Neil Barofsky stopped by at Bloomberg to talk about the his new book and the Libor rigging scandal.
He had some interesting comments on the implications of Treasury officials knowing Libor was rigged but using it in TARP bailout funds anyway.
Guest post by Peter Tchir of TF Market Advisors.
No Bazooka, Not Even a Water Balloon
So the ECB delivered absolutely nothing. No follow up on last week’s speech. No new programs. No details. Basically nothing new was delivered. His press conference is at best confusing, and at worst has become defensive. He brought out the “don’t short the euro” statement. I liked when he said that countries won’t go back to old currencies, but the “don’t be short the euro” line was just silly. I don’t think the Japanese Yen is going away any time, but doesn’t mean I can’t think it is over or undervalued.
Why Aren’t We Lower?
That is a question. Stocks are down, but barely 1%. CDS is wider, but even IG18 is only back to 107.5 (2.25 bps wider). Spanish stocks are hit but Spanish bonds doing okay.
The takeaways that are easing the damage are that
- Spain and Italy have to ask for help and until they do, he cannot do anything
- attempts to assert the ECB’s independence
- the mystique that they may be there if needed, the threat of action
With Knight in total implosion mode, we would like to review a few good videos on antifragility, fat tails, the predictability of the unpredictable, flash crash and some up to date charts on the falling Red Knight.
Computers and algos are great, but you just need to have that big red stop button active. If one Algo can cause such harm, imagine having a few of those algos, operated by quant guys in their early twenties.
What could possibly go wrong?
Guest post by Azizonomics.
Ron Paul’s signature Audit the Fed legislation finally passed the House; on July 25, the House bill was passed 327 to 98. But the chances of a comprehensive audit of monetary policy — including the specifics of the 2008 bailouts — remain distant.
Why? Well, the Fed doesn’t seem to want the sunshine. Critics including the current Fed regime claim that monetary policy transparency would politicise the Fed and compromise its independence, and allow public sentiment to interfere with what they believe should be a process left to experts dispassionately interpreting the economic data. Although the St. Louis Fed makes economic data widely available, monetary policy is determined behind closed doors, and transactions are carried out in secret.
In the glitzy world of investment banking, money market traders were at the bottom of the pecking order before the financial crisis. They were not involved in major deals, and they could only dream of the kinds of bonuses stock and bond traders received. “They were always at the bottom of the food chain,” says a former investment banker.
It was a conspiratorial group of underdogs who worked for various banks and met at least once a month for a beer or a mojito in New York, London or Frankfurt. By the middle of the last decade, when there seemed to be a surplus of money at the banks, they all had the same problem: They were derided or, worse yet, ignored by their colleagues in the trading rooms of major banks.
But what if it were possible to know where interest rates were headed at the end of the day, or even in the next hour? What if a few traders could manipulate the ups and downs of interest rates?
Guest post by Lance Roberts of Street talklive.
Economic reports all across the board this morning continue to confirm a further deterioration in the overall economy. The first set of releases came overnight with Markit’s Flash Purchasing Manager Indexes from around the globe. The numbers were not pretty.
Note: A reading below 50 indicates contraction.