Mark Pittman died this week (on Wednesday).
Pittman was with Bloomberg News. He was part of a team that won the Loeb Award last year for a five-part series in the financial crisis.
He also did pathbreaking work on Goldman Sachs' interest in the AIG bailout, Hank Paulson's role in creating the subprime mess, and the irresponsibility of the ratings agencies increating the conditions for its spread. In June 2007 he wrote a very detailed and incisive piece about the credit agencies that holds up well even with the benefit of 2 and 1/2 years of hindsight.
Felix Salmon, usually a quite astute guy, criticized Pittman for that story, and now regrets that.
Pittman was an old-school reporter, a native of Kansas City, whose first job was covering police for the Coffeyville Journal in southern Kansas in the early 1980s. Later he was at the Times Herald-Record in Middletown, NY, for twelve years, joining Bloomberg in 1997.
The obits I've seen are not very forthcoming about the cause of death, except that it was heart-related. Regardless: it is a loss.
For more, go here.
Showing posts with label Felix Salmon. Show all posts
Showing posts with label Felix Salmon. Show all posts
Monday, November 30, 2009
Monday, October 5, 2009
Larry Summers
Ryan Lizza has written a lenghty story on Larry Summers, one of the key economic-policy figures of this administration, for vanity Fair. It is available online here. Warning, it is rather long.
You can get the gist of it from the lucky fish.
Lizza confronted Summers with a tidbit from Rubin's memoir (written back in 2002). Summers was Rubin's second-in-command at the Treasury Department under Clinton.
Rubin wrote:
"Larry thought I was overly concerned with the risks of derivatives. His argument was characteristic of many students of markets, who argue that derivatives serve an important purpose in allocating risk by letting each person take as much of whatever kind of risk he wants. Larry’s position held together under normal circumstances but seemed to me not to take into account what might happen under extraordinary circumstances.”
You can get the gist of it from the lucky fish.
Lizza confronted Summers with a tidbit from Rubin's memoir (written back in 2002). Summers was Rubin's second-in-command at the Treasury Department under Clinton.
Rubin wrote:
"Larry thought I was overly concerned with the risks of derivatives. His argument was characteristic of many students of markets, who argue that derivatives serve an important purpose in allocating risk by letting each person take as much of whatever kind of risk he wants. Larry’s position held together under normal circumstances but seemed to me not to take into account what might happen under extraordinary circumstances.”
Tuesday, March 10, 2009
The blunderer who is Ben
Curiouser and curiouser. In Sunday's New York Times, 'economics' columnist Ben Stein comes out against speculative portion of the CDS market.
This kind of stance is one of those bonehead simplifications of a complicated subject that appeal to people who want to think they are sophisticated without having to do a lot of wonkish reading. You know. People like ... Ben Stein.
Here's a link to his column for those of you with a subscription to the NYT.
And here is the bit that has provoked my ire:
ADD A RULE Don’t allow speculators with no insurable interest to buy credit-default swaps on bonds.
When used properly, these instruments can function as a legitimate kind of insurance. Yes, if you are a real buyer of the bonds of a given company, you should be able to buy insurance. But you shouldn’t if you are just a shark circling prey, bringing blood into the water.
Allowing speculators to buy C.D.S.’s merely to bet against a firm in difficulty just blasts the prices of bonds, kills the balance sheets of banks, insurers and hedge funds, and throws fear into the system.
First, it is absurd to try to draw a sharp distinction between the "legitimate insurance" use of a CDS and the illegitimate speculative use. Those speculators provide precious liquidity for the market. If you have GM bonds in your portfolio, and you want to buy default protection, you'll be glad that there are counterparties in the market willing to sell protection to you. And part of the reason there will be such counterparties in the market is that there are speculators to whom they can sell. The speculators, in other words, increase the size of the overall pool, making life easier for the hedgers who need to wade into it.
