending to more risky borrowers is, by definition, more risky. More loans to risky borrowers increases the total amount of risk to be sold in the marketplace” (Mason and Rosner 2007).

1980-1990 In Los Angeles real estate was turbocharged for nearly 10 years (Christie 2005).

1985 In Peoria, Ill. a more traditional area the average home price fell from $60,800 in 1981 to $51,400 in 1985 partially because of strikes and lay-offs at Caterpillar, the city’s biggest employer (Christie 2005).

1987 Canadian families saved 20 percent of their take-home pay (Ed 2007).

1987 Stock market crash

1988 In “oil patch” cities like Oklahoma City prices plummeted 26 percent from 1983 to 1988. They only returned to 1983 levels in 2003 fifteen years later. In Oklahoma City, the inflation-adjusted price in 1983 was $196,600. Today, it’s just $135,100 (Christie 2005).

1988 Houston home prices fell 22 percent from $111,000 in 1983 to $86,800 in 1988 rebounded only in 2003. Counting inflation, the average Houston home, which cost just $159,700 in 2004, is actually worth less [in 2005] than it was [in 1983]. When, adjusted for inflation, a home cost about $219,000 in 1983 (Christie 2005).

1988 – 1990s Real estate prices fell in Northern California first followed by the rest of the state “as employers fled, incomes dwindled, quakes rumbled, sales fell and prices slipped. [. . .] Silicon Valley’s housing market crashed into recession along with the state’s economy (Perkins 2001).

1989-90 The notorious price bubble of 1989-90 was linked to central banks specifically the Bank of Japan. “The Japanese economy continued to suffer during the early 1990s, and remained in recession until the end of 1993. Nominal GDP growth rates, which had been around 7 percent during the bubble period, fell beginning in 1990 and by 1991-93 were close to zero. Profits in the manufacturing sector fell 24.5 percent in 1991 and 32.1 percent in 1992. Bankruptcies began to rise starting in the latter half of 1990; by 1992, bankruptcies with debt more than Y10 million totaled 14,569 cases. Failures of real estate firms or of firms engaged in “active fund management” constituted more than half the corporate bankruptcies in 1991 and 1992 (Miller 2001).”

1991 Inflation-adjusted take-home pay in Canada froze to this level (Ed. 2007).”

1992 A new car in Canada cost $20, 000.

1992 – 2000 “Japan remained pretty stagnant in the last eight years, with the majority of the loss coming in the first two, when it eventually fell by more than 60%. There was never a big drop, just a constant and inexorable drift downward. Real estate prices plummeted, almost no Japanese company ended 1992 higher than it started 1990. In the interim, banks have failed (and if it weren’t for the financial props of the Japanese government, many more would have), and companies have had to reassess some of their basic assumptions, such as lifetime employment and large benefit packages” (Mann 2000).

1996 There was a housing market reversal in Los Angeles with average house price dropping from $222,200 in 1990 to $176,300 in 1996, a loss of 20.7 percent. “Furthermore, those are nominal prices, not real values. To calculate the loss more realistically you would have to figure in the cost of inflation: $222,200 in 1990 would have been worth $266,700 in 1996 dollars, which means the actual loss for homeowners buying in 1990 and selling in 1996 was closer to 34 percent (Christie 2005).”

1994- 1996 “In 1994, [Japanese] banks wrote off non-performing assets of Y5.7 trillion, exceeding the previous high of Y4.3 trillion in fiscal year 1993. As yet, no major bank has failed, although a number have reportedly encountered serious difficulties. In December, 1994, the Bank of Japan supervised the takeover of two credit cooperatives, the Tokyo Kyowa Credit Cooperative and the Anzen Credit Cooperative, through the creation of a bridge bank with government support. The Bank’s decision not to let these institutions fail and pay off depositors under the deposit guarantee program was based, largely, on concern for the potential systemic effects of a deposit payoff on public confidence in the banking system in general. The “jusen,” or housing finance banks, suffered the most serious problems; these institutions, which were typically organized and sponsored by major commercial banks and staffed, in part, by former officials from the Ministry of Finance, lost tens of billions of dollars as a result of the collapse of the price bubble, and became one of the most contentious political issues of the day during 1995-86 (Miller 2001)”.

