Friday, December 2, 2011
Politico loses item on Jewish group
castigating Paul as an extremist
Politico's Ben Smith newsletter had this headline:
Republican Jewish group not making friends in Paul-world
which linked to an unrelated article. A search of Politico's web site for the last name of the reporter, Adam Kredo, returned a blank. Kredo writes for Washington Jewish Week.
The brief Politico item had said:
Adam Kredo reports:
After taking some heat across the interwebs and elsewhere, the RJC clarified its stance on Ron Paul earlier today.
Paul was not invited to attend the RJC's candidates forum because the organization — as it has stated numerous times in the past — "rejects his misguided and extreme views," said Brooks.
"He's just so far outside of the mainstream of the Republican party and this organization," Brooks said. Inviting Paul to attend would be "like inviting Barack Obama to speak."
Paul has said the United States should steer clear of military backing of Israel, which can "take care of itself."
http://www.freerepublic.com/focus/f-news/2811304/posts
Kredo, in a cell phone message, directed Newz from Limbo to a copy of his page that had a Politico URL but did not comment on the blocks to access.
Kredo's Twitter description reads:
Newz from Limbo is a news site and, the hosting mechanism notwithstanding, should not be defined as a web log or as 'little more than a community forum'... Write News from Limbo at Krypto78=at=gmail=dot=com... The philosophical orientation of Newz from Limbo is best described as libertarian... For anti-censorship links: http://veilside78.blogspot.com/2010/12/anti-censorship-spectrum_23.html (If link fails, cut and paste it into the url bar)... You may reach some of Paul Conant's other pages through the sidebar link or at http://paulpages.blogspot.com/
castigating Paul as an extremist
Politico's Ben Smith newsletter had this headline:
Republican Jewish group not making friends in Paul-world
which linked to an unrelated article. A search of Politico's web site for the last name of the reporter, Adam Kredo, returned a blank. Kredo writes for Washington Jewish Week.
The brief Politico item had said:
Adam Kredo reports:
After taking some heat across the interwebs and elsewhere, the RJC clarified its stance on Ron Paul earlier today.
Paul was not invited to attend the RJC's candidates forum because the organization — as it has stated numerous times in the past — "rejects his misguided and extreme views," said Brooks.
"He's just so far outside of the mainstream of the Republican party and this organization," Brooks said. Inviting Paul to attend would be "like inviting Barack Obama to speak."
Paul has said the United States should steer clear of military backing of Israel, which can "take care of itself."
http://www.freerepublic.com/focus/f-news/2811304/posts
Kredo, in a cell phone message, directed Newz from Limbo to a copy of his page that had a Politico URL but did not comment on the blocks to access.
Kredo's Twitter description reads:
Adam Kredo
@Kredo0
I do bad things. (I also write newspaper articles, so e-mail me: akredo@washingtonjewishweek.com)
Newz from Limbo is a news site and, the hosting mechanism notwithstanding, should not be defined as a web log or as 'little more than a community forum'... Write News from Limbo at Krypto78=at=gmail=dot=com... The philosophical orientation of Newz from Limbo is best described as libertarian... For anti-censorship links: http://veilside78.blogspot.com/2010/12/anti-censorship-spectrum_23.html (If link fails, cut and paste it into the url bar)... You may reach some of Paul Conant's other pages through the sidebar link or at http://paulpages.blogspot.com/
Thursday, December 1, 2011
Lawmakers, press may find
SOPA throttles political leaks
The Stop Online Privacy Act might be used by the Executive Branch to block web pages holding leaked federal documents, according to a columnist who follows net law closely.
http://en.wikipedia.org/wiki/Stop_Online_Piracy_Act
Given the Obama administration's hard attitude on control of "classified" information, Newz from Limbo posed this question to experts: Would SOPA mean that the Justice Dept. could block the Wikileaks site, or the Wall Street Journal leaks site, or block a site publishing a document leaked by a Congressional aide for partisan reasons?
