These are slung off and on the balance sheet not only from the receivable to the structured deal but the structured deal may sit on the balance sheet as an investment and also on the cash-flow statement and needing to be serviced because of the obligations involved with the deal that the Bigfinancial when again these structures are debt. They need liquidity to service these as well as other obligations the bank itself faces.

Many of them however aside from having negative cash-flow, but what they’ll do is go into repo arrangements with each other -counter-parties and the Fed and other big corporates and the paper of course is rated.

But again what’s in these structures are legal obligations of yours, mine and whatever bigfinancial sold them to a ‘trustee’ but they were put into a structure.

FASB and IASB are ‘harmonizing’ the financial reporting model of the US.I’ve opposed this, however aside from the ‘harmonizing’ bring the US and International not quite the IFRS, but melding for one ‘global’ reporting model our GAAP with that of the British and the Europeans. The Europeans do NOT have SPEs, or structured vehicles that were off balance sheet. In the consolidation of these vehicles which include ABS, MBS, and also the synthetics such as CDO sqrd…but while the banks have been in both capital and liquidity deficits, which they’ve done to themselves by underwriting, buying, structuring and obligating themselves to non performing assets of all sorts, but the one given the most attention are the non performing residential mortgages, and all the leverage ie all of those piece of s*** loans referenced by/in other structured product, but think about it, and blow up a hole in your wallet and everyone elses all of it done with complete knowledge and understanding by the bigFinancials here and abroad especially all of the ones too big to fail and include UBS, CS, Deutsche bank, etc. This stuff is used in repurchase agreements ie, ‘repos’ and re-repos for liquidity purposes. They all do it and have for years.

Not in Europe although they have covered bonds of their mortgage paper (although in those societies often people may not own property dirty little secret). Here its been ok, they’re called ABS and again this is heralded as having been a big boon to our banking community - Lowell Bryan of McKinsey years ago in Breaking Up the Bank discussed ABS and probably even mentioned given the degree of quality of the ABS enabled it to serve as some sort of quality corporate paper usable in the Repo market.

Late in 2007 when we knew the toxic financial vomit was cresting the dam, people like me, i was consulted on what we thought could help take pressure off the banks, I’d suggested Net worth certificates, but also said delaying consolidation of the SPE and other structured business so as to give the BigFinancials breathing room in their capital. the FDIC came up with permitting deferred tax assets and liabilities which are intangibles to be omitted from the tangible capital calculation, while FASB contributed its part in delaying the compliance or the phase in date of consolidation, thus repo 105 continued in abundance by all players, while providing some liquidity relief and capital relief to the BigFinancials. liquidity relied and capital relief BECAUSE the structured vehicles, the SPEs, the SIVs, the QSPEs, this stuff all could then continued to be used in Repo agreements among counter-parties and the Fed for liquidity and if you’ve got negative cash-flow, then the ability to repo is like a transfusion that helps with your sustaining because at this point, with many of the OTC derivatives being cash parasitic.

The banks do not have adequate capital to engage in any of the OTC derivatives trading not to mention the cash parasitic nature of non performing assets that as a bank has to be put on non accrual -revenue backed out of the income statement, and the assets against which provisions had to go into reserves and against which the non accruals unless collected on and worked out to bring in some money from the original loan.

But against those reserves are means used to work out or cover the loan once completely charged off. consider that a fair amount of what was in the structures are non performing loans of all sorts, and there are relationships to which the bank has obliged itself to honor, the $10T to $16T of voter money to flush the system with cash or liquidity of various sorts has enabled the bigFinancials (and managements at those shops to pay themselves unnecessary amounts of money) to enjoy moving markets so that in a moving market you can have better Fair value mark to market marks on your trading books to run thru your income statement and pretend like your actually earningmore money when all your doing is engaging in barter, a cash parasitic activity that the fair value accounting has enabled to be allowed in the income statement but parasiting cash flow out of the company into management’s wallets because of the intangible nature of the accounting, the reporting of the trading ‘gains’ when its all been done on the voters’ wallet and arrives us to another HUGE DIRTY SECRET - THAT DERIVATIVES NEED TO BE CEASED AND DESISTED FROM TRADING AT ALL - AND NEED TO BE WOUND DOWN.