1996 “How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? And how do we factor that assessment into monetary policy? We as central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy, its production, jobs, and price stability. Indeed, the sharp stock market break of 1987 had few negative consequences for the economy. But we should not underestimate or become complacent about the complexity of the interactions of asset markets and the economy. Thus, evaluating shifts in balance sheets generally, and in asset prices particularly, must be an integral part of the development of monetary policy.” – Alan Greenspan (December 5, 1996)**

1998 There was a market correction in the United States in October of 1998.

1992 – 2000 “Japan remained pretty stagnant in the last eight years, with the majority of the loss coming in the first two, when it eventually fell by more than 60%. There was never a big drop, just a constant and inexorable drift downward. Real estate prices plummeted, almost no Japanese company ended 1992 higher than it started 1990. In the interim, banks have failed (and if it weren’t for the financial props of the Japanese government, many more would have), and companies have had to reassess some of their basic assumptions, such as lifetime employment and large benefit packages” (Mann 2000).

2004 British Columbia graduates from university have an average debt of $20, 000.

2005 Real-estate investing spiked, pressuring prices upward. In Phoenix, according to Bill Jilbert, president and COO of the Coldwell Banker brokerage there, investors from Nevada and California have invaded the Arizona market, and “affordable housing has been pushed to extremes (Christie 2005).”

2000 In Tampa Bay Florida, high risk adjustable-rate mortgages (ARM) made homes “seem affordable when wages stagnated as prices soared. They were just the ticket for cash-out refinancings and home equity credit lines that bought cars and swimming pools and paid off credit card debt. “What happened in a lot of expensive real estate markets is that first-time home buyers who felt they could not afford a home otherwise, took on a loan that had lower monthly payments than a traditional mortgage would have,” said Allen Fishbein, director of housing policy for the Consumer Federation of America. “They weren’t being underwritten on the basis of the borrower’s reasonable capacity to handle these loans.” The payments started out manageable, especially since many loans offered teaser rates. But borrowers are getting a lesson in what the word “adjustable” means. More than $130-billion in mortgages payments were reset in 2006″ In 2006 nearly a third of Tampa Bay mortgages were the high-risk varieties, up from 10 percent in 2003 (Huntley 2006).

1991- 2005 “[I]ncreased complexity from increased grading of risk can also result in increased opacity. Risk that is more difficult to see, by virtue of complexity, is risk just the same. There are plenty of reasons to believe that the amount of risk in the marketplace has increased. Figure 3 shows that defaults on ABS and residential mortgage-backed securities (RMBS) increased substantially between 1991 and 2005” (Mason and Rosner 2007).

2006 Fitch Global Structured Finance 1991-2005 Default Study revealed that, “the overwhelming majority of global structured finance defaults over the 1991-2005 period were from the U.S., accounting for more than 97 percent of the total. While the 1,000 U.S. defaults were mainly concentrated in the Asset-Backed Securities._ (ABS) sector, the 27 international defaults were primarily from the collateralized debt obligations (CDO) sector.” See Mason and Rosner (2007) warn that risk continues to increase, as ratings agencies revise their loss expectations to account for the dynamics of the mortgage meltdown. For instance, on March 27, Standard & Poor’s raised its expectation for losses on

2006 In Florida millions of homeowners were warned of the mortgage meltdown in which they will “face a financial nightmare brought on by a combination of higher interest rates, risky mortgages and a housing market gone cold (Huntley 2006).

2007 Since 1991 inflation-adjusted hourly wages rose only 10 cents (Ed. 2007).”

2007 A new car in Canada cost $32,000 a 60 percent increase from 1992 (Ed. 2007).”

2007Canadians collectively owe three quarters of a trillion dollars in personal debt. Canadian families not only have no savings, they draw on pension savings to make ends meet.