"Sure—though it would need to convince a federal judge to order it, first," was the emailed reply of Nate Anderson, who writes for ArsTechnica.
http://arstechnica.com/author/nate-anderson/
Steve Aftergood, on the other hand, wasn't so certain. "I don’t think so, but…" was his emailed reply. Secrecy News is published by the Federation of American Scientists.
www.fas.org/blog/secrecy/
No responses to the question were received from the Electronic Frontier Foundation, the Electronic Privacy Information Center, the Reporters Committee for Freedom of the Press or from members of the Investigative Reporters and Editors listserve.
Wikileaks sheds light on spying industry
http://www.ndtv.com/article/world/new-wikileaks-spy-files-show-global-surveillance-industry-154534
Newz from Limbo is a news site and, the hosting mechanism notwithstanding, should not be defined as a web log or as 'little more than a community forum'... Write News from Limbo at Krypto78=at=gmail=dot=com... The philosophical orientation of Newz from Limbo is best described as libertarian... For anti-censorship links: http://veilside78.blogspot.com/2010/12/anti-censorship-spectrum_23.html (If link fails, cut and paste it into the url bar)... You may reach some of Paul Conant's other pages through the sidebar link or at http://paulpages.blogspot.com/
SOPA throttles political leaks
The Stop Online Privacy Act might be used by the Executive Branch to block web pages holding leaked federal documents, according to a columnist who follows net law closely.
http://en.wikipedia.org/wiki/Stop_Online_Piracy_Act
Given the Obama administration's hard attitude on control of "classified" information, Newz from Limbo posed this question to experts: Would SOPA mean that the Justice Dept. could block the Wikileaks site, or the Wall Street Journal leaks site, or block a site publishing a document leaked by a Congressional aide for partisan reasons?
"Sure—though it would need to convince a federal judge to order it, first," was the emailed reply of Nate Anderson, who writes for ArsTechnica.
http://arstechnica.com/author/nate-anderson/
Steve Aftergood, on the other hand, wasn't so certain. "I don’t think so, but…" was his emailed reply. Secrecy News is published by the Federation of American Scientists.
www.fas.org/blog/secrecy/
No responses to the question were received from the Electronic Frontier Foundation, the Electronic Privacy Information Center, the Reporters Committee for Freedom of the Press or from members of the Investigative Reporters and Editors listserve.
Wikileaks sheds light on spying industry
http://www.ndtv.com/article/world/new-wikileaks-spy-files-show-global-surveillance-industry-154534
Newz from Limbo is a news site and, the hosting mechanism notwithstanding, should not be defined as a web log or as 'little more than a community forum'... Write News from Limbo at Krypto78=at=gmail=dot=com... The philosophical orientation of Newz from Limbo is best described as libertarian... For anti-censorship links: http://veilside78.blogspot.com/2010/12/anti-censorship-spectrum_23.html (If link fails, cut and paste it into the url bar)... You may reach some of Paul Conant's other pages through the sidebar link or at http://paulpages.blogspot.com/
Sunday, November 27, 2011
Is Google too cool for school?
A tale about a bunch of nothing
What does 0^0 equal? WolframAlpha says its is an indeterminate form. But Google calculator insists the answer is 1 -- no ifs, ands or buts.
Google's result comes without explanation, meaning that some kid may end up with a dud answer on his homework assignment (which is what he gets for not paying attention in class).
This writer put the question to a mathematician, who writes:
"You can easily show that Lim_{x->0} x^x=1, but that's not relevant.
"The question is whether the two-variable limit Lim_{(x,y)->(0,0)} x^y
Google's result comes without explanation, meaning that some kid may end up with a dud answer on his homework assignment (which is what he gets for not paying attention in class).
This writer put the question to a mathematician, who writes:
"You can easily show that Lim_{x->0} x^x=1, but that's not relevant.
"The question is whether the two-variable limit Lim_{(x,y)->(0,0)} x^y
exists, and it doesn't. So, you are free to adopt whatever convention
you want for 0^0, and some people apparently have argued for 0^0=1,
but whatever convention you adopt, the function f(x,y)=x^y will be
discontinuous at (0,0). It is important to realize this, because
otherwise when taking limits, and seeing that you have one of the form
0^0 you might think it is 1, but this is false. It is an interesting
exercise to construct a path g(t) into (0,0) such that the limit of
x^y along that path is any given positive real number."
