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High Frequency Trading and Flash Crash – 3: How the Die Was Cast

Nathan Rothschild, head of the family’s London branch, had an agent in the Battle of Waterloo. Upon seeing that the tide of the war was turning against Napoleon, the agent rode to nearby Brussels and hired a sailor for the unheard sum of 2000 francs to take him across a stormy Channel to England and his boss. With valuable intelligence at hand, Nathan rushed to the London Stock Exchange and feigned selling. The crowd followed, on the belief that Wellington had lost. After the share prices had collapsed during the selling frenzy, Nathan Rothschild began buying, making millions.

Whether this is a true story or a legend is not the point here. The point is ethics.

No, I am not talking about Nathan Rothschild. Good for him, I say. If the goyims were slaughtering one another over money, why shouldn’t a Jew make few a pounds from the mayhem?

The question of ethics pertains to the Rothschild agent. What would you say if he had used a mule instead of a horse, or had waited for a “scheduled” ferry…

A Roundup: The FCIC Republicans and an Intellectually Fraudulent Take on the Financial Crisis

Alas, I'm late to this story, but it was so mind-boggling I had to weigh in with something. The four Republicans on the Financial Crisis Inquiry Commission went rogue and issued their own (slim, fact-lite) report on their findings about what caused the crisis ... beating the publication date for the actual report. Sadly their analysis of the crime scene looks something like this, for the comprehension impaired:

FANNIEFREDDIEGOVERNMENTGOVERNMENTFANNIEFREDDIE

Most disturbing was the report (on Huffington Post -- nice job, guys) that the four Republicans voted to ban the following phrases from the official FCIC report: "Wall Street," "shadow banking," "interconnection" and "deregulation." Which is sort of like writing the history of apartheid in South Africa and not being allowed to use the words "race," "white," "black" and "prejudice."

Anyway, my best contribution at this point isn't opining but steppi…

Revolving Whores, Dec. 15 Edition

That didn't take long!

After launching my "Revolving Whores" feature a few days ago, I've already got a second installment as Wall Street greases the palm of another public official, according to Bloomberg:
Theo Lubke, who headed the Federal Reserve Bank of New York’s efforts to reform the private derivatives market, joined Goldman Sachs Group Inc. to help Wall Street’s most profitable firm navigate the looming overhaul of financial regulations.Ka-ching! Mr. Lubke, your bathtub full of caviar awaits ...

High Frequency Trading and Flash Crash – 2: A Philosophical Prelude to Part 3

I sat down this morning to write the second and final part of HFT. I knew how the piece was going to end. It would end on a note of uncertainty and low-grade despair, that “nothing to be done” condition familiar to Beckett readers.

But the dialectics of finance is precisely about going beyond the passive acceptance of events just because they are, to influence and shape them. The inconsistency between the seemingly resigned ending and the active world view that drives the dialectics of finance called for an elaboration.

To purposefully shape events, we must know their dynamics and understand why and how they occur. A financial crisis, for example, has its roots in finance. Saying that the lenders’ stupidity or the borrowers’ greed caused it is saying nothing. After such “explanations”, the erudite explainers shake their head at human folly and go their way, leaving the subject exactly where they had found it. To understand the events, we must take them as they develop “on the ground”. …

Too Big to Fail, the Book, and Inside Job, the Movie

I just finished reading/watching both of these (okay, I know I'm way late on "Too Big to Fail;" it's been a busy year). Some quick takeaways:

"Too Big to Fail" -- here's what particularly struck me in this fascinating fly-on-the-wall account (in fact, I've never read a more "fly on the wall" book than this one) of the events immediately leading up to the financial crisis in the fall of 2008:

* Christopher Cox, former SEC head: Inept. Clueless. Ineffectual. Stupid. It's truly mind-boggling just how bad this guy was.

* Speed dating, capitalism style: It was amazing how many mergers people were trying to engineer behind the scenes at the fever pitch of the crisis. Goldman buying Wachovia? Bank of America buying Lehman? And the Jewish mothers arranging the hookups were usually Hank Paulson and Tim Geithner (some banking executives even started calling Geithner eHarmony).

* The U.S. could have saved Lehman. Sure, you can parse all the differenc…

Revolving Whores

The debut of my new acerbic feature, "Revolving Whores: An Attempt to Shame the Shameless and Expose How Broken Our Damn Government Is." (I'm channeling my inner Denninger today, with some spicy zero hedge-type attitude on the side.)

Today's featured personality: Peter Orszag. (I meant to blog about this earlier in the week, but now Mike K. has alertly jumped on the story; he has some good observations about Orszag's latest career zig).

Reuters lead:
Citigroup Inc. named U.S. President Barack Obama's former budget director as a senior global banking adviser on Thursday, strengthening its ties to high-profile former officials the same week the bailed-out bank finished shrugging off U.S. government ownership.So a bank that was, not long ago, the largest in the world in assets, the quintessence of "Too Big to Fail," has now paid a (presumably) big contract to free agent Peter Orszag, who will help Citi hit a few dingers out of the park using his special k…