Unable to Clear The Derivative Deck

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Chris Dierkes

Chris Dierkes (aka CJ Smith). 29 years old, happily married, adroit purveyor and voracious student of all kinds of information, theories, methods of inquiry, and forms of practice. Studying to be a priest in the Anglican Church in Canada. Main interests: military theory, diplomacy, foreign affairs, medieval history, religion & politics (esp. Islam and Christianity), and political grand bargains of all shapes and sizes.

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28 Responses

  1. Avatar North says:

    Well, Geithner was issuing fighting words in his speech to the AEI. I can see good coming out of this. Obama has shown that he’s willing to push hard when the he favors the principals even when the politics are shakey (HCR). With finance reform on the other hand the politics and the principles are pretty well aligned. He’ll look great the more he yells at Wall Street and he could likely do some good. Personally I think he should have a couple long lunches with Volicker.
    I hope Bartlett writes something about this issue specifically soon.Report

  2. Avatar Dave says:

    I’m going to have to think about it more but to me, Robb’s assumptions on the shadow banking system are somewhat incorrect. The problems with price discovery had less to do with the market’s inability to determine values per se as it did specific problems with the asset class.

    As far as “clearing”, please keep in mind that there was a clearing process in place when counterparties were demanding that borrowers post additional collateral. For example, XYZ may have lent ABC $100 million via a repo agreement and ABC put up $100 million in AAA-rated CDOs as collateral. When the markets tanked, XYZ is looking at its collateral and wondering about its value and either 1) calling the loan (which happened) or 2) demand the borrower post more collateral. Both scenarios were devastating because it caused a lot of the deleveraging in those markets, as sellers were covering leveraged position by massive selling of other AAA-rated asset types (corporate debt, agency debt, etc.)

    I also find it that hard to believe that the shadow banking is somehow under the control of the banks since the near collapse of the financial was caused by a run in the shadow banking on those very banks.Report

  3. Avatar Michael Drew says:

    It’s like the events in Washington the last three days didn’t happen on this blog.Report

    • Avatar North says:

      You could always submit a guest article Drew me lad.Report

      • Avatar Michael Drew says:

        You, I, Jason, Jaybird, others have made our views rather well-known in the previous thread. I’m interested in the views of the regular contributors. But maybe they’re satisfied with their stated views on the topic. I honestly have no idea what angle I’d take on the topic myself at this point (so maybe I should ease up). But I’m curious about the other guys’ impressions of the weekend+.

        All I know is that to me it seemed like we pretty much wore out the carpet in the other thread.Report

        • Avatar Rufus F. says:

          I’m still trying to figure it out, outside of all the overheated analysis I’ve read elsewhere. Also, I have a problem with posting about the current century anyway…Report

          • Avatar Michael Drew says:

            You’re covering your part of the field with aplomb, no worries. Your latest (actually, one prior) is excellent. I’m trying to formulate a comment, but I don’t operate with ease at that level of fundament this early in the morning.

            Also, if people just simply think events speak for themselves, by all means they should leave it at that. Like I said, I don’t know where I’d come at it yet either.Report

            • Avatar North says:

              Agreed. The greek classics are being charmingly explored. I don’t say a lot on them because my knowledge is limited on the subject but I enjoy reading them mightily.Report

        • Avatar North says:

          Fair enough Michael.Report

    • Avatar Dave says:

      I have little to say until I get my arms around that monstrosity. That I’m skeptical to say the least isn’t enough for me to write about it.

      That said, I’m for more concerned about financial reform than I ever have been about health care reform.Report

  4. Speaking for myself only, I’ll just say that my time has been absurdly limited the last few weeks. Hence, I haven’t had a real substantive post in about a month. I didn’t get the opportunity to get a close look at what was in the final bill until last night. Procedurally, I don’t really have any objections to what the Dems wound up doing. Substantively, though, it looks like the final bill is even worse than I anticipated, and in ways that I hadn’t anticipated. Specifically, read this: http://econlog.econlib.org/archives/2010/03/obamacare_what.html

    Obviously, that’s a gigantic flaw in the bill that will need to get corrected. If it doesn’t…that 55 million uninsured statistic will be a lot higher, and those with insurance will be paying even more through the nose than they are now.

    Assuming this flaw is fixed (it almost has to be), I still don’t think the reform will be sustainable in the long run, and we’ll wind up having to implement another round of massive reforms. Perhaps at that point, we’ll realize that the entire direction of this reform was a mistake and take the route of voucherized health care, Wyden-Bennett, or, yes, single payer.

    To steal Jaybird’s schtick – we didn’t get health care reform; we got the idea of health care reform.Report

    • Avatar Michael Drew says:

      That ain’t nothin. I’m glad to get your perspective, Mark. Your absence has been noticed. Reihan Salam is making a plausible argument that this bill was designed precisely to be unsustainable, and hence need considerable adjustment (and, if liberals get their way, expansion). I tend not to credit Democrats with that amount of strategic competence, but the analysis remains consistent with the facts. To it i’d only say that such a plan is by no means an irreversible step toward government-run health care; if this things goes kablooie, it stands to reason there is a decent chance of Republicans being in charge when it happens (as it will have been breaking down steadily beforehand). All they would need to do differently to be able to implement a better reform by their lights is to actually engage substantively on the topic in a serious way (and propose things that the public doesn’t hate).Report

      • Avatar Chris Dierkes says:

        Given my loathing of Congressional rules and systems, I think the bill is the best they could have passed. I wish we had a better Congress, a minority party that didn’t reject the whole process, and certain tweaks to the bill.