He sent me this result from another mathematician
He sent me this result from another mathematician
who uses a similar argument, with the caveat that from one set theoretic perspective as well as from a combinatorial math perspective, one does indeed arrive at 0^0 = 1.
In most cases, however, one would think it makes more sense to leave 0^0 as indeterminate.
In most cases, however, one would think it makes more sense to leave 0^0 as indeterminate.
In line with the quotation above, consider this:
x^0 = (x^1)(x^-1) = x/x, which holds for all x other than 0.
However, if we write (lim x --> 0) x^0 = x/x, we may use l'Hopital's rule to arrive at D(x/x) = 1. Or in other words the limit of x^0 = 1. That limit point however is not analytical for x = 0. The limit is outside the range, and so it is a discontinuous point. We are free to accept the limit, while understanding that it is not analytical. Calculus permits indeterminate forms such as 0/0 if handled with care (usually via l'Hopital's rule).
However, if we write (lim x --> 0) x^0 = x/x, we may use l'Hopital's rule to arrive at D(x/x) = 1. Or in other words the limit of x^0 = 1. That limit point however is not analytical for x = 0. The limit is outside the range, and so it is a discontinuous point. We are free to accept the limit, while understanding that it is not analytical. Calculus permits indeterminate forms such as 0/0 if handled with care (usually via l'Hopital's rule).
One more point: at least one expert in complex variables regards division by 0 as implying "blowing up" to infinity, though infinities are generally excluded from the realm of numbers, unless one is talking about Cantor's cardinals.
Note added Nov. 28, 2001:
= 
So the binomial expansion formula can be used to justify 0^0 = 1 because a = 0 either requires that 0^0 = 1 or that (0 + b)^x not be represented by the binomial expansion formula.
Here's the Google calculator graphic:
 | 0^0 = 1 |
Monday, November 21, 2011
Intelligence unit backed
for global climate perils
By Steven Aftergood, Secrecy News
The U.S. intelligence community needs an organization that can assess the impacts of climate change on U.S. national security interests in an open and collaborative manner, according to a new report from the Defense Science Board (DSB).
The Director of National Intelligence should establish a new intelligence group “to concentrate on the effects of climate change on political and economic developments and their implications for U.S. national security,” said the DSB report on “Trends and Implications of Climate Change for National and International Security” (large pdf).
The Central Intelligence Agency already has a Center on Climate Change and National Security. So why would the Intelligence Community need an entirely new organization to address the exact same set of issues?
One reason is that the role envisioned for the new organization is inconsistent with the practices of the CIA Center. So, for example, the new intelligence group would be expected to pursue cooperative relationships with others inside and outside of the U.S. government. It would also “report most of its products broadly within government and non-government communities,” the DSB report said.
But the CIA Center, by unspoken contrast, does not report any of its climate change products broadly or allow public access to them. (“At CIA, Climate Change is a Secret,” Secrecy News, September 22, 2011).
The CIA’s unyielding approach to classification effectively negates the ability of its Center on Climate Change to interact with non-governmental organizations and researchers on an unclassified basis. Since, as the DSB noted, much of the relevant expertise on climate change lies “outside the government [in] universities, the private sector, and NGOs,” the CIA’s blanket secrecy policy is a potentially disabling condition.
In fact, the DSB report
http://www.fas.org/irp/agency/dod/dsb/climate.pdf
said, the secretive approach favored by CIA is actually counterproductive.
“The most effective way to tackle understanding [climate change] may be to treat it, for the most part, as an open question, transparent to all engaged in its study,” the DSB report said. “Compartmentalizing climate change impact research can only hinder progress.”
