Financial market shenanigans resurface

The New York Times has an excellent article by William D.Cohan warning about the reappearance in the financial markets of 2008 style financial practices which led to the collapse in 2008. Citing speeches by the Fed chairman Jerome Powell , a discussion of former Fed chair Janet Yellen about the dangers of these new instruments and practices with Paul Krugman the Nobel prize winning columnist with the NYT,  and a Fed Wall Street regulator as corroborating witnesses Cohan explains how new instruments called collateralized loan obligations are being bought and sold and speculated on by various financial companies . That disastrous instrument the credit default swap has resurfaced this time attached to these CLOs which often represent corporate debt. Hedge funds have bought small amounts of precarious CLOs and  then massive amounts of credit default insurance on the same vehicles.They then put pressure on the company to file for bankruptcy and  when they fail their credit default insurance far outweighs their losses. Like poison ivy these dangerous speculative vehicles are spreading throughout the industry. Hedge funds pension funds and mutual funds are particularly vulnerable.Regulators need to intervene before we have 2008 all over again.

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About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
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