Second, on any CDS contract, whether hedging or speculative, there is a winner as well as a loser. If a hedge fund makes a speculative bet that GM will fail, it is because and to the extent that somnebody else -- typically, a bank or insurance company -- has made a speculative bet that it will survive for the life of the contract. Stein doesn't even explain: which side of that bet is the public policy problem? Which side is the "shark," which side is the "prey"? If the protection is sold too cheaply, the bank has taken a foolish position. But on that same presumption, the hedge fund has made a wise decision. The outcome isn't going to "killl the balance sheet" of them both.
Third, in more general terms, why shouldn't we expect that a liquid market in CDS will cause prices, i.e. spreads, to move to an equilibrium that won't represent a foolish decision on either side?
There are some necessary changes in the CDS marketplace. Central clearing and settlement would be a good idea, and some standardization of product is probably necessary to make that happen. Such developments are underway. But Stein blunders right through all of that, cognizant of none of the real issues because he just wants somebody -- the SEC? the CFTC/ Treasury? Congress? it doesn't really matter -- he just wants somebody to "add a rule".
This kind of stance is one of those bonehead simplifications of a complicated subject that appeal to people who want to think they are sophisticated without having to do a lot of wonkish reading. You know. People like ... Ben Stein.
Here's a link to his column for those of you with a subscription to the NYT.
And here is the bit that has provoked my ire:
ADD A RULE Don’t allow speculators with no insurable interest to buy credit-default swaps on bonds.
When used properly, these instruments can function as a legitimate kind of insurance. Yes, if you are a real buyer of the bonds of a given company, you should be able to buy insurance. But you shouldn’t if you are just a shark circling prey, bringing blood into the water.
Allowing speculators to buy C.D.S.’s merely to bet against a firm in difficulty just blasts the prices of bonds, kills the balance sheets of banks, insurers and hedge funds, and throws fear into the system.
First, it is absurd to try to draw a sharp distinction between the "legitimate insurance" use of a CDS and the illegitimate speculative use. Those speculators provide precious liquidity for the market. If you have GM bonds in your portfolio, and you want to buy default protection, you'll be glad that there are counterparties in the market willing to sell protection to you. And part of the reason there will be such counterparties in the market is that there are speculators to whom they can sell. The speculators, in other words, increase the size of the overall pool, making life easier for the hedgers who need to wade into it.
Second, on any CDS contract, whether hedging or speculative, there is a winner as well as a loser. If a hedge fund makes a speculative bet that GM will fail, it is because and to the extent that somnebody else -- typically, a bank or insurance company -- has made a speculative bet that it will survive for the life of the contract. Stein doesn't even explain: which side of that bet is the public policy problem? Which side is the "shark," which side is the "prey"? If the protection is sold too cheaply, the bank has taken a foolish position. But on that same presumption, the hedge fund has made a wise decision. The outcome isn't going to "killl the balance sheet" of them both.
Third, in more general terms, why shouldn't we expect that a liquid market in CDS will cause prices, i.e. spreads, to move to an equilibrium that won't represent a foolish decision on either side?
There are some necessary changes in the CDS marketplace. Central clearing and settlement would be a good idea, and some standardization of product is probably necessary to make that happen. Such developments are underway. But Stein blunders right through all of that, cognizant of none of the real issues because he just wants somebody -- the SEC? the CFTC/ Treasury? Congress? it doesn't really matter -- he just wants somebody to "add a rule".
Monday, November 24, 2008
Win Ben Stein's Cheapened Money
Ben Stein, the droning voice of Ferris Bueller's teacher, fancies himself an economist, like his father, Nixon adviser Herb Stein. When he's not a game show host, or an anti-Darwinian propagandist.
Ben has recently posted on Yahoo!Finance a column about why the US and all the other major industrial nations should print money like mad. All the dangers are on the "deflationary" side, he says. There's no danger in the other direction, from inflation/reflation. So ... let's go for it!