But the voters’ wallet flushing the financial system has given us moving markets rather than the strongly correcting markets Lehman was facing by September 2008 when all the other financials were facing the same thing (and consider this, with correcting markets the traders can’t fair value their trades at higher mark to markets and because much of what they’re trading hasn’t cash flow and in effect is barter when fair valued or marked to market downward, this leaves a hole in the traders’ books and the bank wont have gains running thru the income statement and for THIS REASON THE BIGFINANCIALS ARE DESPERATE TO GET OTC TRADING LEGITIMIZED BEYOND WHAT ENRON PHIL GOT IN HIS LOOPHOLE WITH RUBEN THAT CLINTON SIGNED DAY BEFORE CHRISTMAS IN THE COMMODITY FUTURES MODERNIZATION ACT LEGISLATION)

But the banks had access to the Fed’s discount window, but Paulson formerly of Goldman, still goldman but now with yet more power as secretary of the treasury, didn’t want lehman around any more. Bottom Line. You want a bottom line? That’s it. shrinking economy -shed shut down, take out competitors and they all knew this, although i wasnt the fly on the wall in those urinal conversations…. maybe the Downtown Club, or some back room at the University Club, or the Union Club…

Lehman and Bear Stearns were selected to get taken out while they all were a part of shrinking the Pie although Fuld was either conceited or ignorant enough to think that he and lehman was large enough or great enough or important enough to be among the survivors when the roof was taken down and get out their pie of the pie of the US economy to which they had a hand in the contributing of its collapse to meet the G20 constraints in their europeanesque survival of the fittest reductionist OP part of which was the US compliance with the G20 constraints. Lehman getting taken out was on purpose. actually if they hadn’t trashed the US economy as badly as they’d had, it would be bigger and the other wallstreet maggotry like goldman or JPMC might have obliged to keep another player to handle the perceived business, but the more offshoring that was done to contract production out of the States into the former colonies of our allies, partly to keep the Bund (the Germans) happy, the worse the big financials made it for themselves. Now they didn’t buck the trend and conceitedly thought that they had business globally but virtually all of that is a piece of s***. You should hear the horror stories about doing business in china. wonder why their big banks are looking to cash out NOW? because that place will and is also about to collapse and has been in that process for since the wintertime. I’ve been hearing these for years and I was one who vigorously had opposed PNTR with the PRC, but virtually of of this sort of business there and perhaps also elsewhere in the 2nd, 3rd and 4th world is cash parasitic, except into managements wallets. ADAM SMITH WARNED US ABOUT AGENCY. FOR PEOPLE WHO THINK WE HAVE CAPITALISM AND THAT SMITH IS THE FATHER OF CAPITALISM -which he isn’t as ‘capitalism’ came from either Marx or another later european ‘economist’ but more than 50 years after Smith, a Presbyterian minister, but HE WARNED US ABOUT AGENCY, which is what he called ‘management’, a middle man, but also the guy who is not an owner but an assistant of sorts helping the hands on owners and the remote investors run the company. Now corporations were british and european, like the Dutch and perhaps the Germans, but in the States, corporate law is administered at the State level. but again, Smith warned us about letting agency have any sort of ability to abuse power or at least that was the founders take away with agency and corporate problems which were a reason we had the Boston Tea party, the Declaration of Independence and the American Revolution, unless you do not understand why we broke away from not only King George -a german, but British corporate including banking/financial power known in those days as the ‘Crown’.

Thank the Lord for insight and when you get the Truth, because if you do not and you want the lies, the ignorance or the darkness, it will hit you and wash you away like the flood. At least if you know the Truth, and if you know that God honors those who love the Truth, as He even says, I will lead you into ALL TRUTH, then He will help you make the right decisions.

Many times it’s to push one’s self away from the table and leave behind some sort of marginal thing. If something in a place like the PRC sounds ‘good’, shed it. You save yourself not only the headaches, but the time to put your important attention to other more important matters. But the bigFinancials like the Europeans started all that international ‘business’ which mostly is with the other elite around the world, attempting to shake down the wallets anywhere else where there was money, while crapping on the people here.

If you’re reliant on debt, the money changers and banker cartel here will screw you. and that’s how those feudal lord wannabes want that. That’s still kicking around in their lizard brains.

But now we’re here. And repo 105 was getting a pass all over at all the BigFinancials and analysts like me knew about these things - this isn’t what stoked my fire - that they are operating in negative cash flow, engaging in cash parasitic, barter activities including trading derivatives OTC and having underwritten non performing assets, while paying themselves vast sums of money is what stokes my fire. that they’ve had a hand in treason - in collapsing the US economy, parasiting $10T to $16T of voter means and paying themselves vast sums of money stokes my fire. that people like ruben and greanspan say while they’re in the middle of what they’re doing but they didn’t know the consequences of the outcome of what they’re doing and they’re paying themselves vast sums of money, unless they lied, that stokes my fire. Because we know the consequences of moral hazard and know when it’s being being perpetrated. we know what is feckless, flawed management decisions, and marginal-flawed business and one can order a clerk to make better decisions than that an pay him an hourly wage. so for these men to admit their management insight is little better than what you’d get from a clerk and they were paid nearly like Croesus, where are there words.

but nnoooooo, gotta have non tariff’d ie, ‘free’ trade…gotta s**** on the blue collar middle class american which while crapping out part of our middle class was going to cause a cotnraction in our economy — which was known and understood after germany doing it to its own with east germany. So this all was understood after the fall of the berlin wall and germany reuniting, but their fear brought all of this…. for us, and for us to agree to trash our economy by shedding our production jobs into cheap labor regions that are the former colonies of our european allies, like the french or germans, although germany had little internationally (but wanted most of europe if they could take it over while they couldn’t figure out how to run their own country or manage their own internal politics properly probably because of the european banker( probably zionist) cabal keeping everything unstable) and DB or otherwise, they all need each other for their relationships, their CP activities, etc…

