The Spanish EU Presidency is aiming to close an agreement on the draft hedge and private equity funds directive at a meeting of finance ministers in Brussels tomorrow (16 March), with teething problems on foreign fund treatment threatening to derail a deal. The UK is pushing for EU-wide recognition of hedge funds that have won approval on its territory. But such an agreement appears unattainable at the moment as Britain and France continue to hold opposing views on the proposed Alternative Investment Fund Managers Directive (AIFMD). [...] The UK is alone in making such demands and will be overruled by other member states if necessary, the diplomat indicated. "All members [of the EU's Council of Ministers] are against. The United Kingdom is isolated on this issue. When you are alone, at one point or another you have to recognise it."
The UK is pushing for EU-wide recognition of hedge funds that have won approval on its territory.
But such an agreement appears unattainable at the moment as Britain and France continue to hold opposing views on the proposed Alternative Investment Fund Managers Directive (AIFMD).
[...]
The UK is alone in making such demands and will be overruled by other member states if necessary, the diplomat indicated.
"All members [of the EU's Council of Ministers] are against. The United Kingdom is isolated on this issue. When you are alone, at one point or another you have to recognise it."
Greece told to ensure 'solid austerity plan' By Contant Brand 15.03.2010 / 18:24 CET Dutch finance minister says there will be intervention, but no bail-out of Greece. The Netherlands today warned Greece at a meeting of eurozone finance ministers not to expect "a free ride to cheap loans" as part of any EU co-ordinated measures to help it out of its financial woes. Dutch Finance Minister Jan Kees de Jager said that Greece had "to ensure a solid austerity plan" before any other aid is offered by the other members of the eurozone. "It's possible we will take measures in a co-ordinated way...but there will be no bail-out, because a bail-out is also forbidden in the [EU's] treaty," de Jager said.
The Netherlands today warned Greece at a meeting of eurozone finance ministers not to expect "a free ride to cheap loans" as part of any EU co-ordinated measures to help it out of its financial woes.
Dutch Finance Minister Jan Kees de Jager said that Greece had "to ensure a solid austerity plan" before any other aid is offered by the other members of the eurozone.
"It's possible we will take measures in a co-ordinated way...but there will be no bail-out, because a bail-out is also forbidden in the [EU's] treaty," de Jager said.
The European Commission will tell Britain to do more to cut its ballooning budget deficit in the medium term, saying the country's fiscal programme lacks ambition, a draft from the EU executive showed on Monday. The draft, obtained by Reuters two days before publication, said the programme failed to guarantee Britain would meet a European Union deadline of 2014-15 for cutting the deficit to below the bloc's cap of 3 percent of economic output. "The overall conclusion is that the fiscal strategy in the convergence programme is not sufficiently ambitious and needs to be significantly reinforced," said the draft, expected to be approved by the Commission on Wednesday. "A credible timeframe for restoring public finances to a sustainable position requires additional fiscal tightening measures beyond those currently planned," it said.
The draft, obtained by Reuters two days before publication, said the programme failed to guarantee Britain would meet a European Union deadline of 2014-15 for cutting the deficit to below the bloc's cap of 3 percent of economic output.
"The overall conclusion is that the fiscal strategy in the convergence programme is not sufficiently ambitious and needs to be significantly reinforced," said the draft, expected to be approved by the Commission on Wednesday.
"A credible timeframe for restoring public finances to a sustainable position requires additional fiscal tightening measures beyond those currently planned," it said.
The government's plans for reducing the budget deficit are not ambitious enough - according to a European Commission report to be published later this week.The report warns that the UK is not on course to cut its deficit in line with EU rules by a deadline of 2015. Those rules say deficits must be below 3% of GDP, but the UK's is expected to hit £178bn - 12.6% of GDP - this year. Ministers insist their plans to halve the deficit in four years are less likely to halt the economic recovery. Those plans, announced in the pre-Budget report, would see the UK's deficit reduced to 4.7% by 2015 - missing the EU target outlined by finance ministers last year.
The government's plans for reducing the budget deficit are not ambitious enough - according to a European Commission report to be published later this week.
The report warns that the UK is not on course to cut its deficit in line with EU rules by a deadline of 2015.
Those rules say deficits must be below 3% of GDP, but the UK's is expected to hit £178bn - 12.6% of GDP - this year.
