New York Dealbook is reporting SAC Capital is in talks with the Securities Exchange Commission in a potential $2 billion insider trading case settlement in which it might also admit wrongdoing. Such a punitive settlement is extremely high, but if the case is proven, then such a fine would act as an effective deterrent to other institutions and market participants. Unfortunately, the financial services industry has been putting itself is such a state of disrepute, that we need to change the mindset and so I very much welcome tough regulatory action and strong penalties. As a taxpayer and ordinary citizen, I am fed up watching unprofessional conduct, poor performance and  incompetence being lavishly rewarded. Carry on the good work SEC ! The Dealbook links are here  LINK1, LINK2, LINK3, LINK4. Some text from the original indictment below:. The documents are listed under LINK3

Video link to SAC case LINK5

Well the Fed had a chance to start the process of slowing down its printing press today and it ducked in a spectacular fashion. He is just gonna keep printing away until he leaves office - that is the easy short term thing to do, but it is creating massive distortions in the financial system and the wider economy and risking a real catastrophe down the road. When you are given the job of running the central bank, it should be about making sure you run sound a sound monetary policy so that capitalism can get on with its business. It is not about printing cash to buy mortgage backed securities and interfering in the government debt markets. Eventually the markets will get sick of this money printing and will turn on the central bank big time.
 
Seems that the Fed "groupthink" that printing money creates a good economy continues. Full credit however to Esther George who voted against to quote from the release:

"Voting against the action was Esther L. George, who was concerned that the
continued high level of monetary accommodation increased the risks of future
economic and financial imbalances and, over time, could cause an increase in
long-term inflation expectations"

Project syndicate has an excellent set of interesting articles by well known economists and finance experts on the post Lehman's era and lessons  LINK1.
I particularly like the article by Stephen Roach which examines the end of Quantitative Easing and its impact on emerging markets LINK2. The basic thesis is that QE and easy money in the developed nations meant a flood of money went to emerging market economies in search of higher yield. Now that QE is coming to an end, that money is beginning to exit the emerging markets to return to developed economies where long term bond yields are rising in anticipation of the end of QE. I think it is pretty much spot on, one point worth adding is that if emerging markets are now slowing, that is bound to start affecting developed markets down the road, this combined with higher interest rates in developed markets will ultimately impact on our already sub par growth rates.  All in all, it is easy to see how we might be headed for another downturn. Unfortunately, this time with large fiscal policy deficits and virtually zero short term interest rate policies there will not be a lot of room for policy makers to make much of a difference....trouble is brewing!

The Lehmans collapse of 5 years ago was a great boon for the lawyers and bankruptcy specialists. As the Bloomberg story link makes clear the Lehman's collapse has been great for the lawyers and  those that sort out the mess left behind. No doubt they have been taking their time to sort out the mess, not surprising you don't want to rush the job with some of the specialists no doubt earning $1,000 plus per hour. It all seems a bit expensive to me, after all a well run bank should have all its trades well documented and the counterparty exposure should be clear as well....so why is $2 billion in fees required?  That seems to be somewhat excessive - lets remember these fees mean less cash for the other creditors such as bond holders. Judges normally have to approve the fees as reasonable but is $1,000 per hour that reasonable?

Central bankers think quantitative easing is having a positive economic effect - to me that is debateable. In my view its is risking long run stability for short term gain because it distorts interest rates making them artificially low and thereby means government don't get there fiscal finances in order and necessary structural reforms are delayed or don't take place. One important aspect of Quantitative Easing that seems to get little coverage is the distributional consequences. By holding interest rates down the indebted gain and creditors lose, borrowers gain while savers are penalised. Also of course bankers skins are saved but the rest of the population loses out as real wages decline since inflation starts to exceeds the rise in wages. Also owners of property and stocks and bonds tend to make capital gains while others such as youngsters are priced out of the housing market. Pensioners are also suffering as pension annuities are much lower due to the lower interest rates. I am sure there are many other distributional consequences as well. The main point is that Quantitative Easing creates winners and losers both in the short and longer term. There is a nice video interview below by the Institute for New Economic Thinking with William White a former Bank of Canada official that discusses these points in some detail.