February 2010
3 posts
Those Greek Swaps
Heidi Moore has a great write-up of the Goldman-Greece swap story. Do read it. But don’t let her convince you that there’s nothing in this story to lend credible ammunition to the squid-eating Matt Taibbis of the world. Moore lets Goldman and the rest of the banks off too easy.
But the swaps weren’t illegal, and Goldman was giving its client — Greece — what it asked for. The...
On the Impossibility of Measuring Model Risk
This week The Economist poked a little fun at the quants:
JPMorgan Chase holds $3 billion of “model-uncertainty reserves” to cover mishaps caused by quants who have been too clever by half. If you can make provisions for bad loans, why not bad maths too?
And in response to this revelation, Francine McKenna wondered how the auditors could have signed-off on the models:
If you need $3 billion...
Deposit Insurance and Moral Hazard
Over the weekend, I listened to Russ Roberts’ EconTalk interview with Charles Calomiris. There’s far too much in this interview to unpack in a single post, so for now I only want to address Calomiris’ take on deposit insurance. He’s against it, and pins deposit insurance and other risk subsidies as the primary cause of many recent financial crises. I’m for it.
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