Ministers insist their plans to halve the deficit in four years are less likely to halt the economic recovery.
Those plans, announced in the pre-Budget report, would see the UK's deficit reduced to 4.7% by 2015 - missing the EU target outlined by finance ministers last year.
Europe is Doomed and I'm not a scaremongering right-winger. We're doomed because we're incapable of thinking past right-wing frames - our institutions are rotten to the core with neo-liberalism.
Sad but true. The brainless should not be in banking -- Willem Buiter
our institutions are rotten to the core with neo-liberalism.
i just heard trichet mouthing opaque platitudes on euro news. the operative, repetitive phrase 'structural reforms' was chanted as my gut clenched in rhythm.
not that structures don't need reforming, but... ~"When an inner situation is not made conscious, it appears outside as fate." Karl Jung~
So what is the Dutch FM proposing again? And why should Greece take it?
Timmy-Gate Takes a Turn For The Worse: Did Geithner Help Lehman Hide Accounting Tricks? Just when you thought that nothing could stink more than Timothy Geithner's handling of the AIG bailout, a new report details how Geithner's New York Fed allowed Lehman Brothers to use an accounting gimmick to hide debt. The report, which runs to 2200 pages, was released by Anton Valukas, the court-appointed examiner. It actually makes the AIG bailout look tame by comparison. It is now crystal clear why Geithner's Treasury as well as Bernanke's Fed refuse to allow any light to shine on the massive cover-up underway. Recall that the New York Fed arranged for AIG to pay one hundred cents on the dollar on bad debts to its counterparties--benefiting Goldman Sachs and a handful of other favored Wall Street firms. (see here) The purported reason is that Geithner so feared any negative repercussions resulting from debt write-downs that he wanted Uncle Sam to make sure that Wall Street banks could not lose on bad bets. Now we find that Geithner's NYFed supported Lehman's efforts to conceal the extent of its problems. (see here) Not only did the NYFed fail to blow the whistle on flagrant accounting tricks, it also helped to hide Lehman's illiquid assets on the Fed's balance sheet to make its position look better. Note that the NY Fed had increased its supervision to the point that it was going over Lehman's books daily; further, it continued to take trash off the books of Lehman right up to the bitter end, helping to perpetuate the fraud that was designed to maintain the pretense that Lehman was not massively insolvent.
Just when you thought that nothing could stink more than Timothy Geithner's handling of the AIG bailout, a new report details how Geithner's New York Fed allowed Lehman Brothers to use an accounting gimmick to hide debt. The report, which runs to 2200 pages, was released by Anton Valukas, the court-appointed examiner. It actually makes the AIG bailout look tame by comparison. It is now crystal clear why Geithner's Treasury as well as Bernanke's Fed refuse to allow any light to shine on the massive cover-up underway.
Recall that the New York Fed arranged for AIG to pay one hundred cents on the dollar on bad debts to its counterparties--benefiting Goldman Sachs and a handful of other favored Wall Street firms. (see here) The purported reason is that Geithner so feared any negative repercussions resulting from debt write-downs that he wanted Uncle Sam to make sure that Wall Street banks could not lose on bad bets. Now we find that Geithner's NYFed supported Lehman's efforts to conceal the extent of its problems. (see here) Not only did the NYFed fail to blow the whistle on flagrant accounting tricks, it also helped to hide Lehman's illiquid assets on the Fed's balance sheet to make its position look better. Note that the NY Fed had increased its supervision to the point that it was going over Lehman's books daily; further, it continued to take trash off the books of Lehman right up to the bitter end, helping to perpetuate the fraud that was designed to maintain the pretense that Lehman was not massively insolvent.
Wray cites a NYT article on the subject of the Fed's involvement in hiding the insolvency:
They were considered the dregs of Lehman Brothers -- "bottom of the barrel," as one banker put it. But as Lehman executives tried to keep the floundering bank afloat in 2008, they used these troubled investments to raise quick cash that helped mask the extent of the firm's troubles. And they did it with the help of the Federal Reserve Bank of New York. The newly released report on the collapse of Lehman Brothers -- which lays out what it characterizes as "materially misleading" accounting at the bank -- also sheds surprising new light on Lehman's dealings with the New York Fed. Lehman engaged in a series of transactions with the New York Fed that were similar to the ones that drew criticism from the bankruptcy court examiner who investigated its collapse. The examiner, Anton R. Valukas, drew no conclusions about the transactions with the Fed, and focused instead on deals that were known inside Lehman as "Repo 105." But the report by Mr. Valukas nonetheless raises fresh questions about the role of the New York Fed in supporting Lehman during the frantic months leading up to its collapse. It suggests that Lehman executives believed the Fed would be able to help the bank avert disaster and provide it with a business opportunity.
