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Sean Ryan  

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  • The Benefits of Too Big to Fail [View article]
    I disagree; the fact that the subsidy does not take the form of cash does not change the fact that it is a transfer of value from the government to the TBTF banks.

    This is PRECISELY the argument that I and other critics made about the subsidy in the government's implicit guarantee of Fannie Mae and Freddie Mac for years. The companies and their Congressional patrons always made the argument Felix makes - that since there is no explicit transfer of cash, then there is no cost to the government. The cost comes in the form of risk borne without compensation. The risk of the GSEs *seemed* costless for many years. It wasn't, as ultimately became clear.

    An implicit guarantee is no less a subsidy than an explicit guarantee, or a giant pile of cash. It is just value in a different form.
    Oct 5, 2009. 07:53 PM | 3 Likes Like |Link to Comment
  • First Goldman Sachs (GS +1.7%) wanted into commercial banking to survive the crisis. Now some investors think it will want to shed its charter in order to avoid the likely approaching wave of pay regulations.  [View news story]
    I don't think they ever actually *wanted* a bank charter. The odds that Lloyd Blankfein and John Mack both happened to go to work one Monday and think "you know what, we should get a bank charter" seem improbably remote. Far more likely is that then-Secretary Paulson effectively ordered them to do so last autumn, at a time when both Congress and the White House seemed perfectly happy to cede all responsibility to Paulson. It should surprise nobody that given the chance, Goldman wants to shed the bank charter.
    Sep 22, 2009. 07:43 PM | 1 Like Like |Link to Comment
  • Good News from BofA: Another Bailout Ends [View article]
    I think the interesting - and ominous - long term question is, do the Fed's positions ever get fully unwound, or does the government decide that a massive carry trade is the answer to their budget problems?
    Sep 22, 2009. 11:22 AM | Likes Like |Link to Comment
  • Dodd's Push for Regulatory Reform Has Unintended Consequences [View article]
    I suspect Dodd's reinvention of himself as a tribune of the common man is less reflective of a "country first" mentality than a "reelection first" mentality. He is a known quantity in Connecticut and his problem isn't insufficient campaign resources, it is insufficient trust by a voting population that is strongly inclined to favor Dodd from a policy perspective. My sense is that the more dramatic reform proposal is of a piece with his speculation last winter about nationalizing solvent institutions - a somewhat desperate appeal to anti-financial populism for purely instrumental reasons.

    Moreover, there isn't really any big principled divide between Dodd and Frank; rank and the administration have not wanted to expend the political capital that more dramatic reform may require - again, more a function of political exigencies than a clash of principles.
    Sep 22, 2009. 11:20 AM | 1 Like Like |Link to Comment
  • Colony Financial to Join Real Estate Finance IPO Parade [View article]
    Amazing; its easy enough to understand why underwriters are eager to peddle mortgage REIT equities, which seem to account for the majority of IPO filings this year, but not at all clear why investors would want to participate. Well, based on the post-issuance performance of most of these stocks, I guess the answer is "they don't."
    Sep 22, 2009. 11:12 AM | Likes Like |Link to Comment
  • How to Replenish the FDIC's Coffers [View article]
    Clearly both the government and the bank industry would prefer that the funds come from within the industry simply for the sake of optics.

    The striking thing to me in the Times' report is yet further confirmation that Sheila Bair can't play well with others. She alienated the Bush financial team and has done the same with the Obama team; it seems clear that her rocky relationship with Geithner is not an aberration.

    Sep 22, 2009. 11:09 AM | 1 Like Like |Link to Comment
  • Why Bank Overdraft Fees Merit Some Regulation [View article]
    With Chris Dodd preparing a Senate companion bill to Carolyn Maloney's House bill on overdrafts, I'd say the odds are pretty good that we get some action on overdrafts once Congress gets to financial reform.
    Sep 18, 2009. 06:37 PM | Likes Like |Link to Comment
  • Overdraft Fees Revisited [View article]
    I agree that some regulation is in order, but believe Rep. Maloney's bill - much more focused on improved disclosure than dictating actual transaction terms - would resolve most of the egregious situations. The critical element is her requirement of disclosure of a looming fee, and giving customers the ability to cancel, before a transaction is completed, including debit transactions.

