Morning Caffeine Links 4-10-2012

Comments

  1. Thanks for the link, but . . .

    1. I am not clearinghouse. I am anti-clearing mandate. There is a difference. Read my research and maybe you’ll figure it out. Maybe. I am also pushing back on clearing propaganda from the likes of Timmy! and GiGi and Barney and Chris. I want to make it plain that CCPs are not panaceas, and pose their own risks. Maybe if you pay attention you’ll notice that regulators around the world are making the same warnings. Warnings I’ve been making for 3+ years. You need to get up to speed.
    2. MF Global couldn’t have happened under a clearinghouse? Really? The whole point of MF Global is that customer moneys that were held in segregated accounts *as margins for cleared futures positions* (and extra funds that customers kept primarily to facilitate margin calls and the opening of new cleared positions) were used by the firm. For you to say that “MF Global could not have happened under a clearinghouse” is just embarrassing.
    3. I haven’t written anything recently on MF Global because there are no new facts: when there are, I will weigh in. I wrote about it quite a bit when it happened. A good deal of what I wrote was deconstructing some of the false and misleading claims about the obligation of CME’s clearinghouse to MF Global customers. Which kind of shows that the MF Global disaster “happened under a clearinghouse.”

  2. Are you claiming the trade which required additional funding from MF Global to JPM would have required that same additional funding in a clearing house setting?

    I’d like to be sure you are making that specific claim. Because it seems to me if that derivative trade was commonly cleared, the change in MF Global’s credit rating would not have required the massive amount of additional margin which ended up triggering felonies, the bankruptcy and the loss of customer funds.

    With a commonly cleared derivative – where the clearing house is the counterparty to every trade, long and short – this additional margin would not have been required. Or if there were additional margin requirements, they would have been minimal at best. You know this, because you do know clearinghouses.

    The squeeze JPM puts on MF can’t happen if the derivative trade is commonly cleared, because the market for these derivatives didn’t change much in response to changes in credit worthiness of the clearing members. Changes in margin happen when price volatility significantly changes.

    I do not know why you would think JPM could have still caused an MF Global bankrupcty in this case.

  3. “Jurisprudence Fetishist Gets Off On Technicality”
    Secretly, he was hoping for a hung jury.

    I liked the asteroid story. It sounds disturbingly plausible.
    “In a strong rebuke of President Obama and his domestic agenda, all 242 House Republicans voted Wednesday to repeal the Asteroid Destruction and American Preservation Act, which was signed into law last year to destroy the immense asteroid currently hurtling toward Earth.”
    http://www.theonion.com/articles/republicans-vote-to-repeal-obamabacked-bill-that-w,19025/

    • I laughed and laughed at that one.

      “In support of their position, Democrats have pointed to estimates from the nonpartisan Congressional Budget Office that show repealing the law could result in a loss of up to $14 trillion in the nation’s GDP.”

  4. Maybe there is something to this, but I can’t help but think this is the phase where conservative economists switch from ‘austerity works’ to ‘the right kind of austerity works.’ Got it from Mankiw’s blog…

    http://www.voxeu.org/index.php?q=node/7836