Notes from Cyberia
Blacklisting threatens net freedom
http://www.wired.com/threatlevel/2011/11/blacklist-bill-analysis/#more-33145
Wikileaks strangulation spurs countermeasures
http://techland.time.com/2011/11/21/how-the-internet-evolves-to-overcome-censorship/
More dangerous than bombers
http://www.wired.com/threatlevel/2011/11/hackers-destroy-water-pump/#more-33192
Newz from Limbo is a news site and, the hosting mechanism notwithstanding, should not be defined as a web log or as 'little more than a community forum'... Write News from Limbo at Krypto78=at=gmail=dot=com... The philosophical orientation of Newz from Limbo is best described as libertarian... For anti-censorship links: http://veilside78.blogspot.com/2010/12/anti-censorship-spectrum_23.html (If link fails, cut and paste it into the url bar)... You may reach some of Paul Conant's other pages through the sidebar link or at http://paulpages.blogspot.com/
for global climate perils
By Steven Aftergood, Secrecy News
The U.S. intelligence community needs an organization that can assess the impacts of climate change on U.S. national security interests in an open and collaborative manner, according to a new report from the Defense Science Board (DSB).
The Director of National Intelligence should establish a new intelligence group “to concentrate on the effects of climate change on political and economic developments and their implications for U.S. national security,” said the DSB report on “Trends and Implications of Climate Change for National and International Security” (large pdf).
The Central Intelligence Agency already has a Center on Climate Change and National Security. So why would the Intelligence Community need an entirely new organization to address the exact same set of issues?
One reason is that the role envisioned for the new organization is inconsistent with the practices of the CIA Center. So, for example, the new intelligence group would be expected to pursue cooperative relationships with others inside and outside of the U.S. government. It would also “report most of its products broadly within government and non-government communities,” the DSB report said.
But the CIA Center, by unspoken contrast, does not report any of its climate change products broadly or allow public access to them. (“At CIA, Climate Change is a Secret,” Secrecy News, September 22, 2011).
The CIA’s unyielding approach to classification effectively negates the ability of its Center on Climate Change to interact with non-governmental organizations and researchers on an unclassified basis. Since, as the DSB noted, much of the relevant expertise on climate change lies “outside the government [in] universities, the private sector, and NGOs,” the CIA’s blanket secrecy policy is a potentially disabling condition.
In fact, the DSB report
http://www.fas.org/irp/agency/dod/dsb/climate.pdf
said, the secretive approach favored by CIA is actually counterproductive.
“The most effective way to tackle understanding [climate change] may be to treat it, for the most part, as an open question, transparent to all engaged in its study,” the DSB report said. “Compartmentalizing climate change impact research can only hinder progress.”
Notes from Cyberia
Blacklisting threatens net freedom
http://www.wired.com/threatlevel/2011/11/blacklist-bill-analysis/#more-33145
Wikileaks strangulation spurs countermeasures
http://techland.time.com/2011/11/21/how-the-internet-evolves-to-overcome-censorship/
More dangerous than bombers
http://www.wired.com/threatlevel/2011/11/hackers-destroy-water-pump/#more-33192
Newz from Limbo is a news site and, the hosting mechanism notwithstanding, should not be defined as a web log or as 'little more than a community forum'... Write News from Limbo at Krypto78=at=gmail=dot=com... The philosophical orientation of Newz from Limbo is best described as libertarian... For anti-censorship links: http://veilside78.blogspot.com/2010/12/anti-censorship-spectrum_23.html (If link fails, cut and paste it into the url bar)... You may reach some of Paul Conant's other pages through the sidebar link or at http://paulpages.blogspot.com/
Saturday, November 19, 2011
Court pressed to speed
health care recordings
Reporters Committee for Freedom of the Press
The Reporters Committee for Freedom of the Press is urging the U.S. Supreme Court to permit the press to record upcoming oral arguments in the three cases involving proposed federal health-care legislation, rather than wait for the court to release its own recordings.
“Because the health care reform law deeply affects millions of Americans, there likely will be a strong interest nationwide in closely following the proceedings as, or shortly after, they occur,” a Reporters Committee letter to Chief Justice John G. Roberts said. “As such, the court’s current policy of releasing audio recordings of arguments at the end of the week will not adequately satisfy this strong public interest in being timely informed of important developments in a matter of such overwhelming impact on such a widespread scale.”