Hey, sort of like Zimbabwe, right? How's it working out there?
Here's Ben's column, just so you won't think I'm inventing a straw man!
And here is a fine take-down of Ben's nonsense, by the economics junkie, who rightly says that the Stein column is "so utterly wrong" that somebody had to call him out.
Good work, EJ.
Also, over at Portfolio, Felix Salmon has a semi-regular feature, his "Ben Stein Watch," in which he tilts with this windmill pretending to be a giant. I recommend that.
Now that I check, I see that this is the fourth mention of Stein's economic views I've made in the brief history of this blog. So just follow the tag if you've got the stomach for more. Thanks.
Ben has recently posted on Yahoo!Finance a column about why the US and all the other major industrial nations should print money like mad. All the dangers are on the "deflationary" side, he says. There's no danger in the other direction, from inflation/reflation. So ... let's go for it!
Hey, sort of like Zimbabwe, right? How's it working out there?
Here's Ben's column, just so you won't think I'm inventing a straw man!
And here is a fine take-down of Ben's nonsense, by the economics junkie, who rightly says that the Stein column is "so utterly wrong" that somebody had to call him out.
Good work, EJ.
Also, over at Portfolio, Felix Salmon has a semi-regular feature, his "Ben Stein Watch," in which he tilts with this windmill pretending to be a giant. I recommend that.
Now that I check, I see that this is the fourth mention of Stein's economic views I've made in the brief history of this blog. So just follow the tag if you've got the stomach for more. Thanks.
Wednesday, May 28, 2008
Jerome Kerviel
Société Générale hosted its shareholders' meeting yesterday, five months after the disclosure of $7.7 billion in trading losse, which it blamed on rogue trader Jerome Kerviel.
Shareholders weren't happy. Daniel Bouton, ther company chairman, was lustily booed while he stood impassively at the podium and one shareholder, Jean Richard, shouted, "Who do you take us for" to approval of the crowd. Or so the scene is captured in The New York Times' report.
When SocGen first reported the Kerviel losses, Bouton was both chairman and chief executive. Criticism of his captaincy has been intense -- some of it coming from President Sarkozy -- and Bouton has since given up the CEO post. But he does remain the chair.
Since the start of the year, the value of their shares has declined by 28%. It isn't surprising they're ticked off.
Back in February, it was Felix Salmon, of Portfolio, who put his finger on the key point. Kerviel's profit-and-loss balance for last year was a wild zig-zag on both sides of the zero line. Entering December, though, he found himself sitting on a pot, more than 1 billion euros in the black. He suddenly gets extremely conservative, as if sitting on that pot untilt he year's end. Either he stopped trading entirely or his hedging was perfect.
Then, comes January ... he starts trading again and almost immediately ends up below -4 billion euros.
More is happening than meets the eye if the eye is looking here.
Shareholders weren't happy. Daniel Bouton, ther company chairman, was lustily booed while he stood impassively at the podium and one shareholder, Jean Richard, shouted, "Who do you take us for" to approval of the crowd. Or so the scene is captured in The New York Times' report.
When SocGen first reported the Kerviel losses, Bouton was both chairman and chief executive. Criticism of his captaincy has been intense -- some of it coming from President Sarkozy -- and Bouton has since given up the CEO post. But he does remain the chair.
Since the start of the year, the value of their shares has declined by 28%. It isn't surprising they're ticked off.
Back in February, it was Felix Salmon, of Portfolio, who put his finger on the key point. Kerviel's profit-and-loss balance for last year was a wild zig-zag on both sides of the zero line. Entering December, though, he found himself sitting on a pot, more than 1 billion euros in the black. He suddenly gets extremely conservative, as if sitting on that pot untilt he year's end. Either he stopped trading entirely or his hedging was perfect.
Then, comes January ... he starts trading again and almost immediately ends up below -4 billion euros.
More is happening than meets the eye if the eye is looking here.