    The interesting thing to me is that payday lenders are routinely vilified while bankers are often regarded as pillars of the community, despite the fact that standard bank overdraft practices are far less consumer-friendly than payday loans. The debate over payday lending is relevant because bank overdraft charges effectively form the umbrella under which payday lenders can function. Far more than banks care to admit, overdrafts and payday loans are substitute products. In fact, the biggest difference is that payday lenders offer consumers a better deal than banks do. The typical payday loan costs a fee equal to 15% of the amount borrowed for a two-week loan, which equates to an APR of 391%. Borrowers must actively seek out payday loans, and the terms and conditions are all laid out immediately prior to the transaction. In contrast, the effective APR on a typical overdraft transaction can exceed 1000% (it varies by type of transaction – check/ATM/debit) and disclosure, while excellent at some institutions, is broadly far inferior to that of the payday loan industry.
    Sep 9, 2009. 06:03 PM | 1 Like Like |Link to Comment
  • FDIC's Proposed Capital Requirements for Private Equity: Still a Dumb Idea [View article]
    Well put, Matt. Of course, as evidenced by her fetishistic attraction to mortgage modifications, Ms. Bair does not seem to be a hostage to logic...
    Sep 9, 2009. 08:57 AM | Likes Like |Link to Comment
  • Life Settlements: Still No Dice [View article]
    Anderson's article is yellow journalism of the worst sort. She asserts that the events of the past two years prove that the idea of securitizing sub-prime mortgages is "deeply flawed," which would be akin to me asserting that the willingness of Anderson and her employer to print patent falsehoods proves the idea of a free press is deeply flawed. It proves nothing of the sort, only that Anderson knew what article she wanted to write and was determined to prevent any actual facts from stopping her.
    Sep 7, 2009. 03:45 AM | 1 Like Like |Link to Comment
  • The Five Worst Bailouts [View article]
    Agreed on AIG; I have yet to hear any actual evidence supporting the thesis that its failure would have caused a cascade of failures. In asserting that it must be so, the bailout advocates sound like medieval ship captains who pointed to the edges of the map and said "There be dragons."

    But I quarrel with the idea that GS or BAC were really bailouts, properly construed.

    GS didn't need the capital, and had just demostrated the ability to raise private capital (from none other than Buffett) just a month before Paulson forced them to take TARP funds.

    BAC was never at risk of failure, what the government really bailed them out from was the dilution shareholders would have absorbed had they been forced to raise capital in the markets.

    I'd substitute Fannie and Freddie for GS and BAC on the list of most outrageous bailouts.
    Sep 7, 2009. 03:24 AM | 8 Likes Like |Link to Comment
  • Wall Street Securitizing Life Insurance Policies. Seriously. [View article]
    Why all the harsh criticism of financial innovation? It advances human well-being as much or moreso than innovation in other fields.

    Yes, some people got carried away with risk layering in the mortgage market in recent years, and rating agencies fell down on the job.

    Those problems will be rectified and the market will ultimately rebound on a sounder basis.

    More importantly, securitization, regardless of the underlying instruments, reallocates risk to those most willing to bear it, and reduces the cost of borrowing for all involved.

    Mortgages rates are far lower than they would be without securitization. Holders of life insurance policies will be able to wring more value out of them as a result of securitization.

    Even the yellow journalism of the NY Times is forced to concede as much.
    Sep 7, 2009. 03:13 AM | 2 Likes Like |Link to Comment
  • Another Mess Taking Shape - Bank Deposit Insurance [View article]
    I am just amazed that people have allowed Sheila Bair to get away with deploying deposit insurance funds as though it were some magical piggy bank. The idea that it is funded by "insurance premia" is a triumph of semantics. If the FDIC were subject to truth-in-advertising regs, its funding would be more accurately described by its economic function - i.e. as a tax on savings.
    Sep 5, 2009. 09:30 AM | Likes Like |Link to Comment
  • Can Higher Capital Standards Cause Lower Pay? [View article]
    I think its far too simplistic to say that higher capital reqs translate into lower comp levels.

    First, its important to remember that the catch-all term "bankers" refers to people with a very broad range of jobs, the only common denominators of which are that a) they are in the financial services sector and b) tend to have relatively high compensation levels.

    But if we assume that the labor market is reasonably efficient - and Wall Street's is arguably among the most efficient since productivity can be quantified fairly readily - then comp will remain a function of each individual's profit generation.

    Higher cap reqs might then reduce the leverage available to, say, prop desks, and thus reduce the comp of traders on those desks. But plenty of other functions - M&A advisory comes to mind - employ little or no leverage and so would be unaffected.

    Moreover, the belief that the remnants of the bulge bracket are price setters in the labor market requires the assumption that rainmakers can't generate comparable earnings at smaller platforms, which is true for a subset of functions but at the firm-wide level seems a dubious assumption.

    An investment banker may monetize his rolodex at a Lazard as well as he might at a Merrill, and likewise a trader may trade a hedge fund's capital as profitably as a bank's capital.
    Sep 5, 2009. 09:23 AM | 1 Like Like |Link to Comment
  • MySpace Headed for Lower Revenues and Possible Layoffs [View article]
    There is no question this 2009/2010 will be brutal for all ad-supported sites, especially social media ones like MySpace. However, the critics underestimatedwhat a well run virtual commerce system could generate for a site as large as MySpace - tens of millions of dollars in year 1, and rapidly growing after that. At Loki Partners, we've seen numerous examples of smaller sites driving high incremental revenue in this fashion, and MySpace will eventually get there

    Sean Ryan - Loki Partners
    "Monetizing Social Media"
    Mar 20, 2009. 11:43 PM | Likes Like |Link to Comment