The letter also noted that delaying the release of argument recordings “will impede journalists’ ability to provide same-day coverage of the arguments.”
The following media organizations joined the Reporters Committee’s letter:
ABC News
“Because the health care reform law deeply affects millions of Americans, there likely will be a strong interest nationwide in closely following the proceedings as, or shortly after, they occur,” a Reporters Committee letter to Chief Justice John G. Roberts said. “As such, the court’s current policy of releasing audio recordings of arguments at the end of the week will not adequately satisfy this strong public interest in being timely informed of important developments in a matter of such overwhelming impact on such a widespread scale.”
The letter also noted that delaying the release of argument recordings “will impede journalists’ ability to provide same-day coverage of the arguments.”
The following media organizations joined the Reporters Committee’s letter:
ABC News
A. H. Belo Corp.
Allbritton Communications Co. on behalf of WJLA-TV and NewsChannel 8
ALM Media, LLC
The Associated Press
Association of Alternative Newsweeklies
Atlantic Media, Inc.
Bay Area News Group
Belo Corp.
Bloomberg News
Cable News Network, Inc.
California Newspaper Publishers Association
CBS Broadcasting Inc.
Chicago Tribune
Citizen Media Law Project
Consumer Reports
Cox Media Group, Inc.
Dow Jones & Co., Inc.
The E.W. Scripps Co.
First Amendment Coalition
Gannett Co., Inc.
Hearst Corp.
Los Angeles Times
The McClatchy Co.
MPA – The Association of Magazine Media
National Association of Broadcasters
The National Press Club
National Press Photographers Association
NBCUniversal Media, LLC
New York Daily News
The New York Times
The Newspaper Guild – CWA
Newspaper Association of America
The Newsweek/Daily Beast Co. LLC
North Jersey Media Group Inc.
NPR, Inc.
Online News Association
POLITICO LLC
Reuters America LLC
The Seattle Times Co.
Society of Professional Journalists
Stephens Media LLC
Time Inc.
Tribune Co.
The Washington Post
WNET
“Federal health-care reform affects everyone’s well-being, and everyone has the right to see and hear the arguments over this important issue made before the highest court in the country,” said Lucy A. Dalglish, Reporters Committee executive director. “And they have the right to see it and hear it as it happens.”
Barring the approval of cameras in the Supreme Court, the Reporters Committee proposed the court at least consider immediate release of audio recordings, such as it did during the contested presidential election of 2000 and when considering campaign finance reform laws.
“Federal health-care reform affects everyone’s well-being, and everyone has the right to see and hear the arguments over this important issue made before the highest court in the country,” said Lucy A. Dalglish, Reporters Committee executive director. “And they have the right to see it and hear it as it happens.”
Barring the approval of cameras in the Supreme Court, the Reporters Committee proposed the court at least consider immediate release of audio recordings, such as it did during the contested presidential election of 2000 and when considering campaign finance reform laws.
“To be sure, the American public’s access to affordable health care is among the most significant issues to inform public debate in this country and to come before its highest court in many years,” the letter said. “The time has come” for public access to include visual recordings.
Newz from Limbo is a news site and, the hosting mechanism notwithstanding, should not be defined as a web log or as 'little more than a community forum'... Write News from Limbo at Krypto78=at=gmail=dot=com... The philosophical orientation of Newz from Limbo is best described as libertarian... For anti-censorship links: http://veilside78.blogspot.com/2010/12/anti-censorship-spectrum_23.html (If link fails, cut and paste it into the url bar)... You may reach some of Paul Conant's other pages through the sidebar link or at http://paulpages.blogspot.com/
Thursday, November 17, 2011
Can Rube Goldberg system
stem derivative crash peril?
The New York Times was first to publish the following analysis by a columnist for ProPublica, which operates under the Creative Commons guidelines.
By JESSE EISINGER, ProPublica
When the architects of the Dodd-Frank regulatory overhaul flinched from the most effective solution — breaking up the banks so that none would be too big to drag down the financial system — they forced regulators of the derivatives market into a cumbersome and potentially dangerous workaround.
