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Obama is the worst president since WWII

Francesca R said:
Well no there isn't. Or no there wasn't. I can write you more and more CDSs and you can buy them all and our net position is flat but we have multiplied leverage. Why don't you know that?
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Well, I thought you were referring to the fact that CDS enabled an increase in the ability of investors to purchase mortgage bonds through leverage, which stimulated additional production of mortgage bonds and the deterioration of lending standards.

But, yes, you are right that CDS can increase leverage in bets on the direction of some underlying. Just like futures contracts can. And that is one of the reasons that Warren Buffett doesn't like CDS. But basically his fears about out of control leverage due to CDS have never come to pass. CDS has been used very responsibly by the markets in my experience.

And out of control leverage in the CDS market itself was simply not a cause of the financial crisis.
 
Francesca R said:
Tell that to AIG . . .
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AIG didn't need the CDS market to gain exposure to AAA-rated RMBS and CDOs. It could have used (and indeed did use) conventional insurance as well. It also could have bought the bonds directly and financed them. There were multiple avenues for AIG to express its view that earning 30bps over Libor for a AAA-rated mortgage backed security was a really good deal. The fundamental problem was that its view was terribly wrong, not the way in which it was expressed.
 
But it used CDS. And it went phut. And Lehman used CDOs and it went phut. And you agree that both intruments together allow increased leverage. And you agree leverage was "key" to the GFC propagating.

Well you seem to agree that these securities played a pretty critical role in the GFC.
 
Francesca R said:
But it used CDS. And it went phut. And Lehman used CDOs and it went phut. And you agree that both intruments together allow increased leverage. And you agree leverage was "key" to the GFC propagating.

Well you seem to agree that these securities played a pretty critical role in the GFC.
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Well, I think CDOs played a critical role, although not as big a role as plain vanilla securitizations. But I don't think CDS was an important factor. Although CDS can be used to expand leverage, it wasn't actually used to expand leverage in aggregate in the case of the GFC. The main vehicle for expanding leverage was the creation of AAA-rated product through securitization (which banks did to compete with Fannie and Freddie's own securitizations which were AAA-rated automatically due to the implicit government guarantee). The AAA-rating itself facilitated the leverage. Back in 2006, it was easy to get 50x leverage on AAA-rated bonds. Whether you used repo financing or shorted CDS, or, if you were an insurer, you wrote conventional insurance wraps, the leverage was approximately the same.

Over $3T of AAA-rated private label bonds were created, whether they were RMBS tranches or CDO tranches, or even CDO^2 (securitizations composed of BBB- or A-rated CDOs) tranches. And the vast, vast majority of this stuff did not deserve the AAA rating. But the AAA rating is what enabled the leverage, which allowed investors to pile on more AAA-rated risk, which increased demand for more AAA-rated product, and so on.

CDS wasn't necessary for the bubble to grow, and it didn't materially enable demand for more AAA-rated product. It was used mainly in the late stages of the bubble as hedge funds and investment banks looked around for a way to short mortgage bonds and CDOs (and the other side of the trade were the suckers, including AIG). As I explained a few days ago, CDS facilitated the popping of the bubble, but not its growth. I suppose it could be argued that the bubble might not have popped if such things as the ABX index (an index of CDS on mortgage bonds) hadn't been invented. Perhaps the air would have been let out gently. But I don't think so.
 
I guess it is important if you wish to sift through the truth of wot did it.

Some people want to say that too much government meddling did it. Others want to say that insufficient regulation did it. I think that the answer plays to neither side of the ideologocial divide (funny that--most things don't).

Financial engineering and government policy both acted in the same (adverse) direction. Not particularly surprising when you consider that the incentives of both private and public actors were the same ("let's use leverage to make the people we want to feel good, feel good").

Some are still stuck on saying "the gubmint diddit" or "the greedy fatcat bastards diddit". And they probably always will be. But the truth is out there.
 
applecorped said:
http://www.washingtontimes.com/news/2014/jul/2/obama-worst-president-wwii-new-poll-shows/

"“Over the span of 69 years of American history and 12 presidencies, President Barack Obama finds himself with President George W. Bush at the bottom of the popularity barrel,” said Tim Malloy, assistant director of the Quinnipiac University Poll."
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Bumpy time! :)

So if we are going by what the polls say, Obama leaves office with rather high approval ratings overall:

http://www.realclearpolitics.com/epolls/other/president_obama_job_approval-1044.html

For example, the Quinnipiac Poll cited in the OP has him at +16 (55/39),
And Rasmussen, not usually overly friendly toward Democrats has him at +20 (59/39).

Meanwhile, although incoming first-term presidents usually have a relatively high approval rating at the start of their term (the honeymoon period), it seems that the President-Elect already has rather poor approval ratings:

Poll: Majority disapprove of Trump's handling of transition

A majority of Americans disapprove of President-elect Donald Trump's handling of his transition, and only 30% approve of his Cabinet choices, a new Quinnipiac University poll released Tuesday finds.
The poll, released on the first week of hearings for Trump's Cabinet nominees, finds several key numbers slipping for the incoming President.

More than half -- 51% -- of Americans surveyed disapprove of Trump's handling of his transition, an increase in disapproval compared to a November Quinnipiac poll, when 46% disapproved of his transition handling. Meanwhile, the number of Americans calling him honest has decreased to 39% down from 42% in the November survey.
Fifty-two percent say Trump does not care about average Americans, and 62% say that he is not level-headed. As for his nominees, 40% of Americans disapprove of them, while 28% say they haven't heard enough yet.
However, there were some positive responses for the President-elect. More than two-thirds -- 68% -- consider Trump intelligent and 71% say that he is a strong person.
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picture.php
 
Amazing how his approval went up consistently the deeper into the election season (and the uninspiring if not horrifying choices available) we got.
 
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