Today the House Financial Services Committee will hear testimony from the SEC inspector general on the Madoff scandal. It promises to be the beginning of what Rep. Paul Kanjorski (chairman of the House Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises) is calling “the most substantial rewrite of laws governing U.S. financial markets since the Great Depression.” Wall Street could not have escaped congressional scrutiny after the year that we’ve had even if Madoff had never happened, but the failure of regulators to protect the public from his massive fraud has drawn fresh attention to the shortcomings of existing
The late Sen. Everett Dirksen would be livid if he were around, even though Dirksen probably didn’t make the remark most often attributed to him. But we’re definitely talking real money: $7.76 trillion is about half of the US annual Gross Domestic Product.
The full amount hasn’t actually been spent; rather, this is the total of all the guarantees, asset buybacks, and equity purchases made by various government agencies over the past year. The Federal …Read More
Yesterday, the House Oversight and Government Reform Committee hauled in a gaggle of hedge fund managers to grill them about, among other things, why they should receive such favorable tax treatment. If I were a congressman, the question I’d have liked to have asked this crowd is, “Why is it so often the case that when hedge funds fail, they don’t merely fail, they implode, like dying stars?” This failure mode seems especially inappropriate for an investment class that’s often touted as a way to make money in both good times and bad.
I can’t possibly discuss all the …Read More
I’ve written several posts on the asset protection limits available to consumers who have invested in a variety of financial assets. With all the changes and adjustments that have taken place in the last few months in the financial landscape, I thought it might be helpful to provide a single article summarizing the insurance /protections currently available to investors.
Some protections are temporary for now, while others appear to be permanent. I expect there will be future modifications of federal protections if there are changes in the condition of the financial markets, for good or ill.
Money Market Accounts
Until now, it hasn’t been entirely clear how much damage will result from the Lehman bankruptcy. An auction taking place today will be an important step in assessing which financial institutions stand to take a hit. Today’s auction involves a type of security that many people know little about or have only heard of recently: credit default swaps.
What are credit default swaps?
Generally, an “investment swap” involves trading one security for another. However, another kind of investment swap is a contract: one in which two parties agree to enter into transactions with each other on the basis of changes …Read More