Wall Street’s credit-derivatives traders, who before the financial crisis commanded $2 million of annual pay, are being replaced by machines as banks cut costs and heed new regulations.
UBS AG, Switzerland’s biggest bank, fired its head of credit-default swaps index trading, David Gallers, last week, with no plan to fill the position, according to two people familiar with the matter.
Instead, the bank replaced Gallers with computer algorithms that trade using mathematical models, said the people, who asked not to be identified because moves are private.
As every frustrated American knows, no major banking executive has gone to prison or has been fined any significant amount in the aftermath of the financial crisis. But what’s astonishing is that Wall Street bankers seem not to have paid any social cost either. They sit on corporate and nonprofit boards and attend functions and galas. They remain top Wall Street executives, or even serve as regulators. The nation’s prominent op-ed pages, talk shows and conferences seek their opinions. If you are rich, you must be intelligent. Your views must be worthwhile, never mind the track record.
The largest transfer of wealth from the public to private sector is about to begin. The federal government will be bulk-selling the massive portfolio of foreclosed homes now owned by HUD, Fannie Mae and Freddie Mac to private investors — vulture funds.
The first in a perhaps continuing series
Israel/Egypt: Gunmen kill six in Israel in attack near Egypt border
Syria: via @Reuters: “The United States is certain that Syrian President Bashar al-Assad is “on his way out,” - senior U.S. official”
Money and Markets
Markets taking again, down over 500 at one point today
As of now, not only have we failed to fix these three problems, but we’ve made them all worse. The big banks are bigger than ever, after having swallowed up their failed competitors. (Merrill Lynch, for example, is now a subsidiary of Bank of America; don’t believe for a minute that BofA’s senior management or board of directors has a remotely adequate understanding of the risks that Merrill is taking.)
Interconnectedness, too, has increased. With the bailout came a deluge of liquidity, courtesy of Ben Bernanke: the Fed bailout was tantamount to dropping billions of $100 bills from helicopters over Lower Manhattan. That money got spent on financial assets—that was the whole point—and as a result, financial assets started moving in conjunction with one another. If my shares are rising, your shares are almost certainly rising too. And your commodities, and your municipal bonds, and your Old Master paintings. Because of this increase in financial correlation, if and when another crisis hits, it will be uncontrollable: it’s certain to strike absolutely everything, all at once. And though some people think Congress can simply regulate the problems away, there’s no way to legislate solutions to problems that are endemic to our financial system.
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