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Thread: This little gem got lost yesterday...

  1. #1
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    This little gem got lost yesterday...

    I'm somewhat at a loss for words here

    [url]http://abcnews.go.com/Blotter/WallStreet/story?id=6180235&page=1[/url]

    [QUOTE]It's No Joke: Fed Hires Failed Bank Executive
    Heckuva Job, Fed?
    By JUSTIN ROOD
    November 4, 2008

    The Federal Reserve Bank is drawing jeers for hiring a former top executive from the now-defunct investment bank Bear Stearns to help it gauge the health of other banks.

    The Federal Reserve Bank has hired the former head of risk management for Bear Stearns, which imploded this spring.

    "How's this for sweet irony?" business publication Portfolio.com needled the pick.


    Michael Alix was head of risk management for Bear Stearns for two years until the institution imploded this spring, a victim of its (risky) subprime-mortgage related investments.


    Last Friday, the Federal Reserve Bank of New York quietly announced it had hired Alix to advise it on bank supervision.


    "You're kidding me," said economic policy expert Dean Baker, of the Washington, D.C.-based Center for Economic Policy and Research. While he didn't know Alix personally, he said, "You would think [his record] would be a big strike against him."

    The collapse of Bear Stearns led to its pennies-on-the-dollar buyout by J.P. Morgan Chase; the bank's shareholders saw their wealth plummet. To facilitate the buyout, the Fed agreed to assume potential billions in losses on bad Bear Stearns investments.

    "[Alix] was the guy on the mast charged with yelling 'iceberg' just before the Titanic introducted its bow to a floating chunk of ice," wrote financial expert and blogger John Carney on the web site Clusterstock.com, where he flagged the hire.


    The Fed's move "is sure to put to rest the notion that there are no second acts in American life," Carney observed drily.


    A spokesman for the Federal Reserve declined to comment. [/QUOTE]

  2. #2
    :eek:I would fire him and the guy that hire him, ASAP! Whjen are we going to realize we've got a bunch of crooked cronies running our goverment from elected office to beauracratic appointments

  3. #3
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    In sports news, Bill Buckner has been retained as a roving first base instructor by the Boston Red Sox.:eek:

  4. #4
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    ya think they timed this announcement, or what???

  5. #5
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    Intersting take

    Howard Simons
    Risk Management: Who Ya' Gonna Call?
    11/5/2008 12:50 PM EST


    I was asked by a reporter to provide my opinion of the New York Federal Reserve's hiring of former Bear Stearns risk officer Michael Alix.

    It would be easy to take the obvious cheap shot, but I came to the defense of the decision. First, there are two departments in any financial organizaiton, risk management and compliance, where the primary job is to say, "No." Those departments tend to get pushed around by the primary money-making departments, such as sales, trading, underwriting and product structuring when the times are good.

    Second, just as Brinks hires former safecrackers, or as Franklin Roosevelt hired Joe Kennedy to run the SEC and as Lenin hired the Czarist secret police, you often have to hire people who have been involved in something dubious. Wasn't one of our mistakes in Iraq dismissing all former Baathists; who else knew how to run things there? I'd rather hire someone who saw the disaster unfold from the inside and knew the story than someone from, say, academic who is up-to-snuff on the latest risk management theories but never faced live ammunition.

    The Federal Reserve has a huge portfolio of dubious collateral on its balance sheet as the result of all its recent actions. You need someone experienced with all that dreck to manage it.

    Besides, would you rather have someone from Lehman Brothers, WaMu, Wachovia, AIG, IndyMac running the show?

  6. #6
    [QUOTE=Lawyers, Guns and Money;2843842]Howard Simons
    Risk Management: Who Ya' Gonna Call?
    11/5/2008 12:50 PM EST


    I was asked by a reporter to provide my opinion of the New York Federal Reserve's hiring of former Bear Stearns risk officer Michael Alix.

    It would be easy to take the obvious cheap shot, but I came to the defense of the decision. First, there are two departments in any financial organizaiton, risk management and compliance, where the primary job is to say, "No." Those departments tend to get pushed around by the primary money-making departments, such as sales, trading, underwriting and product structuring when the times are good.

