Dear Friends,
This article is a sign of victory for right thinking finance. It is a sign that all derivatives will eventually move to exchanges and their prices will be ruled by market forces. This is a huge victory, and one that Jim Sinclair, Guild Investment Management, and other right thinking minds have long sought.
Hopefully, the days of irresponsible derivative creation are behind us, and the fact that this is being floated just before the Group of 20 meeting is significant.
N.Y. Fed to Push Banks to Open Credit-Swaps Clearing to Clients
By Shannon D. Harrington and Matthew Leising
March 31 (Bloomberg) — Federal Reserve Bank of New York officials will tomorrow urge Wall Street banks to offer hedge funds and other clients access to clearinghouses that protect against losses in the $28 trillion credit-default swaps market.
JPMorgan Chase & Co., Deutsche Bank AG and Goldman Sachs Group Inc. are among nine banks that this month began using Intercontinental Exchange Inc.’s New York-based clearinghouse for the credit derivatives. Representatives from the banks meet tomorrow in New York with Fed officials to discuss the timing of expanded market access, according to a person familiar with the agenda.
Since March 13, $50 billion of the contracts have been cleared by Intercontinental in a system that is open only to nine banks. Credit-default swap clearinghouses created by Intercontinental competitors CME Group Inc. and NYSE Euronext haven’t attracted any customers from the banks.
Additionally, below is an article in the financial times about how the people who created the problems are occupying their time these days…
Warm Regards,
Monty Guild and Tony Danaher
www.GuildInvestment.com
Bankers find new focus amid rubble of the crisis
FINANCIAL TIMES
March 30 2009
It would be easy to think that life for all those “financial engineers”, the bankers focused on default probabilities and credit ratings arbitrage who were crucial to the boom in mortgage bonds and other structured niceties, was over – professionally at least.
However, for some the job is busier than ever – and their work is a big part of the bump in first-quarter revenues in the debt businesses of their investment bank employers.
Many of them are now engaged in financial restructuring, which involves dealing with toxic assets and freeing up or protecting capital. But they will not get fanfares in earnings reports because the work they are doing – and have in some cases been doing for more than a year – is very hush-hush.
Their work often began in shoring up their own employers’ balance sheets, but has increasingly become a client business.
This is one reason for keeping the work quiet. There is huge sensitivity over anything leaking into what remains a highly tetchy market for bank securities of all kinds, still beset by the fear of panics.
Even the simple fact that an investment bank has been engaged to work with another bank or company could be enough to spook some investors, it is feared. Specialists at only two banks were prepared to be identified at all in this piece.
