Clive Corcoran

Goldman's Great Euro / Dollar Call

This article was written somewhat with tongue in cheek with an exclamation mark in the title when originally published.

As commented the EUR/USD initially moved up on the GS recommendation that it was headed to $1.55, but clearly traders were not convinced and with the Fed's more opaque language in its statement, the tailwinds now appear to be behind the US dollar. In fact the euro dropped below key support and traded as low as $1.4370 in Asian trading on Thursday.

My may main point was that for many prop desks positioned still with a negative dollar bias - the call by GS to clients that the euro was the place to be over the next three months seemed rather too anxious an attempt to talk up their book and to stem the recent decline in their stock.

It remains to be seen whether the move into the US dollar and out of the Australian dollar, for example, as well as out of the euro will continue to weigh on the performance of several large carry play traders.

Financial Crisis: Treating the Symptoms Isn't Enough

One other major structural item which I would suggest could be added to the list is a new mandate which specifically provides for the Fed (and other central bankers) to take preventative measures from allowing asset bubbles to go unchecked.
The methodology for identifying them may not be straightforward but there were plenty of signs during the 1997-2000 period and the 2004-7 period that patently unsustainable bubbles were building in internet related and real estate related sectors.
It simply is not good enough for Greenspan and Bernanke to have abdicated all responsibility for addressing these dangerous market valuation anomalies.

Bailouts Through the Back Door

The quote cited from the book by Robert Pozen makes the sterilization of the Lehman debacle sound deceivingly simple.

PWC has about 250 people working full time on disentangling the Lehman mess and many hundreds of others (including ex Lehman staff) will be gainfully employed for a considerable period - with very considerable fees -sorting out the complex labyrinth of counter-parties to their trades. AIG's labyrinth went right to the "heart" of the financial system.

As John L suggests at the end of the day it came down to a "gut" level decision by Mr Paulson about who most needed to be protected.

Four Reasons We're Headed Even Higher

While I might agree with you that there will be a lot of clairvoyant pundits that are likely to be premature in calling the top I think you should not be quite so cavalier in the claim that "Financial armageddon is in the rear-view mirror"

With a debt/GDP ratio approaching 100% (and that's on a benign view of the size of the debt) and with a lackluster recovery at best, imho, there are still a lot more twists and turns to the rolling financial crisis ahead.

Citibank's Problems Are Far from Over

If you are both long and short the financials I am not quite sure what the takeaway message from your article is.

Did We Nationalize Banks, Or Did They Nationalize Us?

Paulson's testimony was underwhelming from a supposed master of the universe.
The key line of questioning on which he failed was when asked to explain when he changed his mind from the view that the $700 bn would be used for buying the toxic assets and instead used to rescue his chums.
That was a helluva lot of money to give one man with so few strings attached

Why Congress Is Asking Bernanke Bogus Questions

The questions you pose are very good ones - but the answers would be way too long and difficult for sound bites.

Ken Lewis and BAC's Shareholders Got Hosed by the Feds

You say "the U.S. government should bear the responsibility for the resulting losses."
They're are already running a tab on the losses.

TARP for Regulators

Alas there can be no systemic guarantor of last resort - it would be a self-referential paradox.
The dis-illusionment will be complete once it is accepted that no-one can control the financial system. To think otherwise is to subscribe to the mythology of credentialism and asymmetric entitlements.

Holman Jenkins's Errors, Part 1

Felix - I agree with your final point (and most of the other criticisms of the Hoover piece.
"The fact is that Wall Street was out of control — out of control of the regulators, yes, but also out of control of its own executives."

It was not only a question of behemoth banks being too big to fail they were too big to understand or manage.

Banks, Oligopolies and Ever-Rising Fees

It is not just an oligopoly but a cartel that is beyond reproach for multiple reasons - donations, cronyism, fear of systemic accidents etc.

The fees you describe are unconscionable but will prevail because of the poor state of "the general financial literacy rate in this country"

Aggravating that problem is the feeling of helplessness from even those who have bothered to attain a certain level of sophistication in financial matters that anything can be done about it

U.S. Government Needs a Maggie Sue

Isn't your last sentence a bit too cavalier as most of these "legacy" assets are now going to weigh heavily on the public finances for years to come.

How Much of the Banks' Earnings Are Real?

I found most of your article to be very informative but this sentence stuck out like a sore thumb for me
"Bankers are really smart and the public is pigs waiting to be slaughtered."
It may have been meant ironically in two key respects I believe it to be wrong . First I don't believe that bankers are really smart they're just very well connected in Washington. Secondly the real slaughter of the public is taking place on the USA national balance sheet where obligations are being incurred without legitimate authority.

Do You Believe Banks Are Recovering? (Part 2)

You make lots of excellent points and you write with great style.
For me Greenspan's remark
"Derivatives have permitted the unbundling of financial risks"

should stand as an epitaph to the financial technocracy