“The result of the easy credit is that an average family now owes far more than it takes in. That means we remain solvent only so long as the book value of our assets — things like our home, pension funds or investments — continue to increase (Ed. 2007).”

2007 British Columbia graduates from university have an average debt of $27, 000.

2007 It is now acceptable for Canadian families to pay 60 percent of income to pay monthly payments of their home mortgages (Ed. 2007).

2007 The British Columbia government will allow home owners who are over 55 to defer property tax payments for as long as they live. The government will claim unpaid taxes after you die or sell effectively placing the tax burden on the children (Ed. 2007).

2007 “The number of corporate failures in Japan rose for the third month in a row totaling 896 cases in December up 18.2%. November flops were up 6.5% and the number of companies going belly up in October were up 7.8%. The amount of debts the insolvent companies left behind were up 30.6% to 463.09 billion yen (Belew 2007).

2007 In March Bob Lawless reported in his blog that, “The folks at Automated Access to Court Electronic Records or AACER regularly collect data from all the bankruptcy courts for creditors and attorneys. They have a wealth of information that does not show up in the mainstream media. Most recently, they tell me that there were 58,640 total U.S. bankruptcy filings in February 2007 as compared to 55,088 total U.S. bankruptcy filings in January 2007. OK, that looks like a slight increase, but looks are deceiving. It’s actually a fairly hefty increase. The February filings were spread over only nineteen business days while the January filings were spread over twenty-one days. On a daily basis, the February filings were up 17.7% as compared to January (Lawless 2007).”

2007 Jayson Seth analysed data in National Association of Realtors (NAR) June 24, 2007 report. Seth argues that “America’s easy-credit, quick-flipping, borrow-now-and-forget-the-consequences lifestyle is coming to an increasingly painful, grinding halt” and the “confidence of homebuilders is at a 16-year low (Seth 2007).”

2007 Lawrence Yun, National Association of Realtors announced that the real estate market is softening due to psychological factors, tighter credit for subprime borrowers. NAR’s Lawrence Yun explained that since late 2006 housing sales have slowed as buyers double up with family, friends or just mortgage helper units in their homes to be able to pay for higher-priced homes.

2007 Mason and Rosner (2007) warn that risk continues to increase, as ratings agencies revise their loss expectations to account for the dynamics of the mortgage meltdown. For instance, on March 27, Standard & Poor’s raised its expectation for losses on 1. “Residential mortgage-backed securities (RMBS) market has experienced significant changes [from 1997-2007]” Furthermore they caution that “structural changes in mortgage origination and servicing have interacted with complex RMBS and highly volatile CDO funding structures to place the U.S. housing market at risk. Equally as important, however, is that housing market weaknesses feed back through financial markets to further weaken financial instruments backing today’s CDOs. Decreased housing starts that will result from lower liquidity in the MBS sector will further weaken credit spreads and depress CDO and MBS issuance. This feedback mechanism can create imbalances in the U.S. economy that, if left unchecked, could lead to prolonged domestic economic implications for U.S. standing in the world economic order [. . .] The potential for prolonged economic difficulties that also interfere with home ownership in the United States raises significant public policy concerns. Already we are witnessing restructurings and layoffs at top financial institutions. More importantly, however, is the need to provide stable funding sources for economic growth. The biggest obstacle that we have identified is lack of transparency.” (Mason and Rosner 2007).

2007 In a Marketplace interview Amy Scott asked interviewees about the disturbing consequences of the interconnections between banks, hedge funds, high risk mortgages and pension funds. In June two major hedge funds managed by the investment bank Bear Stearns, who purchased securities that were essentially a “repackaging of all kinds of risky mortgages” to tap into the subprime mortgage market are now verging on collapse as the number of borrowers defaulting on these mortgages increases. Joseph Mason explained that “this isn’t just a Wall Street problem. Your 401k or pension fund may be invested in similar mortgage-related securities.” The investor-base is broad and it is difficult to know who is at risk. “Investment managers don’t have to report their holdings. And unlike stocks, these securities aren’t quoted on an open market.” Mason has been a firm proponent of more transparency in financial dealings (Scott 2007).