… but ah, think about this and all the wars the europeans CONSTANTLY HAD WITH EACH OTHER AND ACROSS THE FACE OF THAT MAP - and realize none of THAT could be done without their bankers… it probably was their bankers and taking the place either from Rome or again in partnership with Rome to finance their constant wars with each other… now they’re in a panic as they haven’t had a war in their reductionistic mentalities to thin their populations and so this sort of economic ‘war’ they contrive after germany reunited with east germany and trashed its own economy… and this domino thing started looping us in by way of the bush/4th reich relationship with the germans… and our compliance with the G20 agreements, mainly of which has been with the offshoring our production by way of the ‘free’ trade agreements and in THAT process lining management’s pockets, we’re contracted our own economy.

I don’t think Larry and most of wallstreet and its maggotry understand that. They’re paid and Larry was among them -to execute- and on that basis in feeding their bellies, their lusts and fears, they were rewarded, not to think, not to question policies or politics, which of wallstreet is neocon-anything-goes while the pretense of it is money, but it’s not.

And they’ll make stupid decisions about the money, in order to defend their lusts and fears and if you’re not on board with all of that, you’ve got problems and usually not a job or some marginal job.

Repo 105? a pimple on the ass of the elephant in the room suffocating air and means away from nearly everything. No disrespect because Larry mentions how the Lehman goon job in part got pulled of and that’s been done before in corporate america to sort of crater a company from within but Larry’s got traction because he’s not onto the bigger picture - if he were they wouldn’t let him anywhere near the media. Actually what larry describes with Fuld and Fuld’s shadow, Lehman’s PE arm with Steel partners and warren lichtenstien pulled of against Ayden in order to pull together what became L-3 Communications. SEC didnt take action against it, but weaken a company from within and it’s easier to take apart by other forces. divide and conquer as a cia operative said. and there is that on wallstreet too. Do you think Buzzie Krongard was hanging his hat there for no reason for 7 or so years after he flipped alex brown to either bankers trust or deutsche bank?

Respectfully,
Andrea Psoras
Blog: http://www.bankinnovation.net/profile/AndreaPsoras
http://www.linkedin.com/in/andreapsoras
apsoras@gmail.com
andreapsoras@yahoo.com

aloha
norm

That said, after starting my company ten years ago, my company has been pounded into a fine diamond often disadvantaged for being truthful but winning the customers trust later when what sounded so good to be true, was not.

Best of Luck
Jimmy

There was a time when we did not need to worry too much about how the Wall Street houses did their accounting. But then they went public and got Glass-Steagal done away with and you have recorded the results.

Accounting standards are set by the FASB. Now that Wall Street is free to play a role in US household financing (ie, mortgages, credit cards etc), it is time that the FASB’s independence and oversight be strengthened. How?

The Federal Reserve should appoint the members of the FASB and affirm the FASB’s mission that all financial statements are to be “fairly presented” according to GAAP.

Can we get Senator Ben Nelson to file the bill?

In our love of rules-based systems, folks always stretch for the boundaries, but the ultimate insight is Munger’s: there’s a difference between what’s legal and what’s ethical.

As for the throwdown that he’d make Paul Volcker look like a sissy on financial reform, I quote Clint Eastwood, “Go ahead…make my day!”

However, the book is great on describing the respect which exists between trading professionals - and the lack of it when non-professionals tries to do a professional’s job. It is nice to have this story exposed to a larger audience.

If Larry&Larry&Mike should ever find themselves in a great team needing commodity/energy trading expertise, give me a shout.

If you haven’t seen it, you should take look at Mike Mayo’s proposed diagnosis and cures here:

http://www.fcic.gov/hearings/pdfs/2010-0113-Mayo.pdf

Also see my own piece, based on an interview with Michael Lewis, It Was Not A Lack of Regulation, but a Lack of Ethics, that Killed The Street

http://www.qfinance.com/blogs/ian-fraser/2010/03/22/it-was-not-lack-of-regulation-but-lack-of-ethics-that-killed-the-street

Trouble is, how do you legislate for ethics? Breaking up the TBTF institutions and imposing limits on their activities (both sectoral and geographical) a la Volcker Rule is an essential starting point.

See my piece on Bank of England governor Mervyn King and his commendable “three legged stool” approach here:
http://www.qfinance.com/blogs/ian-fraser/2009/12/01/no-one-can-afford-too-big-to-fail-banks

Finally, I would say that genuine reform will be impossible until the ‘big four’ auditors are broken up and some integrity is reintroduced into the accountancy profession.
http://www.ianfraser.org/?p=974

Carmichael