Those regulators are feverishly making lots of important, arcane rulings that are being followed only by insiders. They are replacing an opaque system prone to failures with a new, huge Rube Goldberg-like system that may reduce global financial risk. Or it may not. Nobody knows, not least the regulators themselves.
Those regulators are feverishly making lots of important, arcane rulings that are being followed only by insiders. They are replacing an opaque system prone to failures with a new, huge Rube Goldberg-like system that may reduce global financial risk. Or it may not. Nobody knows, not least the regulators themselves.
The Commodity Futures Trading Commission, led by Gary Gensler, approved rules last month that would require derivatives clearinghouses to open their membership to firms that have as little as $50 million in capital. A clearinghouse is a central body through which trades take place. It is supported by its financial firm members. For instance, if JPMorgan Chase enters into a derivatives transaction with Goldman Sachs, their deal would go through a clearinghouse, which is liable for the trade if one of those banks fails.
The big banks that dominate derivatives trading resisted letting in smaller firms, arguing that doing so would make the clearinghouses vulnerable. They have a point: a clearinghouse with a bunch of undercapitalized members would be more prone to failure, unable to pony up when one side of a trade defaults, and we would be back where we started.
And who had lobbied for this? One of those smaller brokerage firms, MF Global, then run by Jon S. Corzine. Of course, MF Global went belly up because of its aggressive bets and high leverage.
Oops.
That disaster makes it easy to conclude that the Commodity Futures Trading Commission is going about trying to reform the derivatives markets all wrong. But excluding the small fry is dangerous as well. If clearinghouses restricted their membership to only the biggest and best-capitalized firms, the markets would more or less look like they do today — an oligopoly.
Derivatives trading is dominated by the likes of JPMorgan, Goldman Sachs and Deutsche Bank. We now have a financial system where the failure of one megabank can jeopardize the world financial system, and having clearinghouses run only by the “too big to fail” firms merely replicates that fundamental problem.
The big banks that dominate derivatives trading resisted letting in smaller firms, arguing that doing so would make the clearinghouses vulnerable. They have a point: a clearinghouse with a bunch of undercapitalized members would be more prone to failure, unable to pony up when one side of a trade defaults, and we would be back where we started.
And who had lobbied for this? One of those smaller brokerage firms, MF Global, then run by Jon S. Corzine. Of course, MF Global went belly up because of its aggressive bets and high leverage.
Oops.
That disaster makes it easy to conclude that the Commodity Futures Trading Commission is going about trying to reform the derivatives markets all wrong. But excluding the small fry is dangerous as well. If clearinghouses restricted their membership to only the biggest and best-capitalized firms, the markets would more or less look like they do today — an oligopoly.
Derivatives trading is dominated by the likes of JPMorgan, Goldman Sachs and Deutsche Bank. We now have a financial system where the failure of one megabank can jeopardize the world financial system, and having clearinghouses run only by the “too big to fail” firms merely replicates that fundamental problem.
“If you want to restrict access to just the larger organizations, you don’t solve the problem that clearinghouses are there to solve,” said Nicholas Dunbar, the author of “The Devil’s Derivatives” (Harvard Business Press), a history of the creation of these markets.
So both options are bad; letting in small guys is dangerous, but so is keeping them out.
Another insoluble problem is that of the One or the Many. If there were only one giant global clearinghouse for all derivatives, it might have enough capital to survive a panic in any one corner of the derivatives market. But if a general financial crisis forced many members to default, then it really would be too big to save. No country, not even the United States, would allow such a gargantuan institution to be domiciled on its home turf.
Instead we have an explosion of clearinghouses. We have clearinghouses for different asset classes. We have competing clearinghouses. We have clearinghouses in the United States, Europe and Asia. Dodd Frank implicitly supports this “let a thousand flowers bloom” approach.
That leads to another concern. Clearinghouses create an impression there’s some underlying capital to protect them, either in the entity itself or among the members. But a multiplicity of small ones is dangerous, according to Frank Partnoy, a professor of law and finance at the University of San Diego. The fragmentation means that safety is likely to be an illusion.