The newly released report on the collapse of Lehman Brothers -- which lays out what it characterizes as "materially misleading" accounting at the bank -- also sheds surprising new light on Lehman's dealings with the New York Fed.
Lehman engaged in a series of transactions with the New York Fed that were similar to the ones that drew criticism from the bankruptcy court examiner who investigated its collapse. The examiner, Anton R. Valukas, drew no conclusions about the transactions with the Fed, and focused instead on deals that were known inside Lehman as "Repo 105."
But the report by Mr. Valukas nonetheless raises fresh questions about the role of the New York Fed in supporting Lehman during the frantic months leading up to its collapse. It suggests that Lehman executives believed the Fed would be able to help the bank avert disaster and provide it with a business opportunity.
Geithner told Congress that he has never been a regulator. (see here) That is a quite honest assessment of his job performance, although it is completely inaccurate as a description of his duties as President of the NYFed. Apparently, Geithner has never met an accounting gimmick that he does not like, if it appears to improve the reported finances of a Wall Street firm. We will leave to the side his own checkered past as a taxpayer, although one might question the wisdom of appointing someone who is apparently insufficiently skilled to file accurate tax returns to a position as our nation's chief tax collector. What is far more troubling is that he now heads the Treaury--which means that he is not only responsible for managing two regulatory units (the FDIC and OCC), but also that he has got hold of the government's purse strings. How many more billions or trillions will he commit to a futile effort to help Wall Street avoid its losses? Geithner has denied that he played any direct role in the AIG bail-out--a somewhat implausible claim given that he was the President of the NYFed and given that this was a monumental and unprecedented action to funnel government funds to AIG's counterparties. He may try to deny involvement in the Lehman deals. (Again, this is implausible. Lehman executives claimed they "gave full and complete financial information to government agencies", and that the government never raised significant objections or directed that Lehman take any corrective action. In fairness, the SEC also overlooked any problems at Lehman. (see here) But here is what is so astounding about the gimmicks: Lehman used "Repo 105" to temporarily move liabilities off its balance sheet--essentially pretending to sell them although it promised to immediately buy them back. The abuse was so flagrant that no US law firm would sign off on the practice, fearing that creditors and stockholders would have grounds for lawsuits on the basis that this caused a "material misrepresentation" of Lehman's financial statements. (see here) The court-appointed examiner hired to look into the failure of Lehman found "materially misleading" accounting and "actionable balance sheet manipulation." (here) But just as Arthur Andersen had signed off on Enron's scams, Ernst & Young found no problem with Lehman. (here) In short, this was an Enron-style, go directly to jail and do not pass go, sort of fraud. Lehman's had been using this trick since 2001. (here) It looked fine to Timmy's Fed, which extended loans allowing Lehman to flip bad assets onto the Fed's balance sheet to keep the fraud going. More generally, this revelation drives home three related points. First, the scandal is on-going and it is huge. President Obama must hold Geithner accountable. He must determine what did Geithner know, and when did he know it. All internal documents and emails related to the AIG bailout and the attempt to keep Lehman afloat need to be released. Further, Obama must ask what has Geithner done to favor his clients on Wall Street? It now looks like even the Fed BOG, not just the NYFed, is involved in the cover-up. It is in the interest of the Obama administration to come clean. It is hard to believe that it does not already have sufficient cause to fire Geithner. In terms of dollar costs to the government, this is surely the biggest scandal in US history. It terms of sheer sleaze does it rank with Watergate? I suppose that depends on whether you believe that political hit lists and spying that had no real impact on the outcome of an election is as bad as a wholesale handing-over of government and the economy to Wall Street.