2010-05-06 According to a report entitled “The Microstructure of the ‘Flash Crash’: Flow Toxicity, Liquidity Crashes and the Probability of Informed Trading” in The Journal of Portfolio Management, “The ‘flash crash’ of May 6th 2010 was the second largest point swing (1,010.14 points) and the biggest one-day point decline (998.5 points) in the history of the Dow Jones Industrial Average. For a few minutes, $1 trillion in market value vanished.” Report authors argued that the ‘flash crash’ was the result of the new dynamics at play in the current market structure.”

Easley, David, Lopez de Prado, Marcos M. and O’Hara, Maureen, “The Microstructure of the ‘Flash Crash’: Flow Toxicity, Liquidity Crashes and the Probability of Informed Trading.” (November 19, 2010). The Journal of Portfolio Management, Vol. 37, No. 2, pp. 118-128, Winter 2011. Available at SSRN: http://ssrn.com/abstract=1695041

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1695041

See also article was written by Heather Stewart and Simon Goodley, for The Observer on Sunday 9th October 2011 00.06 Europe/London

Credit crunch, Financial crisis, Financial sector, Banking, Global recession, Stock markets, Business, Lehman Brothers, Margaret Thatcher,

Selected Bibliography and Webliography on the Mortgage Meltdown

work in process

see also related timeline

Belew, Bill. 2007. “ Corporate Bankruptcies climb for third month in a row.” Uploaded January 21, 2007. Accessed June 24, 2007.

Christie, Lee. 2005. “Real estate: When booms go bust: Home prices can and do go down. Here’s what declines have looked like in the past.” CNN/Money. September 19, 2005.

Editorial. 2007. “Family finances under pressure.” Victoria, British Columbia. Times Colonist. June 24. D2.

“Leonhardt, David. 2008. “Economic Scene: Can’t Grasp Credit Crisis? Join the Club.” New York Times. March 19, 2008.

Fitch IBCA, 2006. Fitch Global Structured Finance 1991-2005 Default Study, Nov. 26, 2006.

Huntley, Helen. 2006. “Mortgage Meltdown.” Tampa, Florida: St. Petersburg Times. Uploaded October 2, 2006.

Jayson, Seth. 2007. “Housing Slumps. Who’s Surprised?” The Motley Fool. Uploaded June 25, 2007. Accessed June 25, 2007.

Lawless, Bob. 2007. “Bankruptcy Filings Up 18% in February 2007.” Credit Slips: A Discussion on Credit and Bankruptcy. Uploaded March 6, 2007. Accessed June 24, 2007.

Mann, Bill. 2000. “An Investment Opinion: What a Real Bear Market Feels Like.” >> Fool on the Hill. Uploaded April 26, 2000.

Mason, Joseph R.; Rosner, Joshua. 2007. “Where Did the Risk Go? How Misapplied Bond Ratings Cause Mortgage Backed Securities and Collateralized Debt Obligation Market Disruptions.” Uploaded May 2007. Accessed June 24, 2007.

Miller, Geoffrey P. 2001. “The Role of a Central Bank in a Bubble Economy.” July 16, 2001.

Molony, Walter. 2007. “May Existing: Home Sales Show Market is Under Performing.” Washington. Uploaded June 25, 2007.

Perkins, Broderick. 2001. “California Real Estate Won’t Mirror Silicon Valley Volatility.” >> Realty Times. Uploaded May 18, 2001. Accessed June 24, 2007.

Scott, Amy. 2007. “Mortgage meltdown hits Bear Stearns.” New York: Marketplace. Uploaded June 20, 2007. Accessed June 24, 2007.

Winzer, Ingo. 2005. president of Local Market Monitor, which sells real-estate market analysis to corporate and consumer clients.