    [B]Second, just as Brinks hires former safecrackers, or as Franklin Roosevelt hired Joe Kennedy to run the SEC and as Lenin hired the Czarist secret police, you often have to hire people who have been involved in something dubious. Wasn't one of our mistakes in Iraq dismissing all former Baathists; who else knew how to run things there? I'd rather hire someone who saw the disaster unfold from the inside and knew the story than someone from, say, academic who is up-to-snuff on the latest risk management theories but never faced live ammunition.[/B]

    The Federal Reserve has a huge portfolio of dubious collateral on its balance sheet as the result of all its recent actions. You need someone experienced with all that dreck to manage it.

    Besides, would you rather have someone from Lehman Brothers, WaMu, Wachovia, AIG, IndyMac running the show?[/QUOTE]
    I was thinking the same thing. Very similar to companies employing convicted computer hackers in an effort to tighten data security as much as possible. The thinking being that it's best to have those who've actually beaten the system watching out for yours.

  7. #7
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    [QUOTE=RutgersJetFan;2843861]I was thinking the same thing. Very similar to companies employing convicted computer hackers in an effort to tighten data security as much as possible. The thinking being that it's best to have those who've actually beaten the system watching out for yours.[/QUOTE]

    RJF, (or maybe I wanted to post it for Brooklyn Bound)

    I actually have a good article for you from Bob McTeer, been meaning to post it but it would get lost on the board recently. Its about our Money supply discussion and takes the other side. Its worth a read


    The Fed's Balance Sheet
    Bob McTeer 10.29.08, 12:01 AM ET

    The sharp growth in the Fed's consolidated balance sheet has received much attention lately. Some have questioned the Fed's balance-sheet capacity to continuing providing liquidity at home and abroad, and some have worried about the inflationary consequences of its balance-sheet growth down the road. This essay will address these issues--briefly.

    First: The Federal Reserve, as a central bank holding the reserve deposits of commercial banks (hence its name), creates bank reserves and money when it adds to its loans or any other asset. More loans on the asset side of its balance sheet are usually matched by more bank reserve deposits on the liabilities side. There is no balance-sheet constraint on that process. The Fed doesn't have to have assets to make loans.

    In practice, however, the Federal Reserve over the past year has offset most of the increase in loans among its assets with decreases in its holdings of government securities. In other words, it has neutralized or sterilized the monetary impact of its lending--meaning the impact on bank reserves--with open market sales of government securities.

    The funds have gone to the borrowing banks, mostly through the new term auction facilities, but those funds haven't been net additions of reserves to the banking system as a whole. In an operational sense, the trading desk at the New York Fed has not set out to offset loans per se, but that is the effect of maintaining the FOMC's target Federal Funds rate. The targets have produced that outcome.

    While the Fed's balance sheet doesn't constrain Fed lending, it does constrain its ability to offset the impact of the lending on bank reserves. To sell government securities in the open market, it has to have securities in its portfolio. Recently, the Fed asked the Treasury to sell some extra Treasury securities, which the Fed put into a special account to be available for sterilization purposes.

    Second: If the purpose of monitoring the Fed's balance sheet is to gauge the expansionary or inflationary implications of its lending or other actions, a more appropriate way to do it is not to focus on growth total assets and liabilities, but to focus directly on bank reserves. Bank reserve deposits at the Fed, together with currency outside the banking system, make up what economists call the monetary base, or high-powered money.

    Rapid growth in the base (primarily bank reserves in practice) gives the banking system an ability to make more loans and investments and, hence, create more deposit money. The effective marginal reserve requirement is about 10%, so each dollar of new reserves will eventually add about $10 of money. Think of bank reserves as wholesale money and bank deposits as retail money. Exactly which bank deposits you include gives you different definitions of money: M1, M2, MZM and so forth.

    Those definitions and distinctions aren't important for our purposes here. Let me just say that the best measure of the money supply is the one that has the most constant and predictable relationship with income, and that changes from time to time. It is because no measure of money has a tight relationship with income that the Fed uses the Federal Funds Rate, rather than a measure of the money supply, as its operating target. Yet most believe that over the long run, inflation, to quote Milton Friedman, "is always and everywhere a monetary phenomenon." But, I digress.