Geithner has denied that he played any direct role in the AIG bail-out--a somewhat implausible claim given that he was the President of the NYFed and given that this was a monumental and unprecedented action to funnel government funds to AIG's counterparties. He may try to deny involvement in the Lehman deals. (Again, this is implausible. Lehman executives claimed they "gave full and complete financial information to government agencies", and that the government never raised significant objections or directed that Lehman take any corrective action. In fairness, the SEC also overlooked any problems at Lehman. (see here) But here is what is so astounding about the gimmicks: Lehman used "Repo 105" to temporarily move liabilities off its balance sheet--essentially pretending to sell them although it promised to immediately buy them back. The abuse was so flagrant that no US law firm would sign off on the practice, fearing that creditors and stockholders would have grounds for lawsuits on the basis that this caused a "material misrepresentation" of Lehman's financial statements. (see here) The court-appointed examiner hired to look into the failure of Lehman found "materially misleading" accounting and "actionable balance sheet manipulation." (here) But just as Arthur Andersen had signed off on Enron's scams, Ernst & Young found no problem with Lehman. (here)
In short, this was an Enron-style, go directly to jail and do not pass go, sort of fraud. Lehman's had been using this trick since 2001. (here) It looked fine to Timmy's Fed, which extended loans allowing Lehman to flip bad assets onto the Fed's balance sheet to keep the fraud going.
More generally, this revelation drives home three related points. First, the scandal is on-going and it is huge. President Obama must hold Geithner accountable. He must determine what did Geithner know, and when did he know it. All internal documents and emails related to the AIG bailout and the attempt to keep Lehman afloat need to be released. Further, Obama must ask what has Geithner done to favor his clients on Wall Street? It now looks like even the Fed BOG, not just the NYFed, is involved in the cover-up. It is in the interest of the Obama administration to come clean. It is hard to believe that it does not already have sufficient cause to fire Geithner. In terms of dollar costs to the government, this is surely the biggest scandal in US history. It terms of sheer sleaze does it rank with Watergate? I suppose that depends on whether you believe that political hit lists and spying that had no real impact on the outcome of an election is as bad as a wholesale handing-over of government and the economy to Wall Street.
At least Senator Kaufman, who took Joe Biden's seat, has spoken out on this outrage. But the Republicans are hoping to win back Wall Street's favor, so they are keeping quiet about this massive ongoing fraud, and, of course, the Obama White House, who received the most money ever for a presidential campaign from Wall Street, is demonstrating to Wall Street just what their largess has purchased. From HuPo, who picked up Simon Johnson's article in Baseline Scenario:
Last week, Senator Ted Kaufman (D., DE) gave a devastating speech in the Senate on "too big to fail" and all it entails. A long public silence from our political class was broken -- and to great effect. Today's Dodd reform proposals stand in pale comparison to the principles outlined by Senator Kaufman. And yes, DE stands for Delaware -- corporate America has finally decided that its largest financial offspring are way out of line and must be reined in. Now, the Senator has gone one better, putting many private criticisms of the financial sector -- the kind you hear whispered with conviction on the Upper East Side and in Midtown -- firmly and articulately on the public record in a Senate floor speech to be delivered tomorrow (this is a direct link to speech). He pulls no punches: "fraud and potential criminal conduct were at the heart of the financial crisis" He goes after Lehman -- with its infamous Repo 105 -- as well as the other entities potentially implicated in those transactions, including Ernst and Young (Lehman's auditors). This is the low hanging fruit -- but have you heard even a squeak from the White House or anyone else in the country's putative leadership on this issue? And then he goes for the twin jugulars of Wall Street as it still stands: The idea that we saved something, at great expense in 2008-09, that was actually worth saving; and Goldman Sachs. "[T]his is not about retribution. This is about addressing the continuum of behavior that took place -- some of it fraudulent and illegal -- and in the process addressing what Wall Street and the legal and regulatory system underlying its behavior have become."
Now, the Senator has gone one better, putting many private criticisms of the financial sector -- the kind you hear whispered with conviction on the Upper East Side and in Midtown -- firmly and articulately on the public record in a Senate floor speech to be delivered tomorrow (this is a direct link to speech). He pulls no punches:
"fraud and potential criminal conduct were at the heart of the financial crisis"
And then he goes for the twin jugulars of Wall Street as it still stands: The idea that we saved something, at great expense in 2008-09, that was actually worth saving; and Goldman Sachs.
"[T]his is not about retribution. This is about addressing the continuum of behavior that took place -- some of it fraudulent and illegal -- and in the process addressing what Wall Street and the legal and regulatory system underlying its behavior have become."