Flynn-Burhoe, Maureen. 2007. “Democratization of Debt: Wall Street’s Bear Stearn’s and Tampa’s Mortgage Meltdown.” >> Speechless. June 24, 2007.Flynn-Burhoe, Maureen. 2007. “Democratization of Debt: Bear Stearn & Mortgage Meltdown.” >> Google docs
http://docs.google.com/Doc?id=ddp3qxmz_320dqk9nt

Selected Bibliography and Webliography on the Mortgage Meltdown (content to be added to timeline)

Andrews, Edmund L. 2008-03-16. “Fed Chief Shifts Path, Inventing Policy in Crisis.” << New York Times. March 16, 2008.

Andrews, Edmund L. 2008-03-17. “Fed Acts to Rescue Financial Markets.” << New York Times. March 17, 2008.

NYT’s autogenerated keywords: Federal Reserve System, Bear Stearns Cos, Morgan J P Chase & Co, Treasury Department, Finances, Interest Rates, Stocks and Bonds, United States Economy, Mergers Acquisitions and Divestitures, Bernanke Ben S, Paulson Henry M Jr, Schwartz Alan D, Wall Street (NYC), Washington (DC)

Flynn-Burhoe, Maureen. 2008. “Merrill Lynch Bull Reflecting on Enron.” « oceanflynn @ Digg.

Adobe PhotoShop/Flickr image Tag Cloud of Tse’ (2008) article: Tse, Tomoeh Murakami. 2008. “Economic Downturn Emboldens Shareholder Activists.” Washington Post. February 19, 2008. tag cloud. business economy economics risk.society risk.management banking.sector cyber.citizens Del.icio.us flickr flynn-burhoe semantic.web tagging Tag.Clouds tags corporate.governance CEO activist.investors Wall.Street subprime.mortgages hedge.funds credit.crisis transparency recession Merrill.Lynch

Grynbaum, Michael M.; Bradsher, Keith. 2008-03-17. “U.S. Markets Volatile After Fed Actions. Permalink << New York Times.
March 17, 2008.

NYT’s autogenerated keywords: Stocks and Bonds, International Trade and World Market, United States Economy, Bear Stearns Cos, Morgan J P Chase & Co, Federal Reserve System.” http://www.nytimes.com/2008/03/17/business/worldbusiness/17cnd-stox.html?
ex=1363492800&en=ed6b8e647d5b59ed&ei=5124&partner=permalink&exprod=permalink

Sorkin, Andrew Ross; Thomas, Landon Jr. 2008. “JPMorgan Acts to Buy Ailing Bear Stearns at Huge Discount.” Permalink<< New York Times. March 16, 2008.

Most emailed NYT story March 16-7, 2008. NYT’s autogenerated keywords: “Bear Stearns Cos, Finances, Morgan J P Chase & Co, Federal Reserve System, Cayne James E, Schwartz Alan D, Molinaro Samuel Jr, Banks and Banking, Bankruptcies” My delicious tags: 2008 2008-03 Bear.Stearns bankruptcies banking.industry business finance governance US.economy Wall.Street http://www.nytimes.com/2008/03/16/business/16cnd-bear.html?em&ex=1205899200&en=ca62f6b1b4fd516e&ei=5087%0ASorkin, Andrew Ross. 2008. “Sale Price Reflects the Depth of Bear’s Problems.” << New York Times. March 17, 2008. http://www.nytimes.com/2008/03/17/business/17cnd-bear.html?ex=1363492800&en=8e8e9fbff8c8f606&ei=5124&partner=permalink&exprod=permalink

Tse, Tomoeh Murakami. 2008. “Economic Downturn Emboldens Shareholder Activists.” Washington Post. February 19, 2008.