Tuesday, May 13, 2008
Three quick notes
1. Melnyk's astonishment
Let's just try to keep up today with three of our continuing stories. As I reported month, there was a shake-up at the Canadian pharma company Biovail. The company is doing its best to disassociate itself from its founder, Eugene Melnyk, whom it blames for a roster of legal troubles. This is tricky, because Melnyk remains the largest shareholder, with just under 12% of the equity.
And he isn't a happy camper. Indeed, in a letter to the reconstituted board of his old company, dated May 8, he professes himself astonished by the latest measures in this continuing distancing.
He is "very concerned about the circumstances surrounding the entering into of the employment agreements with senior management and the change in control provisions in those agreements. I intend to pursue this matter further."
He can pursue it on June 25, the day of the annual shareholders' meeting. The "record date" for the meeting is April 28 -- i.e. you'd need to have been a shareholder "of record" by then to be qualified to vote.
2. More from Ben Stein
You remember Ben Stein? I last wrote about him in January, when he used his New York Times column to set out a theory of "trader realism," i.e. that the whims and machinations of speculators in Manhattan or London are so important to pricing of strategic commodities that they render the fundamentals ("supply," and "demand" and other stuff and nonsense) essentially irrelevant.
This is a lunatic theory, and since then Stein has shown signs of abandoning it for a cause even dearer to his heart -- "biologist realism" linked here.
But watch out economics. Stein, like a poltergeist, is baaa-ack.
Felix Salmon does him justice.
3. The latest at CSX
The feud between railroad company CSX and activist investor TCI continues, pending some resolution at next month's meeting.
TCI has posted a white paper titled "CSX: The Case for Change," it claims that numerous opportunities for productivity improvements could add $2.2 billion to annual earnings within five years, and it complains that the incumbents ()the folks who have left those opportunities unexploited) have also awarded themselves the highest pay packages in the industry.
Yesterday, TCI sent out a "dear shareholders'" letter asking its fellow investors to go to their website and check out that white paper.
Let's just try to keep up today with three of our continuing stories. As I reported month, there was a shake-up at the Canadian pharma company Biovail. The company is doing its best to disassociate itself from its founder, Eugene Melnyk, whom it blames for a roster of legal troubles. This is tricky, because Melnyk remains the largest shareholder, with just under 12% of the equity.
And he isn't a happy camper. Indeed, in a letter to the reconstituted board of his old company, dated May 8, he professes himself astonished by the latest measures in this continuing distancing.
He is "very concerned about the circumstances surrounding the entering into of the employment agreements with senior management and the change in control provisions in those agreements. I intend to pursue this matter further."
He can pursue it on June 25, the day of the annual shareholders' meeting. The "record date" for the meeting is April 28 -- i.e. you'd need to have been a shareholder "of record" by then to be qualified to vote.
2. More from Ben Stein
You remember Ben Stein? I last wrote about him in January, when he used his New York Times column to set out a theory of "trader realism," i.e. that the whims and machinations of speculators in Manhattan or London are so important to pricing of strategic commodities that they render the fundamentals ("supply," and "demand" and other stuff and nonsense) essentially irrelevant.
This is a lunatic theory, and since then Stein has shown signs of abandoning it for a cause even dearer to his heart -- "biologist realism" linked here.
But watch out economics. Stein, like a poltergeist, is baaa-ack.
Felix Salmon does him justice.
3. The latest at CSX
The feud between railroad company CSX and activist investor TCI continues, pending some resolution at next month's meeting.
TCI has posted a white paper titled "CSX: The Case for Change," it claims that numerous opportunities for productivity improvements could add $2.2 billion to annual earnings within five years, and it complains that the incumbents ()the folks who have left those opportunities unexploited) have also awarded themselves the highest pay packages in the industry.
Yesterday, TCI sent out a "dear shareholders'" letter asking its fellow investors to go to their website and check out that white paper.
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