(Everywhere a "(here)" appears in Wray's text there is a link that I did not incorporate. It is way past my bedtime.) As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
At some point it ran out of securities that its (commercial) counterparties would accept as collateral for these very short term cash loans. And that's where apparently the Fed took over, by taking in junk in exchange for fresh cash.
Amazing. Wind power
Geithner told Congress that he has never been a regulator. (see here) That is a quite honest assessment of his job performance, although it is completely inaccurate as a description of his duties as President of the NYFed. Apparently, Geithner has never met an accounting gimmick that he does not like, if it appears to improve the reported finances of a Wall Street firm.
Lehman's had been using this trick since 2001
Lying is what very serious people do for a living. The head nodding, think tank funding and suit wearing are just protective colouration.
BBC: ECB lends $500bn€350bn to lower rates (18 December 2007)
All banks with enough collateral, and which submitted bids of at least 4.21%, received funds from the ECB. The ECB said 390 banks across the eurozone had sought the funding. The move - making the extra cash available over the next two weeks -will ease fears of a credit meltdown over the Christmas period, when banks need extra cash.
The ECB said 390 banks across the eurozone had sought the funding.
The move - making the extra cash available over the next two weeks -will ease fears of a credit meltdown over the Christmas period, when banks need extra cash.
I mean, how is ease fears of a credit meltdown over the Christmas period, when banks need extra cash [to close their year-end books] different from Jérôme's temporarily convert securities into cash at the time of quarterly book closings, to make its accounts look better?
Lehman was using repo 105s to temporarily convert securities into cash at the time of quarterly book closings, to make its accounts look better (less leveraged, mainly). At some point it ran out of securities that its (commercial) counterparties would accept as collateral for these very short term cash loans. And that's where apparently the Fed took over, by taking in junk in exchange for fresh cash.
Amazing
The Lehman innovation was systematic misreporting of its solvency, repeated quarterly to give a misleading impression to markets - aided by the Fed, which presumably was doing similar deals elsewhere on Wall St.
It's the difference between a one-off loan with full disclosure, and a quick bung between friends, which is never reported or disclosed.
In the UK it's illegal for a company to trade while insolvent. Lehman was insolvent in real terms, and was hiding that fact behind a facade of misreporting, creative accounting and generous undisclosed cash handouts from Timmy.
So it is in Spain. However, a Decree was enacted on December 12 2008 providing that losses on real state investments or inventory are not computed for the purposes of technical insolvency. Just in time to close the books for the year, I might point out. The brainless should not be in banking -- Willem Buiter
At some point (Lehman) ran out of securities that its (commercial) counterparties would accept as collateral...
Gotta love the multiple meanings of "accounted." And who says the financialization industry doesn't have a brutal sense of humor. A long term repo written around trash and held by a subsidiary or the friendly Fed is a SIV! As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
They were considered the dregs of Lehman Brothers -- "bottom of the barrel," as one banker put it. But as Lehman executives tried to keep the floundering bank afloat in 2008, they used these troubled investments to raise quick cash that helped mask the extent of the firm's troubles. And they did it with the help of the Federal Reserve Bank of New York.
But what exactly was Lehman Bros stuffing into the Repo 105 sausage? Perhaps counter-intuitively it was not using the stuff on its balance sheet that was hardest to sell into markets. Rather, it was the most liquid -- things like A- to AAA-rated securities, Treasuries and Agency debt, which you can see in the below table, from the Examiner's Report (Appendix 17)
Perhaps counter-intuitively it was not using the stuff on its balance sheet that was hardest to sell into markets.
Rather, it was the most liquid -- things like A- to AAA-rated securities, Treasuries and Agency debt, which you can see in the below table, from the Examiner's Report (Appendix 17)
In August 2008, just before it was over, the firm allowed $55 million, or seven securities, rated CCC to be included in a Repo 105 transaction.
The next chart makes it evident it that 105s were used simply to game the firm's assets into quarter end (yellow highlights), by reducing overall asset for leverage ratio calculations. That this scam was going unsupervised (just who the hell were the counterparties?) for many years, and that many banks are likely using it right now to fool investors, regulators, rating agencies, and the idiots at the FRBNY (who certainly also know about this), is beyond criminal. Yet that nobody will go to jail for this is as certain as the market going up another 10% tomorrow. A full investigation has to be conducted immediately into whether existing Wall Street firms, and in particular those who use Ernst & Young as auditors, are currently abusing public confidence via such transactions.