Tag.Clouds tags corporate.governance CEO activist.investors Wall.Street subprime.mortgages hedge.funds credit.crisis transparency recession Merrill.Lynch << Google docs http://docs.google.com/Doc?id=ddp3qxmz_525cb82bcdn

Creative Commons 3.0 Flynn-Burhoe, Maureen. 2008. “Selected Bibliography and Webliography on the Mortgage Meltdown.”<< Google Docs. Modified March 17, 2008. http://docs.google.com/Doc?id=ddp3qxmz_545hs9n7dd4

More state intervention through laws and regulations: the future of financial intruments as mortgage-meltdown reveals high cost of unfettered markets

More state intervention through laws and regulations: the future of financial intruments as mortgage-meltdown reveals high cost of unfettered markets. The US heads towards recession, shares plungs, oil prices have reached a $120 peak, gold a $1000, OPEC spurns US call for more oil production, activist shareholders call for more transparency and accountability of CEOs, but complex financial instruments used by hedge funds and private equity funds that operate outside of regulation, continue to create more wealth for the wealthy. Wealth disparities intensify as hedge funds and private equity funds skim off the cream of global markets by operating from tax-free offshore locations using everything from emotions, gut feelings, intuition, chaos theory and complex financial algorithms (based on variables, outcomes and values that might be realized in the future and money that is more cyber that really real. These financial institutions with their rhizome-like roots have permeated practically every aspect of our economic lives through our pensions, mortgages and investments. They have create havoc in the economies of nation states and lower quintile households. They gamble big and lose big. When their losses cause the inevitable domino effect, nation states and citizens are forced to cover their losses to prevent the worst. The financial crisis has been triggered by the invisible hand impatient for higher returns, controlled not by a law of nature, human or otherwise, but by an insatiable addiction to a money game. Law makers and regulators from the state and the market are calling a halt.

Bajaj, Vikas. 2008. “Mortgage Defaults Reach a New High.” New York Times. March 6, 2008.

Other related New York Times stories:

Bush and Fed Step Toward a Mortgage Rescue (March 5, 2008)

Bundled Mortgages and Dubious Fees Complicate Foreclosure Cases (March 4, 2008)

Spitzer to Present a Plan to Reduce Foreclosures (March 4, 2008)

Other related stories:  

Acharya, A., H. Almeida, and M. Campello, 2006, “Is cash negative debt? A hedging perspective on corporate financial policies.” Journal of Financial Intermediation.

Bates, Thomas W.; Kahle, Kathleen M.; Stulz, René M. 2007. “Why do U.S. firms hold so much more cash than they used to?”  (October 2007). Fisher College of Business Working Paper No. 2007-03-006 Available at SSRN: http://ssrn.com/abstract=927962

Dittmar, A., and J. Mahrt-Smith. 2007. “Corporate governance and the value of cash holdings.” Journal of Financial Economics 83, 599-634.

Johnston, Megan. 2007. “Whatcha doin’ with all that cash?: Summer money scramble to be one hot topic at AFP confab.” Financial Week. October 22, 2007.

McDonald, Ian. 2006. “Cash Dilemma: How to Spend It.” Wall Street Journal. May 24, 2006. p. C3. McDonald, Ian. 2006. “Capital Pains: Big Cash Hoards.” Wall Street Journal. July 21, 2006. p. C1. Polczer, Shaun. 2008. Scientific investor finds predictability in chaos: Check your emotions before acting.” Calgary Herald. March 04, 2008.

Relief for Homeowners Is Given to a Relative Few (March 4, 2008) 

Walter Zimmerman, principal partner in New York-based United Energy brokers, applies chaos theory to commodity markets. ” Chaos theory is not based on chaos but on the theory that extremely complex phenomena, like the market, have underlying hidden patterns that can be revealed by delving deeply to glean predictive information about that which was seemingly chaotic. He bases his market predictions on the assumption that markets are reflections of human nature and that both are unchanging, both are more emotional than logical, and that behavioural patterns of human nature/herd instinct/the market will be repeated over time. He advises his clients, the bigger oil producers in Calgary to hedge production against high commodity values (oil at $120 a barrel). If the economy continues to unravel, oil prices will correct lower to about $70 or $80.  He argues that governments cannot fight a recession and inflation at the same time. Cutting interest rates to fight recession leads to inflation and fighting inflation depresses economic activity. Summary of (Polczer 2008-03-04).

