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Non-Tech : Derivatives: Darth Vader's Revenge -- Ignore unavailable to you. Want to Upgrade?

To: Worswick who wrote (1690)	8/17/2010 5:04:09 PM
From: axial	1 Recommendation Read Replies (1) \| Respond to of 2794

Hi Clark - In reading Bass's testimony, I was struck by this: From page 3: "Again, if participants had to post initial collateral in order to take risk, the derivatives marketplace would not have mutated into the monster it is today." --- Hmmm... "On reflection, I can think of NO regulation or policy that will prevent further mischief, save one: make the participating players guarantee each transaction on a dollar-for-dollar (not leveraged) basis. Disregarding the burden that would place on the financial transaction system, that would ensure that each player has underwritten the potential failure of each transaction, and that the consequences would be confined to the perpetrators." Message 24665654 In all this highfaltin' dialogue about financial esoterica, doesn't it seem there should be a place for simple common sense? Guess not :( Jim

To: Worswick who wrote (1690)	8/18/2010 7:05:09 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 2794

Anyone see this video Tony Robbins (the motivational speaker) put out earlier this month?: metatube.com The guy mentions Credit Default Swaps SPECIFICALLY twice in the video. Something one of his financial clients told him must have put the fear of god into him sufficiently that he felt compelled to warn his followers. Hawk

To: Worswick who wrote (1690)	8/22/2010 1:34:36 PM
From: axial	Respond to of 2794

The Sausage Making Begins. I’m Sure It Will Turn Out Swell. "First, the extensive scale and scope economies associated with clearing make it likely that the clearing industry will be highly oligopolistic, and that strategic considerations will influence decisively the way that the industry develops. Moreover, scope economies across trade execution and clearing (Pirrong, 2010b) will also affect the strategic and efficiency forces that will shape industry structure. Strategic considerations will almost certainly drive a wedge between what is optimal for the individual decision makers, and what is optimal for the economy. This is particularly true inasmuch as there is no market mechanism evident that would induce CCPs to internalize the systemic externalities associated with their failure. Relatedly, governance and organizational form will matter. For instance, for profit and not-for-profit mutual CCPs are likely to act differently. Which choice is preferable? What will determine CCP choices of organizational form? CCPs are effectively cooperatives: how will collective action problems affect their incentives and actions? What regulations are required to address the governance problems that might arise under each form? These are not easy questions to answer, but those answers will have an important effect on how clearing works in practice. Second, industry evolution will inevitably be a highly politicized process. Dodd-Frank gives regulators enormous discretionary authority over the operation of CCPs. Interested parties will influence the regulatory process for their private benefit. Political tradeoffs, rather than efficiency considerations, also threaten to cause serious divergences between the structure that evolves in practice, and the one that would optimize the relevant economic tradeoffs. The effects of politics are particularly pronounced in this context because finance is a truly international industry, and hence jurisdictional issues and competition between jurisdictions will play a decisive role in determining the industry’s ultimate configuration. For instance, governments in major financial centers (e.g., the US, London, the EU, and individual countries in the EU, Japan, Singapore, and Hong Kong) have all expressed a strong interest in domiciling CCPs, for both economic and political reasons. But accommodating these interests would fragment clearing, reducing netting benefits and raising serious concerns about coordination during a crisis. Moreover, regulatory competition between jurisdictions to favor their local CCPs could compromise financial market stability." streetwiseprofessor.com Jim