That this scam was going unsupervised (just who the hell were the counterparties?) for many years, and that many banks are likely using it right now to fool investors, regulators, rating agencies, and the idiots at the FRBNY (who certainly also know about this), is beyond criminal. Yet that nobody will go to jail for this is as certain as the market going up another 10% tomorrow. A full investigation has to be conducted immediately into whether existing Wall Street firms, and in particular those who use Ernst & Young as auditors, are currently abusing public confidence via such transactions.
President Obama must hold Geithner accountable. He must determine what did Geithner know, and when did he know it.
It's becoming less and less clear who exactly appointed whom. See also:
Senator Kaufman Makes A Stand Against The Criminality Exposed By The Lehman Examiner Report, Questions The Core Principles Of US Democracy | zero hedge
One person, however, who refuses to let it go, is Senator Ted Kaufman, whose determined support for an overhaul of market structure we have followed over the past year. The Senator now moves on to yet another pressing issue: the disclosures of unprecedented impropriety conducted by virtually every person of responsibility within the Lehman organization, as well as associated firms like Ernst & Young, and regulators who were asleep at the wheel during the moment of greatest stress for the American financial system. Kaufman calls for a "a thorough investigation, both civil and criminal, to identify every last person who had knowledge that Lehman was misleading the public about its troubled balance sheet - and that means everyone from the Lehman executives, to its board of directors, to its accounting firm, Ernst & Young. Moreover, if the foreign bank counterparties who purchased the now infamous "Repo 105s" were complicit in the scheme, they should be held accountable as well."
So what happens now?
Funny the (New York) Fed is not mentioned... The brainless should not be in banking -- Willem Buiter
I wonder how the audit bill is doing.
Over and over again. keep to the Fen Causeway
The examiner's report gives us a new term for hiding problems on a corporate balance sheet that may become common parlance: "Repo 105." Starting in 2001, Lehman Brothers engaged in repurchase agreements, called "repos," which were described by DealBook as "what amounts to a short-term loan, exchanging collateral for cash up front, and then unwinding the trade as soon as overnight." Repos are a common method for investment banks to finance their operations and are neither illegal nor questionable, at least when clearly accounted for. Lehman Brothers went a step further by having the collateral exchange under the agreement worth 105 percent of the cash it received -- hence, the "105" in the firm's nomenclature. By doing so, that turned it into a sale for accounting purposes, so that the firm could move the assets it exchanged in the deal off of its balance sheet, at least for a short while. As explained by DealBook, "That meant that for a few days -- and by the fourth quarter of 2007 that meant end-of-quarter -- Lehman could shuffle off tens of billions of dollars in assets to appear more financially healthy than it really was." By timing Repo 105 transactions to the end of a quarter, the reports filed with the S.E.C. and reviewed by investors looked much better than what was going to be the case just a short time later. Enron did much the same thing with some of its assets, such as its notorious Nigerian barge deal.
Lehman Brothers went a step further by having the collateral exchange under the agreement worth 105 percent of the cash it received -- hence, the "105" in the firm's nomenclature. By doing so, that turned it into a sale for accounting purposes, so that the firm could move the assets it exchanged in the deal off of its balance sheet, at least for a short while.
As explained by DealBook, "That meant that for a few days -- and by the fourth quarter of 2007 that meant end-of-quarter -- Lehman could shuffle off tens of billions of dollars in assets to appear more financially healthy than it really was." By timing Repo 105 transactions to the end of a quarter, the reports filed with the S.E.C. and reviewed by investors looked much better than what was going to be the case just a short time later. Enron did much the same thing with some of its assets, such as its notorious Nigerian barge deal.
A repo is, roughly, a contract where A pays B an amount X in exchange for collateral worth Y and the commitment to repurchase the collateral for Z at a later date.
