Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. Silver Lining? Possible Leverage for DebtorsVery interesting blog post by Doug Henwood of Left Business Observer; what he's pointing out could be the basis for organizing leverage for ordinary folks. We were sorry to miss Doug's talk at Left Forum; he was on a panel on bank nationalization that also included Fred Moseley, author of our March/April cover story. We didn't even get to chat with him at our exhibit table, so we weren't able to have our yearly conversation about whether D&S and LBO are rival publications (they are not—everyone should subscribe to both). —csIn the course of a pretty wonky piece on CDOs, Felix Salmon points out that the modern financial environment weakens the political position of creditors. Back in 1975, when New York City was on the verge of default, its bonds were uninsured, and held mostly by the city's rich and its biggest banks. Both sets of bondholders were relatively few in number and invested in the city's long-term survival. The creditors were able to come together and speak with one voice to force wage cuts and layoffs on the unions and service cuts on city residents. Today, bondholdings are dispersed around the world, so it's hard to imagine a similar workout in 2009. There's an interesting parallel with Argentina's deliberate default early this decade (a default which followed the script laid out in this LBO article: How to default). Because Argentina's debts were held mostly by bondholders all over the place, many with rather small holdings, the creditors were in a very weak bargaining position. The contrast with the debt crisis of the early 1980s was stark. Then, a dozen bankers, backed by the IMF, could face down a finance minister in a conference room and demand the concessions for which neoliberalism became famous. But that was no longer possible in a world dominated by bond finance. And in today's securitized, derivatized world, mortgage holders often don't know who their creditors are. In fact, it could even be easier for debtors in a single neighborhood to organize than their creditors, who could be anywhere from Frankfurt to Abu Dhabi. (This is the full post.) Labels: CDOs, creditors, debtors, Doug Henwood, Felix Salmon Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Essential Reading from Yesterday's FTIn case you missed it, due to Friday night carousing, or whatever...--Whistleblower contacted US regulators (should they even be called this anymore?) on fraudster Sir Allen Stanford five years ago. --Banking editor Peter Thal Larson writes that the UK plan for Royal Bank of Scotland amounts to nationalization in all but name, "maintaining the fiction that the ailing bank is anything other than fully state-owned." This certainly has relevance in light of US policy with regard to Citi. --The excellent Gillian Tett on how CDOs may be worth even less than the pitiful estimates bandied about these days. And, in a point too rarely rarely made in the financial press, "as the zeroes relating to writedowns multiply, a peculiar--and bitter-- irony continues to hang over these numbers. Notwithstanding the fact that bankers used to promote CDOs as a tool to create more "complete" capital markets, very few of those instruments ever traded in a real market sense before the crisis--and fewer still have changed hands since then." Labels: bailout, CDOs, financial crisis, Financial Times, Gillian Tett, Peter Thal Larsen, Royal Bank of Scotland, Sir Allen Stanford Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
