Marketplace Whiteboard
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The Uptick Rule
Bankers have been debating bringing back the uptick rule for months, if not years. This week the debate made it to Capitol Hill. Senior Editor Paddy Hirsch gives a quick and dirty explanation of what the uptick rule is, and why it could be reinstated to turn the American taxpayer into one of Citigroup's biggest stockholders. Senior Editor Paddy Hirsch explains.
Derivatives
Credit default swaps? They're complicated -- and scary! The receipt you get when you pre-order your Thanksgiving turkey? Not so much. But they have a lot in common: They're both derivatives. Senior Editor Paddy Hirsch explains.
Bonds, notes and bills
So much government debt! But what's the difference between the Treasury's bills, notes and bonds? Senior Editor Paddy Hirsch explains.
Inflation
Most economists agree that inflation of about 2% or 3% annually is a natural function of a growing economy. But people are worried government stimulus measures could spark much higher inflation. Senior Editor Paddy Hirsch explains
High-frequency trading
High-frequency trading is creating a ruckus on Wall Street. Marketplace Senior Editor Paddy Hirsch explains what high-frequency trading is and why some people are up in arms about it.
Factoring
Many small businesses get the cash they need to operate and expand from so-called factors. One of the biggest factors in the business is CIT, and with CIT on the ropes, small businesses are worried. Senior Editor Paddy Hirsch explains what factoring is, and how it works.
Financial alchemy
Many asset-backed securities have been downgraded from AAA recently. But at least one issuer has miraculously repackaged a downgraded deal to make some of its bonds worth a AAA rating again. Senior Editor Paddy Hirsch explains.
Where's the toxic waste?
Banks are paying back TARP money and claiming they're the picture of health. So what happened to all those toxic assets that were clogging their arteries a few months back? Senior Editor Paddy Hirsch explains.
Dark pools
Dark pools are exchanges where people trade stocks anonymously. Senior Editor Paddy Hirsch explains how they work, and why the SEC is considering regulating them.
The 'repo' market
Senior Editor Paddy Hirsch explains why the repurchase (or repo) market is a vital part of the financial system, and why the government is considering changes to it.
Meet Cap 'n Trade
Cap and Trade is the linchpin of the government's effort to curb carbon emissions. Senior Editor Paddy Hirsch explains how the cap and trade model works.
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Comments
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From Dallas, TX, 09/19/2009
Paddy is doing a great service for the masses with these educational videos. Keep up the good work. Paddy's accent also helps.
From Denver, CO, 04/10/2009
Do any regulations preside over the loan transaction between Jack and Diane? And does this all mean, with prices being lowered, that more people will have incentive to loan to short sellers in the future (given that their initial investment probably much smaller today than it would be in, say, 2015)?
Thank you for your work. I've learned more in about two minutes, from you, than all the speeches, conferences, and reports we've been subjected to.
From Dallas, TX, 03/26/2009
This is great stuff. I hope all of the whiteboard clips are archived and available as a handy reference on the website. I wouldn't even mind paying for a "Whiteboard" DVD...
From OR, 03/24/2009
PLEASE EXPLAIN NON-RECOURSE LOANS. IF THE HEDGE FUND LOSES THEIR EQUITY, DO THEY HAVE TO PAY BACK THE GOVERNMENT OR NOT?
From Westbrook, ME, 03/23/2009
Bravo, Bravo!
03/22/2009
What I find puzzling is that why didn't the government did not attempt to “bailout” the people holding sub-prime mortgages directly instead of giving money to the holders of the asset backed securities. On paper, the argument seems good. The government pays off these mortgages creating a “trickle-up” effect rendering bad assets that derive their value from these mortgages nontoxic. Sure, there is a moral hazard involved, but so is giving out blank cheques to financial institutions that dabbled in these risky assets in the first place.
03/19/2009
Hi Lezlee
Sorry, we had a wee glitch with the TCE video and had to take it down. I'm going to shoot another one in the next day or so. please bear with us!
paddy
From Kerrville, TX, 03/18/2009
Paddy, I was referring my bank to your TCE ratio whiteboard discussion (because they have never heard of that term before) and this particular video is the only one that is "Locked". Why?
From Ridgefield, CT, 03/18/2009
I think this is a great resource. thanks. I only wish I could get the videos to load on a more consistent basis. Are you having technical issues or am I?
From Berkeley, CA, 03/18/2009
Can you explain why it's better for the government to buy bad assets from banks to get them to lend instead of just lending money to people who need loans? It seems all this money we give them just goes to their creditors instead of actually being lent out. Some of those creditors are in other countries and not likely to loan us money right? Or they are worried that the economy will tank and are thus timid.
THis question is partly in response to the article
http://news.bbc.co.uk/2/hi/business/7951493.stm If we want lending to resume, why not have the government loan money to people (or businesses) instead of to banks?
From boston, MA, 03/16/2009
Of course, it is a fake name. I am unemployed, oh excuse me, in career transition, and have to be paranoid. So Paddy, I think Richard Quest at CNN International stole your idea on uncorking CDOs and didn't credit you and that royally pisses me off! Plus he used it in reference to quantitative easing, which makes no sense. You have fans watching out for you. I love your whiteboards! Keep up the fantastic work!
03/16/2009
HI Alejandro
It doesn't matter what the price was when Jack borrowed it. Could have been $2, could have been $10. Diane's business is lending stock out to short sellers like Jack: in return, she gets a fee and some collateral, which she might invest elsewhere until the share is returned. So having money "sucked out" of her shares is just a cost of doing business for her.
To answer your second question: when Jack sells his stock, he does so at the market price.
And this might interest you, by the way. We discovered today that AIG lost more than $43 billion in its securities lending business. In other words, they had a business like Diane's. They lent shares and other stuff to short-sellers and invested the collateral to make money. Usually most securities lenders people invest collateral in safe securities like Treasuries. AIG invested collateral in, you guessed it, toxic waste. And when the value of that waste dropped to, well, nothing, it had to liquidate other holdings to pay that collateral back.
Pretty smart, huh?
From CA, 03/16/2009
a few details you left out.
what was the price of the stock when jack 'borrowed' it from diane?
did jack sell the stock at what it was actually 'worth' at the time or for less?
we know how poor old greg fared, did diane suffer as well. im not sure i would appreciate you giving me back my stock after you 'sucked' a dollar out of it for yourself. = )
From appleton, WI, 03/16/2009
good presentation
nicely explaind
From Hackensack, NJ, 03/13/2009
In my admittedly uninformed opinion, it seems to me at first glance that the Uptick Rule would induce a sort of feast-or-famine effect. Whereas now, we have the danger of a vicious cycle being induced by all the short-sellers piling-on at once as a stock declines, with the uptick rule it seems that we might get more intense pile-ons at each uptick in a steady decline. The question remains: would the net-result be better, worse, or about the same?
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