Are we supposed to understand from the Repo 105 issue that, depending on the relative values of X, Y, and Z, the transaction may or may not be a sale or a derivative or a loan for accounting purposes? Can accounting regulations be this byzantine and at the same time this harebrained? The brainless should not be in banking -- Willem Buiter
First off, what's a repo?: Repos, or repurchase agreements, are transactions which banks use to borrow cash short term. The deals involve raising cash to fund operations by lending out high-quality assets (usually Treasury bills) for a short period of time. As part of the deals, the banks agree to repurchase their collateral within days or weeks. What is the accounting?: In most circumstances, these transactions are accounted for as a loan on the books of the company. Accountants can treat these agreements as sales of assets rather than loans, only if the companies show that the company receiving the loan does not retain control over the securities used as collateral. How do you know if the company controls the securities or not?: Guidance in the accounting rules suggests that an exchange of securities in excess of 102% of the cash value would show a lack of control. So Lehman exchanged securities worth 105% of the cash it received, which is why they were called Repo 105 deals, according to the Lehman examiner's report. So according to the report, Lehman would get these things off its books, report earnings, showing lower leverage rationsratios, and then buy the assets back.
What is the accounting?: In most circumstances, these transactions are accounted for as a loan on the books of the company. Accountants can treat these agreements as sales of assets rather than loans, only if the companies show that the company receiving the loan does not retain control over the securities used as collateral.
How do you know if the company controls the securities or not?: Guidance in the accounting rules suggests that an exchange of securities in excess of 102% of the cash value would show a lack of control. So Lehman exchanged securities worth 105% of the cash it received, which is why they were called Repo 105 deals, according to the Lehman examiner's report. So according to the report, Lehman would get these things off its books, report earnings, showing lower leverage rationsratios, and then buy the assets back.
Guidance in the accounting rules suggests that an exchange of securities in excess of 102% of the cash value would show a lack of control.
Lehman's own accounting policy required assets used for Repo 105 "be readily obtainable" -- i.e. liquid -- according to the report. Lehman's lawyers also recommended they be liquid so that "the Buyer could easily dispose of the Purchased Securities and acquire equivalent securities if it wished."
Clever little buggers, Lehman Brothers... The brainless should not be in banking -- Willem Buiter
Enron did much the same thing with some of its assets, such as its notorious Nigerian barge deal.
I got an email today from an executive in a big American bank telling me he had a barge in Nigeria he needed to move and did I have a couple million for a repo...
FREMONT, Calif. (AP) -- The United Auto Workers union has reached a tentative agreement to shut down California's sole remaining auto plant which employs 4,600 people.... Nummi, which stands for New United Motor Manufacturing Inc., began 25 years ago as a joint venture between Toyota and General Motors Co. The goal was to let GM observe the Japanese car-making system and let Toyota test out its production model on U.S. workers.... Toyota plans to move production of the Corolla to Canada and Japan and the Tacoma to Texas. Read more...
Nummi, which stands for New United Motor Manufacturing Inc., began 25 years ago as a joint venture between Toyota and General Motors Co. The goal was to let GM observe the Japanese car-making system and let Toyota test out its production model on U.S. workers....
Toyota plans to move production of the Corolla to Canada and Japan and the Tacoma to Texas.
Read more...
"If these programs keep growing, you're going to wind up with more and more students who are graduating and can't find meaningful employment," said Rafael I. Pardo, a professor at Seattle University School of Law and an expert on educational finance. "They can't generate income needed to pay back their loans, and they're going to end up in financial distress."... The administration is also tightening regulations to ensure that vocational schools that receive aid dollars prepare students for "gainful employment." Under a proposal being floated by the Department of Education, programs would be barred from loading students with more debt than justified by the likely salaries of the jobs they would pursue. "During a recession, with increased demand for education and more anxiety about the ability to get a job, there is a heightened level of hazard," said Robert Shireman, a deputy under secretary of education. "There is a lot of Pell grant money out there, and we need to make sure it's being used effectively." ... For-profit schools have proved adept at capturing Pell grants, which are a centerpiece of the Obama administration's efforts to make higher education more affordable. The administration increased financing for Pell grants by $17 billion for 2009 and 2010 as part of its $787 billion stimulus package. Two years ago, students at for-profit trade schools received $3.2 billion in Pell grants, according to the Department of Education, less than went to students at two-year public institutions. By the 2011-12 school year, the administration now estimates, students at for-profit schools should receive more than $10 billion in Pell grants, more than their public counterparts. (Those anticipated increases may shrink, depending on the outcome of wrangling in Congress over health care and student lending.) ... Jeffrey West was working at a pet store near Philadelphia, earning about $8 an hour, when he saw advertisements for training programs offered by WyoTech, a chain of trade schools owned by Corinthian Colleges Inc., a publicly traded company that last year reported revenue of $1.3 billion. After Mr. West called the school, an admissions representative drove to his house to sell him on classes in auto body refinishing and upholstering technology, a nine-month program that cost about $30,000. Read more...