    Third: I said earlier that a focus on bank reserves on the Fed's balance sheet was more useful in anticipating monetary outcomes than a focus on the overall size of the balance sheet. To isolate bank reserves, consider the following relationship: Bank Reserves equal total Fed assets minus non-reserve Fed liabilities.

    That relationship means that, other things being equal, increases in Fed assets tend to increase bank reserves while increases in other Fed liabilities tend to reduce bank reserves. Therefore, when the Fed offsets an increase in one of its assets--loans--with a decrease in another of its assets--Treasury securities--there is no net effect on bank reserves.

    That was the case over most of the past year. Fed lending had virtually no impact on bank reserves. However, beginning in September 2008, that changed dramatically. In recent weeks, bank reserves, the monetary base and other monetary aggregates, have grown very rapidly.

    According to the Fed's H.4.1 releases, as of Thursday, Oct. 23, the Fed's assets totaled $1,804,208,000, roughly double its total of $919,235 a year earlier. Bank reserve balances during the same period rose from $294,225,000 to $301,270,000, an increase of only 2.4%. Thus the monetary impact of Fed activities over the year has been substantially less than implied by the doubling of its assets.

    While an increase in reserves of 2.4% seems low for a year, virtually all the increase is recent, which means it was even lower for most of the year. Bank reserves remained flat up until a few weeks ago even though total bank assets were growing. The monetary base and various measures of the money supply followed that pattern--very slow growth for about a year then explosive growth in recent weeks.

    The main thing that accounts for the greater growth in total assets than bank reserves is the expansion of the Fed's swap facilities that allow participating foreign central banks access to dollars to meet the demand for dollars in their countries. A swap is simply an exchange of a given dollar amount of currencies with a promise to swap back some time in the future at the same exchange rates. Swap lines used to be used to provide dollars for foreign central banks to use to support their currencies in foreign exchange markets.

    One could easily argue that the Fed overdid its sterilization for most of the period, which made monetary policy too tight. As for the recent period, the extremely high growth is probably appropriate, and not inflationary, while credit markets remain frozen and velocity continues to fall. It is something that will have to be corrected as we return to normal in credit markets, or accelerating inflation will become a serious concern.

  8. #8
    [QUOTE=32green;2843579]In sports news, Bill Buckner has been retained as a roving first base instructor by the Boston Red Sox.:eek:[/QUOTE]he was an excellent first baseman...

  9. #9
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    [QUOTE=2foolish197;2844038]he was an excellent first baseman...[/QUOTE]

    Yes.

    Yes he was.

  10. #10
    Heh. I worked in the Bear Stearns Fitness Center and I saw him often.

  11. #11
    so let me guess, it's not okay for this guy to be in the fed but okay for obama to have franklin raines as his advisor or offer cabinet jobs to guys like robert rubin or larry summers?

    it's not okay for either and it is very important that these clowns who caused the financial mess be barred from anything. it is also a travesty that a guy like barney frank gets to keep his seat in congress.

    meet the new boss, same as the old boss.

  12. #12
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    [QUOTE=AJGunns;2844163]Heh. I worked in the Bear Stearns Fitness Center and I saw him often.[/QUOTE]

    I worked with a Mike Alix in a financial institution.........does anyone have a pic of him?

  13. #13
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    I did a search and can't find a pic................

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    [QUOTE=AJGunns;2844163]Heh. I worked in the Bear Stearns Fitness Center and I saw him often.[/QUOTE]

    You should have kicked him in the balls.


    At least now I have decided my next career path. Get a job. F*** up. Get another job because I'm a f*** up. Profit from my f*** up while everyone I f***ed over is still f***ed out of their retirement.

  15. #15
    [QUOTE=PlumberKhan;2844908]You should have kicked him in the balls.


    At least now I have decided my next career path. Get a job. F*** up. Get another job because I'm a f*** up. Profit from my f*** up while everyone I f***ed over is still f***ed out of their retirement.[/QUOTE]

    You missed step 1) Be well connected through family or school ties.

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