        My wishes plus Jiminey Cricket and/or a genie from a lamp would actually have any relevance.

        In the meantime, that bill was the best I imagine they could have passed and better than the status quo (by far) and hopefully will continued to improved as time goes on.Report

  5. Avatar Freddie says:

    I say this, truly, not as a criticism, but just an observation– this blog has gone in 100% on a certain fiscally-dominated libertarianism, wouldn’t you say? Again, there’s nothing wrong with that, but if I’m remembering correctly, that’s an evolution.Report

    • Avatar Jaybird says:

      Dude, you left.

      Now you’re complaining that the website isn’t left enough?

      How’s this? Come back and encourage Jamelle to come back.

      When people argue with you in the comments, argue back with them. Demonstrate how your viewpoints are morally superior to theirs and encourage Jamelle to respond to comments more often.

      Maybe you could help make this website be more like the website you wish it were.

      Be the change you want to see in the world, Freddie.Report

      • Avatar Freddie says:

        Jaybird, I understand that you are, shall we say, unduly preoccupied with me. That’s cool; I don’t mind. I understand that you think that you have a duty to weigh in on absolutely all of my opinions as I express them here– again, cool. I understand that you (libertarian) are incapable of an intellectual pluralism that exceeds a very slight range of acceptable, fiscally conservative, socially silent libertarianism. Well, I think you should grow, in that arena. I also accept the fact that you are constantly going to say that I don’t argue in “the right way,” when in fact what you don’t like is the content of what I have to say, which is your way of excluding opinion you don’t like while maintaining a certain self-aggrandizing narrative about yourself and your probity. Fair enough, I don’t mind.

        But here’s the thing: not everything is about me, and not everything is about you, and there was a time around here where you could get a broader range of opinion that has nothing to do with being insufficiently leftist, and I think it’s a change. I’m not even willing to say that it is a change for the worse, but it is a change, I think.Report

        • Avatar Jaybird says:

          This has nothing to do with you, Freddie.

          It has everything to do with the viewpoints that you (and similar ones that others) hold. If we are having a discussion about how this particular website is too fiscally-libertarian, I think that the solution to that problem is to have more viewpoints like yours and Jamelle’s (remember Jamelle? He’s the guy I also talked about in my comment that you read as being all about you) represented on the site.

          I think that you should come back and give your exceptionally moral and principled opposition to a fiscally libertarian viewpoint… hell, not just antithesis to the thesis they represent but to come out and write posts providing a thesis of your own.

          And if you want to interpret that as a manifestation of my being (let me quote you here) “incapable of an intellectual pluralism that exceeds a very slight range of acceptable, fiscally conservative, socially silent libertarianism”, then put that out there! Write a post about how I do not want to face the facts in the posts that you write! Point out how I hate broad ranges of opinion!

          And, please, ask Jamelle to come back and spend more time in the comments as well. Perhaps you can get him to point out to me that I don’t want to discuss things with people who hold his views.

          It’ll be a fun topsy-turvy time for everybody!Report

          • Avatar Michael Drew says:

            Whatever Freddie’s responsibilities to the site, he is entirely free to point out what he observes. He made the decision to leave for reasons that made it necessary for him. I can attest to the fact that the purveyors have attempted to provide balance, but notwithstanding that, they have recently added another exceptionally strong libertarian voice. There is a point at which the returns for the efforts of writers from other viewpoints will not be sufficient to justify the energy spent. At that point, it becomes a libertarian-conservative blog. Freddie went out of his way to say that this was a nonjudgmental observation — sometimes things just go that way. Tipping Points, etc. You have no reason to react as though Freddie has condemned the site for what he sees. He simply sees what is here.Report

            • Avatar Jaybird says:

              I’m not suggesting that Freddie has a single responsibility to the site. He posted that he was going to quit and became Just Another Commenter Like Any Of Us.

              It does seem odd to observe that the site became more of what everybody else was after one leaves, however.

              Surely it’s not surprising.

              I think that the site benefited from both Freddie and Jamelle’s viewpoints and wish that both would post (and comment) far more frequently than they do. The only viewpoints I can really offer with any authenticity are my own… so it’s not like I can offer a viewpoint that represents the true left, the Marxist left. If I want more such views to show up here, I’m stuck asking the people who hold them to talk more.

              And, I assure you, I want more such views to show up.

