Finished F.I.A.S.C.O.. Pretty good read. He gets into
selling derivatives to the Japanese that allows them to move
losses into the indefinite future, while taking gains in the here
and now. Apparently their companies do this just before year
end if they have more losses than they want. One deal generated
$75MM in profit for Morgan Stanley, and $400MM in sham
profits for the bank. Apparently the Japanese prefer US
partners on these scams so they are a little farther away from
their regulators.
If this is true and widespread, we have hardly seen the
beginning of the Japanese debacle. It still seems like a
fairy tale world to me. Economic collapse caused by some
dry entries on a balance sheet? It does seem easy to just
fiddle the numbers until the regulators leave you alone. As
long as everybody doesn't think you are bankrupt, you can
keep on doing business.
The Mexican bail out, the various company derivatives mistakes,
Latin American bonds, and Japanese trades are discussed at
length, I found the book fascinating and informative.
Political Note:
His book seems to have a Democratic as opposed to
Republican bias. I noticed he takes every chance he
can to name the party affiliation of republicans, but somehow
never comes to mention the affiliation of a democratic. I
wouldn't have noticed this but he describes Orange County
as a republican dominated California county. Then he goes
on to describe their treasurer who blew $1000MM with
derivatives, leading to the temporary bankruptcy of a county
that, until the bankruptcy, had the best investment grade
from S&P and Moodys. He even notes that the treasurer's
opponent in the election correctly estimated the cost of the
debacle, but never mentions that his opponent was republican,
while Citron was the democrat. Perhaps the author's bias
comes from his early education as a lawyer, and current
employment as professor of Law at UC San Diego. Naturally
I got slightly upset and mailed off $200 to the RNC. Other than
that it was a great book, though with a lot of profanity.
-- Carl |