The administration is also tightening regulations to ensure that vocational schools that receive aid dollars prepare students for "gainful employment." Under a proposal being floated by the Department of Education, programs would be barred from loading students with more debt than justified by the likely salaries of the jobs they would pursue.
"During a recession, with increased demand for education and more anxiety about the ability to get a job, there is a heightened level of hazard," said Robert Shireman, a deputy under secretary of education. "There is a lot of Pell grant money out there, and we need to make sure it's being used effectively." ...
For-profit schools have proved adept at capturing Pell grants, which are a centerpiece of the Obama administration's efforts to make higher education more affordable. The administration increased financing for Pell grants by $17 billion for 2009 and 2010 as part of its $787 billion stimulus package.
Two years ago, students at for-profit trade schools received $3.2 billion in Pell grants, according to the Department of Education, less than went to students at two-year public institutions. By the 2011-12 school year, the administration now estimates, students at for-profit schools should receive more than $10 billion in Pell grants, more than their public counterparts. (Those anticipated increases may shrink, depending on the outcome of wrangling in Congress over health care and student lending.) ...
Jeffrey West was working at a pet store near Philadelphia, earning about $8 an hour, when he saw advertisements for training programs offered by WyoTech, a chain of trade schools owned by Corinthian Colleges Inc., a publicly traded company that last year reported revenue of $1.3 billion. After Mr. West called the school, an admissions representative drove to his house to sell him on classes in auto body refinishing and upholstering technology, a nine-month program that cost about $30,000.
Possibly related vitriol: Feb 2010 Diversity is the key to economic and political evolution.
Updated and expanded graph. Growth and stability pact is major FAIL. Peak oil is not an energy crisis. It is a liquid fuel crisis.
Mr Obama does not mention the company by name. He does however deprecate advocates of insurance deregulation calling "less oversight and fewer rules ...the fox-guarding-the-henhouse approach to health insurance reform." He says deregulation --of current monopolistic insurer practices-- "would segment [sic] the market further." More interesting, he associates "bargaining power" of government or "big company" benefits planners opposed to insurers to the "negotiating power" of an individual member or an insurers' actuarial pool (market "segment") defined by age, location, income, plan design, and pre-existing medical condition-- rather than that purchasing power exemplified by single-payer, federal administration of managed care insurance models Medicaid and Medicare. And he of course continues to gloss guaranteed issue and guaranteed renewal provisions of coverages with premium "affordability" these bills purport to establish.Source
While I can support Mr Obama's intention to reassure employed, insured citizens that legislative opponents misrepresent substantitive health insurance regulation, I still cannot support either his alternative explanation of insurance reform or the inexplicable urgency of passing this bill, this week. I reviewed H.R. 3590 this week and it is evident to me that since 24 Dec., House intransigence and popular agitation have produced some beneficial alterations to the senate language. So-called debate must continue and senators up for re-election forced early and often to reveal their hands to constituents.
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legitimate "process arguments" "illigitimate" process arguments, Rules Committee "psy-ops" reconciliation tactics Diversity is the key to economic and political evolution.
article, "Market power".
Individual buyers (policy holders) whether not grouped by community- or experience-ratings (risk) participate in an insurance market as individual price takers. First, Baucus bill Romneycare does not alter the market power of individual buyers; it in fact formalizes inelasticity of demand or zero pricing power viz. insurers. Second, actuarial classification of individual buyers by insurers does not solve or eliminate agency inequities identified as monopolistic practices if individual buyers are prohibited by law from uniting their insurable interests and purchase decisions; it in fact formalizes insurer price discrimination and scheduled rate adjustments, while imposing an annualized debt limit on insureds' cost-sharing obligations for consideration of guaranteed issue and guaranteed renewable policy ownership; and it in fact only empowers medical goods and services producers that are state contractors bargaining license, limit cost plus 175% mark-up. Thank you. Diversity is the key to economic and political evolution.