              It’d be a nice change from the statist righties we’re saddled with.Report

              • Avatar Michael Drew says:

                There may be a slight tic in the direction we both apparently would like to see (regardless of our personal affinities) on the way…Report

              • I will say that the fiscal-libertarian perspective has become the baseline here in a way that I’m not entirely comfortable with. I wish I could do more about it, but I have to blame my low post count on a combination of personal issues (can’t speak about them here) and philosophical frustration. To be a libertarian is to have accepted some settled answers about what society should look like; to be a libertarian is to have a level of certainty and a method of analysis that a mixed-up fellow like me just can’t match. And when I try to write for this site, I know I’ll have to answer to the fiscal-libertarian point of view: I frame whatever I say with that in mind. I wish I didn’t have to.Report

              • Avatar Jaybird says:

                To be a libertarian is to have accepted some settled answers about what society should look like; to be a libertarian is to have a level of certainty and a method of analysis that a mixed-up fellow like me just can’t match. And when I try to write for this site, I know I’ll have to answer to the fiscal-libertarian point of view: I frame whatever I say with that in mind. I wish I didn’t have to.

                Oh, goodness. There’s a lot of stuff in here.

                “accepted some settled answers about what society should look like”

                I don’t know how to unpack that. My first reading of it was this: “they disagree with settled answers about what we, as a society, have said society ought to look” but that seems to directly contradict “accepted some settled answers”… but I don’t see where there might be conflict with acceptance of settled answers. Did I misread?

                “to be a libertarian is to have a level of certainty and a method of analysis that a mixed-up fellow like me just can’t match”

                I actually have an answer for this: The majority of online libertarians are a little bit aspy. Say what you will about Aspergers Syndrome, it helps with certain kinds of analysis.

                “I frame whatever I say with that in mind. I wish I didn’t have to.”

                I’m reading this a handful of ways and some of the readings are more uncharitable than others, I don’t know how to read this charitably. Could you explain?

                Or is all of the above more or less exactly what you were talking about and this whole comment pretty much makes you wish you hadn’t written yours?Report

              • By the “settled answers” line, I just mean that libertarians only call themselves libertarians because they’ve adopted a certain worldview. I suppose the same thing goes for anyone who adopts a label. My own relationship with Reformed Protestantism is very different: I didn’t choose it and I’m pretty sure it’s wrong in some important ways, but I am tied to it anyway.

                About the issues of framing: I am thinking of that post where I tried to unpack what I took to be Freddie’s point about about scale-of-preference versions of morality/distributive justice. I felt like a wimp after posting that: it was such a hedged, qualified, bare-minimum sort of post. It is probably something internal that makes me write like that, and I often wish I had the ability to write interesting screeds.Report

              • Avatar Jaybird says:

                Ah, that clears it up. Thank you.

                libertarians only call themselves libertarians because they’ve adopted a certain worldview.

                Eh. It’s more that they’ve deliberately not taken one of two really, really popular views. If you get two libertarians in the same room and leave for two minutes, you’ll come back to them yelling that the other is a Nazi. It’s a useful term insofar as it says “I’m *NOT* a Democrat/Republican” but you won’t get much more information, in practice, than that.

                My own relationship with Reformed Protestantism is very different: I didn’t choose it and I’m pretty sure it’s wrong in some important ways, but I am tied to it anyway.

                I’ll say something pretty presumptuous here: If you have not abandoned it, you have chosen it.

                Here’s something even more presumptuous: if that last sentence was not true before you read it, it’s certainly true now.

                It is probably something internal that makes me write like that, and I often wish I had the ability to write interesting screeds.

                Here’s what I do (which, of course, may not work for you but…):
                I assume that the discussion is a moral one. That is, there is a fundamental moral principle at stake.

                From there, there are a lot of ways to go. Maybe “my opponents have either deliberately turned their back upon this moral principle or are completely ignorant of the moral principle and the only debate that remains is ‘WHICH IS WORSE?'” Maybe “my opponents have different moral principles but mine are better because they will result in better outcomes or are predicated on better moral foundations.”

                It doesn’t really matter where you go from there. Once you realize that it is a moral argument, you will be ready to screed. Even if it’s something about how The Grey Hulk was a better character than The Green Hulk. This is a moral argument… and there are people out there who need brought to The Light.

                That’s how I do it, anyway.Report

              • “If you have not abandoned it, you have chosen it.” This is one of those things that runs so deep that it’s really hard to argue about, but I do believe in unchosen obligations and in unchosen influences. Which is to say that, yes, I could ‘choose’ to try to stop engaging with Protestantism, but it would be wrong of me to do so. (Also my conscience would plague me.) Stanley Hauerwas says something like what I’m trying to say: “America is the exemplification of what I call the project of modernity. That project is the attempt to produce a people who believe that they should have no story except the story that they choose when they had no story.”Report

              • Avatar Jaybird says:

                I do believe in unchosen obligations and in unchosen influences.

                If I can make a request, I’d like to see a post really getting into the guts of this one. (For what it’s worth, it strikes me as an exceptionally interesting moral argument.)Report

    • Avatar Dave says:

      If anything, despite our disagreements, I think I have spent more time than not coming out against the more fiscal conservative and libertarian types in the topics I’ve addressed than not. Am I incorrect in this assumption?Report