“There is less money” in each tiny clearinghouse, he explained. It virtually guarantees that if there’s a panic in one area of the world, the clearinghouse that backs it won’t have enough capital.
So both options are bad; letting in small guys is dangerous, but so is keeping them out.
Another insoluble problem is that of the One or the Many. If there were only one giant global clearinghouse for all derivatives, it might have enough capital to survive a panic in any one corner of the derivatives market. But if a general financial crisis forced many members to default, then it really would be too big to save. No country, not even the United States, would allow such a gargantuan institution to be domiciled on its home turf.
Instead we have an explosion of clearinghouses. We have clearinghouses for different asset classes. We have competing clearinghouses. We have clearinghouses in the United States, Europe and Asia. Dodd Frank implicitly supports this “let a thousand flowers bloom” approach.
That leads to another concern. Clearinghouses create an impression there’s some underlying capital to protect them, either in the entity itself or among the members. But a multiplicity of small ones is dangerous, according to Frank Partnoy, a professor of law and finance at the University of San Diego. The fragmentation means that safety is likely to be an illusion.
“There is less money” in each tiny clearinghouse, he explained. It virtually guarantees that if there’s a panic in one area of the world, the clearinghouse that backs it won’t have enough capital.
The regulatory changes could make things worse in another way, said David Murphy, principal of the risk management firm Rivast Consulting and a former head of risk at the trade group International Swaps and Derivatives Association. Here, it’s worth knowing a little about how banks minimize risks as they trade derivatives.
The underlying amount of derivatives, called the “notional value,” is in the hundreds of trillions. The biggest dealers, like JPMorgan, have tens of trillions of notional value on their books. What we are worried about is counterparty risk: what happens if one of the banks on either side of a trade fails?
The underlying amount of derivatives, called the “notional value,” is in the hundreds of trillions. The biggest dealers, like JPMorgan, have tens of trillions of notional value on their books. What we are worried about is counterparty risk: what happens if one of the banks on either side of a trade fails?
As an example, the investment bank Robbin & Steelin has a portfolio with another investment bank, Engulf & Devour. Robbin goes through an exercise to figure out the following:
If Engulf fails, how much would Engulf owe us and what collateral do we have against that?
And how much would it cost us to replace those positions, to restore our offsetting hedges?
If Engulf fails, how much would Engulf owe us and what collateral do we have against that?
And how much would it cost us to replace those positions, to restore our offsetting hedges?
That, with a few steps in between and a lot of fancy math, is how those trillions of “notional” amounts shrink to a much smaller “net” figure, in the billions.
But under the clearinghouse regime, the banks will have to split up those gargantuan portfolios. Let’s say Robbin and Engulf had two trades with each other, a European derivatives trade worth $200 and an American derivatives trade worth $180. It has a net value of $20, with Engulf posting that amount in collateral with Robbin.
Now the trades move to clearinghouses. The European trade goes to a European clearinghouse. The. American trade goes to an American clearinghouse. The parties need to post larger amounts of collateral. If, say, the European clearinghouse fails, one bank is exposed and now has a much bigger exposure.
But under the clearinghouse regime, the banks will have to split up those gargantuan portfolios. Let’s say Robbin and Engulf had two trades with each other, a European derivatives trade worth $200 and an American derivatives trade worth $180. It has a net value of $20, with Engulf posting that amount in collateral with Robbin.
Now the trades move to clearinghouses. The European trade goes to a European clearinghouse. The. American trade goes to an American clearinghouse. The parties need to post larger amounts of collateral. If, say, the European clearinghouse fails, one bank is exposed and now has a much bigger exposure.
Will that bank have received adequate collateral from the clearinghouse? Maybe, but maybe not.
But the bank may have to go out into the market to offset its exposure — possibly a more disruptive move than it would have been under the previous regime.
It’s possible that the netting effects from other trades with the clearinghouse will serve the same function. But it hasn’t been adequately studied.