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More state intervention through laws and regulations: the future of financial intruments as mortgage-meltdown reveals high cost of unfettered markets

Merrill Lynch Bull Reflecting on Enron

Merrill Lynch Bull Reflecting on Enron

Originally uploaded by ocean.flynn.

Tse, Tomoeh Murakami. 2008. “Economic Downturn Emboldens Shareholder Activists.” Washington Post. February 19, 2008.

tag cloud: corporate governance, senior executive compensation guidelines, New York, investor groups, plunging stock prices, executives, corporate board members, accountability, annual shareholder meetings shareholder, U.S. companies, credit crunch, activist investors, financial services companies, Citigroup, Merrill Lynch, Washington Mutual, shareholder proposals, major banks, transparency, discloser, risk management, mortgage-related risks, Wall Street investment firms, executive succession plans, credit-rating agencies, conflicts of interest, rate securities, security rating, CtW Investment, major financial institutions, subprime mortgage-related losses, shareholder value, economy, recession, investors, withhold votes, network of shareholder groups, multimillion-dollar payouts, financial executives, worst corporate performance, executive compensation, residential homebuilding crisis, credit crisis, corporate affairs, Laborers’ International Union of North America, shareholders, public, housing market decline, losses in securities related to subprime mortgages, five-year housing boom, that peaked in mid-2005, mortgage lenders, risky credit, Wall Street investment banks, complex securities, ultra-safe, AAA ratings, credit-rating agencies, defaulting mortgage payments, risk-averse, management experts, Enron scandal, shareholders challenged corporate boards, larger, more widespread losses, toxic subprime mortgages, investment portfolios, Wall Street banks, large institutional money managers, pension plans, small towns overseas, advocating changes in corporate governance, directors elected by majority of stockholders, shift to majority voting, Weinberg Center for Corporate Governance at University of Delaware, shareholder resolutions, union pension funds, measure of shareholder unrest, high investor support, opportunity for hedge funds, shareholders with larger stakes, mount a takeover campaign for board seats, dissatisfied investors, opportunistism, challenge management, effect change, shareholders, improved disclosure, mortgage-related risks, Ryland Group, home builder, mortgage-lending unit, types of home loans, secondary market, fair disclosure rules, Lehman Brothers, Bear Stearns, Washington Mutual, Beazer Homes, Securities and Exchange Commission, credit agencies, safe mortgage-backed securities, billions of dollars, mortgage-backed securities, safe investments, credit agencies, shareholder scrutiny, Moody’s, parent company, Standard & Poor’s, direct involvement, management potential conflicts of interest, enhancing independence, rotate lead analysts, hire outside firm, conduct regular reviews, rating process, customer feedback, Merrill Lynch, Citigroup, write down securities, $46 billion, mortgage-related securities, restate value on company books, targets of shareholder proposals, AFL-CIO, limit executive employment agreements, exclude evergreen clauses, automatic renewal of employment agreements, shareholder approval, bans on accelerated vesting of stock options, ban on excise tax gross-ups, ban on paying executives’ taxes, response to CEO’s multimillion-dollar pay packages, senior executive compensation guidelines, current practices, expanded disclosure of succession plans, CtW Investment, directors responsible for risk oversight, risk oversight, protect shareholders, mortgage-related losses, epicenter of the meltdown, huge losses, destabilized market, value strategies, pension funds, corporate governance, protect shareholders’ interests, directors independent of management, audit committee,

Polar Bears Stranded on Thin Ice in the great debate: Energy, Environment and Economy

On Feb. 6 — three days before FWS’s new deadline — the Minerals Management Service (MMS), also part of the Interior Department, plans to lease 30 million acres for oil and gas drilling in the Chukchi Sea bordering Alaska, where one-fifth of the world’s remaining polar bears live. The Market, the State and Civil Society are again focusing on big-eyed talking animals to capture global attention.

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