The New York Times is reporting Chrysler has made a deal with the UAW and is headed to a Chapter 11, pre-arranged bankruptcy that is not a liquidation.
The deal includes Fiat, the Italian automaker with which Chrysler was ordered by the government to form an alliance before Thursday.
Neither the United Automobile Workers union nor the company released details of the tentative agreement, which would modify the union’s 2007 contract and reduce the amount of money Chrysler must pay into a new health fund for retirees.
Some of the terms, which are not officially released are:
The wagons circling around TARP Congressional Oversight Panel Chair Elizabeth Warren should come to no surprise. She has the guts to try to do her job after all.
Naked Capitalism points out our biggest promoter of political economic Calvinball, House Chair Nancy Pelosi is now doing the dirty on one of the few voices of reason in D.C. (and of course this is true for Professor Warren is an outsider).
So why are we pointing a finger at Pelosi in particular? The next chapter is her appointment of one Richard Nieman to the Congressional Oversight Panel. Under the TARP rules, the House Majority leader selects one of the oversight panel members, so this choice was completely under her control.
You will recall David Li, the quant who devised the formula that "revolutionized" derivatives. I believe this post from Robert Oak was the last time he was discussed at EP.
Now, along comes this article recently published in FT. While it doesn't shed any new light on the formula, per se, it is a very interesting biographical piece about young Mr. Li. It also retraces key developments in the creation and the ascendancy of quantitative analysis on Wall Street.
This sure ain't a good sign. Bloomberg reports that the Fund which manages GM employees 401ks just dumped all of GM shares because they would be worthless in bankruptcy:
State Street Bank and Trust Co., manager of a 401(k) investment fund for General Motors Corp. employees, has sold the majority of its shares in the automaker on concern that the stock could lose all value in a bankruptcy.
State Street sold 75 million shares, or about 12.4 percent of GM outstanding common stock, between March 31 and yesterday, Julie Gibson, a GM spokeswoman, said yesterday in an interview. It held most of those shares in a 401(k) fund for 29,800 employees and retirees. The fund is one of several options available in the GM employee-retirement savings plan.
The investment company held a total of 103 million GM shares at the end of the year, according to Bloomberg data.
The Black-Scholes model of the market for an equity makes the following explicit assumptions:
1) It is possible to borrow and lend cash at a known constant risk-free interest rate.
2) The price follows a geometric Brownian motion with constant drift and volatility.
Also, Black and Scholes make the simplifying assumptions that all securities are perfectly divisible, there are no transaction costs or dividends and there are no restrictions on short selling. These are just simplifications that later, more complicated versions, have worked around. So there are really only two essential assumptions made by quantitative analysts - quants.
Let us begin by considering Black and Scholes' first axiom. A forum discussant, Suzy, writes:
Petit Julien welcomes you back to the Populist Pub.
As a nation, we are groping for some sense of hope that we are emerging from the economic morass. The ranks of the unemployed continue to swell and millions of working Americans and retirees worry that the economic tsunami may engulf them next. The government has enacted a dizzying array of bailouts and assistance plans aimed at stabilizing the banking industry, thereby clearing a path to recovery in the real economy.
There is plenty of criticism for the government's actions to date, much of which is centered on understanding what brought on the crisis in the first place. Many critics attribute the 1999 repeal of the Glass-Steagall Act of 1933 and the 2000 enactment of the Commodities Futures Modernization Act as the impetus for the wreckless financial gambling of the last 8 years. For sure, this is not wrong and various measures of reform are now working their way through the Congressional process.
However, in an excellent article published in the April edition of Harper's Magazine, Thomas Geoghegan argues that we have not focused enough on the big deregulation that precedes all other deregulation. For him it was the day that America changed. His essay is titled: Infinite Debt; How Unlimited Interest Rates Destroyed The Economy.
Hard Times? Getting Repoed, Foreclosed on? Well one population segment is loving it, the rats. In the U.K. rats are having a party:
As the biggest economic bust in 60 years fostered a boom for rodents, municipalities were called an estimated 700,000 times to deal with infestations in the last 12 months, compared with 650,000 the previous year, said Peter Crowden, chairman of National Pest Technicians Association Ltd.
The rat population has swollen by 13 percent this year to more than 50 million, one for every person living in England, according to an industry consensus cited by Crowden. Rats and mice are capable of spreading more than 35 diseases, including a fever inducing nausea and muscle aches passed to humans either via a bite or the rodent’s urine.
Deflation, inflation, it really doesn't matter. The price for money, that is interest rates, is going up. You can see it in the back month contracts in the futures market. You can see it in the failed auctions for foreign debentures like the Gilt in the UK. Investors/lenders are demanding a higher rate for loaning out money. The banks may be lending, but it's still a capital desert out there. We were at historical lows, not seen in decades. Folks, it was not always going to stay that way.
It's Friday Night! Party Time! Time to relax, put your feet up on the couch, lay back, and watch some detailed videos on economic policy!
Tonight's focus is on consumer debt and predatory lending.
With the Obama administration talking about student loans and credit cards, I thought an ode to Americans for Fairness in Lending organization and related documentaries would be in order.
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It's Friday Night! Party Time! Time to relax, put your feet up on the couch, lay back, and watch some detailed videos on economic policy!
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