Category Archives: Toxic Assets

Stress Testing the Banks

The FED’s stress test was run in March and April on the top 19 banks which hold two thirds of all assets and half of loans in the US banking sector.  The tests are explained in this document: The Supervisory Capital … Continue reading

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Derivatives Regulation

Read the transcript of William Black’s recent testimony on derivatives before the Committee on Agriculture, Nutrition & Forestry of the United Slates Senate: Prepared Testimony of William K. Black Associate Professor of …

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Fraud in the Mortgage Crisis

William Black talks to Bill Moyers about fraud in the current mortgage crisis, and the Prompt Corrective Action Law.  William Black was a senior regulator during the S&L crisis of the 1980s.   See Bill Moyers Journal . Watch & Listen … Continue reading

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Risk Premiums & Hedging

If you create long-term risky loans without adding a risk premium, you are bound to fail.  The risk premium is the first line of defense (micro hedging), and capital reserves are the last line of defense (macro hedging).  Banks underestimated … Continue reading

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Alan Explains

You can’t blame the Maestro.  In this WSJ op-ed article, Alan Greenspan explains the difference between short rates (directly influenced by FED policy), and long rates (influenced by risk premiums and inflation expectations).  He points out that the correlation between … Continue reading

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