Tom Jacobs

The Fed Cracks Down on Overdrafts

Good point on the default choice and the opt in/opt out confusion for the consumer. One would think that the principles in books like Nudge,

www.librarything.com/w...

which emphasized making consumer friendly defaults like contributing to a 401K requiring one to opt out if desired, would be embedded in any policy adopted today by enlightened regulators. It does not say much for the Fed's attempt to beat any planned Consumer Financial Protection agency to the punch.

Bloomberg vs. the Fed: Secrecy and Moral Hazard

1. The Fed remits its operating balance (profit) each year to the US Treasury. For every $ not remitted, taxes must be higher. By definition any funds spent by the Fed on anything that take away from this equation is money that must be made up by taxpayers.

2. As significant balances such as transaction accounts and amounts above the FDIC insurance limit are uninsured, traditional runs are still a problem. Just examine what led the FDIC to move on WAMU and Wachovia.

U.S. Banks Putting 'Lipstick on a Pig'

Jeff,

I generally find your posts, this one included, credible and in the right direction, but I believe that the inflammatory language detracts from your analysis. There is nothing wrong with tact. You have strong arguments and the only perception I get from "crime syndicate" or "feces" is to question your judgment.

I have not observed Bloomberg to be a Wall Street mouthpiece at any point of the crisis. They took the lead on challenging the Fed's secrecy regarding its actions, not a step that a Wall Street mouthpiece would pursue when the Fed has repeatedly acted to protect Wall Street and the status quo.

Tom

How CDS Spreads Affect Equity

You should probably differentiate between levels of seniority when you do your comparison. Two firms with CDS at the same level of seniority, etc. Further, the CDS spread is effectively Probability of Default * Loss in the event of default, so adjusting for loss in event of default, CDS is a proxy for default likelihood, etc. Thanks for the post.

FDIC Regulation: Reason for Alarm

Thanks to Alan for making the point on the differing means of government handout. The Wells Fargo deal will actually cost us more as taxpayers than the proposed Citi offer, an unclear conclusion from the link shared by Alan. The original story along with the unconstitutional nature of the administrative law change enabling Wells to proceed was broken by the Washington Post:

www.washingtonpost.com...