Sunday, January 24, 2010

Pimco, the New Vampire Squid

"A switch in how state regulators size up insurers' risks will save the industry more than $5 billion in capital requirements, New York officials said Monday. ... In ditching the ratings firms, the regulators said they had lost faith in the ratings firms' ability to size up risk in insurers' big holdings of residential-mortgage bonds. In choosing Pimco for the high-profile assignment, they cited the rating firms' widely publicized shortcomings in initially rating many of the bonds as triple-A, the highest rating, then last year downgrading waves of the bonds to 'junk' status. ... Some have critcized the regulators for changing their methodology in a way that could lead to a more-lenient outcome for the insurance companies, saying the move could weaken protection for policy holders", Leslie Scism at the WSJ, 5 January 2010, link:

Apparently Pimco is our new Vampire Squid (VS) as old VS developed a foul odor since it claimed to do "God's work". Neal Kasksahri formerly of VS and Treasury recently went to work for Pimco. When will Hank Paulson and Robert Steel decamp to Pimco? Will this regulatory change do anything for insurance company policyholders? Why ask?


Anonymous said...

It's really remarkable how easily regulators are "captured"... even state regulators.

A fundamental issue with problems in mark-to-market accounting, capital adequacy, liquidity and fiduciary issues is the lack of transparency in over-the-counter markets.

If Congress and other national governments insisted on the transparent reporting of securities many of these "dark" problems would be dissolved by the markets. Instead we get Vampire Squid, JPMC, Pimco, the Fed and a few other gianticious entities controlling the financial markets and indirectly the economy.

These giant firms have created the "stability of oligopoly"...

Independent Accountant said...

If you want to see how the "system" really works, read C. Walton Hamilton's "Politics of Industry", 1957. You'll be surprised.