One possible result of all of this is that there will be less derivatives trading and more collateral going back and forth. That’s bad for bankers, but good for the rest of us.
Given the weak hand that regulators have, however, it seems more likely that the collateral will just be inadequate. It’s easy to see regulators and trading partners falling for the illusion of safety that clearinghouses provide.
“The scary part,” said Mr. Murphy, the risk expert, “is that I’m pretty certain that clearing is being imposed without anyone actually knowing whether it actually reduces counterparty risk or not.”
One sure thing in this morass of uncertainty: We will find out.
Jesse Eisinger is a reporter for ProPublica, an independent, nonprofit newsroom that produces investigative journalism in the public interest. Email: jesse@propublica.org. Follow him on Twitter (@Eisingerj).
Newz from Limbo is a news site and, the hosting mechanism notwithstanding, should not be defined as a web log or as 'little more than a community forum'... Write News from Limbo at Krypto78=at=gmail=dot=com... The philosophical orientation of Newz from Limbo is best described as libertarian... For anti-censorship links: http://veilside78.blogspot.com/2010/12/anti-censorship-spectrum_23.html (If link fails, cut and paste it into the url bar)... You may reach some of Paul Conant's other pages through the sidebar link or at http://paulpages.blogspot.com/
Wednesday, November 16, 2011
Labor chief backs Occupy,
calls for protests tomorrow
Here is an email sent from the AFL-CIO:
They can take away the tarps and the tents. But they can’t slow down the Occupy Wall Street movement.
There have been police raids on Occupy Wall Street in Oakland, Calif.; Portland, Ore.; Denver; Albany, N.Y.; Burlington, Vt.; and Chapel Hill, N.C. — and now, last night in New York’s Zuccotti Park — orchestrated by politicians acting on behalf of the 1%.
But the 99% is undaunted. Occupy Wall Street’s message already has created a new day. This movement has created a seismic shift in our national debate — from austerity and cuts to jobs, inequality and our broken economic system.
Show your solidarity by attending a Nov. 17 bridge action near you.
http://local.we-r-1.org/all
And click here (http://act.aflcio.org/c/18/p/dia/action3/common/public/... ) to send a message of solidarity directly to the Occupy Wall Street protesters—Working America will deliver it this week.
The Occupy Wall Street movement has been committed to peaceful, nonviolent action from its inception. And it will keep spreading no matter what elected officials tell police to do. But that doesn’t mean these raids are acceptable. In fact, they are inexcusable.
As former Secretary of State Colin Powell put it, these protests are “as American as apple pie.” Americans must be allowed to speak out against pervasive inequality, even if the truth discomfits the 1%...
We are the 99%.
In Solidarity,
Richard L. Trumka
President, AFL-CIO
calls for protests tomorrow
Here is an email sent from the AFL-CIO:
They can take away the tarps and the tents. But they can’t slow down the Occupy Wall Street movement.
There have been police raids on Occupy Wall Street in Oakland, Calif.; Portland, Ore.; Denver; Albany, N.Y.; Burlington, Vt.; and Chapel Hill, N.C. — and now, last night in New York’s Zuccotti Park — orchestrated by politicians acting on behalf of the 1%.
But the 99% is undaunted. Occupy Wall Street’s message already has created a new day. This movement has created a seismic shift in our national debate — from austerity and cuts to jobs, inequality and our broken economic system.
Show your solidarity by attending a Nov. 17 bridge action near you.
http://local.we-r-1.org/all
And click here (http://act.aflcio.org/c/18/p/dia/action3/common/public/... ) to send a message of solidarity directly to the Occupy Wall Street protesters—Working America will deliver it this week.
The Occupy Wall Street movement has been committed to peaceful, nonviolent action from its inception. And it will keep spreading no matter what elected officials tell police to do. But that doesn’t mean these raids are acceptable. In fact, they are inexcusable.
As former Secretary of State Colin Powell put it, these protests are “as American as apple pie.” Americans must be allowed to speak out against pervasive inequality, even if the truth discomfits the 1%...
We are the 99%.
In Solidarity,
Richard L. Trumka
President, AFL-CIO
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