centralized clearinghouse

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pages: 282 words: 80,907

Who Gets What — and Why: The New Economics of Matchmaking and Market Design by Alvin E. Roth

Affordable Care Act / Obamacare, Airbnb, algorithmic trading, barriers to entry, behavioural economics, Berlin Wall, bitcoin, Build a better mousetrap, centralized clearinghouse, Chuck Templeton: OpenTable:, commoditize, computer age, computerized markets, crowdsourcing, deferred acceptance, desegregation, Dutch auction, experimental economics, first-price auction, Flash crash, High speed trading, income inequality, Internet of things, invention of agriculture, invisible hand, Jean Tirole, law of one price, Lyft, market clearing, market design, medical residency, obamacare, PalmPilot, proxy bid, road to serfdom, school choice, sealed-bid auction, second-price auction, second-price sealed-bid, Silicon Valley, spectrum auction, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, The Wealth of Nations by Adam Smith, two-sided market, uber lyft, undersea cable

Shapley and Scarf showed that for any preferences that patients and their surgeons might have regarding which kidneys they would like, there was always a way to find a set of cyclical trades they called “top trading cycles,” with the property that no group of patients and donors could go off on their own and find a cycle of trades that they liked better. Organizing trades this way would help make it safe for surgeons to enroll their patients in such a market, since the patients couldn’t do better by trading differently among themselves. As I began to play with this model, I started to think of it as the potential architecture for a centralized clearinghouse that could help traders overcome the obstacles to barter. But for such a clearinghouse to find the most desirable set of trades, it would need to have access to patients’ needs and preferences, and so participation would have to be safe in another way, too. Since preferences are by and large private information, for a clearinghouse to work people would have to reveal this information.

In some respects, these services are faster even than taxis: you don’t have to take time to pay when you reach your destination, since the same app through which you called the car will also pay the bill automatically through your credit card. This works because your original call goes through a central clearinghouse that archives your credit card details. Perhaps you are beginning to see a pattern here and can anticipate (even build) marketplaces that don’t yet exist. Limousines have been around for a long time, and there have always been spare bedrooms that you could arrange to rent through friends.

Under the new plan, third-year medical students would apply to residency programs on their own, as before, and the residency programs would invite them to interviews, also as before. But then a change: after the interviews had been conducted, the process of making offers would be done through the new centralized clearinghouse. This meant that students would submit to the clearinghouse a rank order list of the residency programs at which they had interviewed, indicating their first choice, second choice, and so on. In parallel, those residency programs would submit a rank order list of students. Before the clearinghouse opened, both applicants and employers would exchange information about job descriptions (including wages and other features) and about the applicants’ qualifications, so that each side could form well-considered preferences regarding the other.


pages: 252 words: 73,131

The Inner Lives of Markets: How People Shape Them—And They Shape Us by Tim Sullivan

Abraham Wald, Airbnb, airport security, Al Roth, Alvin Roth, Andrei Shleifer, attribution theory, autonomous vehicles, barriers to entry, behavioural economics, Brownian motion, business cycle, buy and hold, centralized clearinghouse, Chuck Templeton: OpenTable:, classic study, clean water, conceptual framework, congestion pricing, constrained optimization, continuous double auction, creative destruction, data science, deferred acceptance, Donald Trump, Dutch auction, Edward Glaeser, experimental subject, first-price auction, framing effect, frictionless, fundamental attribution error, George Akerlof, Goldman Sachs: Vampire Squid, Gunnar Myrdal, helicopter parent, information asymmetry, Internet of things, invisible hand, Isaac Newton, iterative process, Jean Tirole, Jeff Bezos, Johann Wolfgang von Goethe, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Arrow, late fees, linear programming, Lyft, market clearing, market design, market friction, medical residency, multi-sided market, mutually assured destruction, Nash equilibrium, Occupy movement, opioid epidemic / opioid crisis, Pareto efficiency, Paul Samuelson, Peter Thiel, pets.com, pez dispenser, power law, pre–internet, price mechanism, price stability, prisoner's dilemma, profit motive, proxy bid, RAND corporation, ride hailing / ride sharing, Robert Shiller, Robert Solow, Ronald Coase, school choice, school vouchers, scientific management, sealed-bid auction, second-price auction, second-price sealed-bid, sharing economy, Silicon Valley, spectrum auction, Steve Jobs, Tacoma Narrows Bridge, techno-determinism, technoutopianism, telemarketer, The Market for Lemons, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, transaction costs, two-sided market, uber lyft, uranium enrichment, Vickrey auction, Vilfredo Pareto, WarGames: Global Thermonuclear War, winner-take-all economy

(According to market design guru Al Roth, one theory holds that the term “fraternity/sorority rush,” which today describes the process by which sororities and fraternities recruit new members, comes from the frenzied competition among sororities to lock in new members.4) It’s what prompted medical residency programs to develop a centralized clearinghouse in the 1940s to fend off students receiving exploding offers before they were done with their intro to anatomy course. These allocation problems all now have centralized clearinghouses, many designed with the basic deferred acceptance algorithm as their foundations. But that’s really all that Gale and Shapley provided: a conceptual framework that market designers have, for several decades now, been applying, evaluating, and refining.

It turned out that there weren’t quite enough coat hooks at the back of his classroom to go around, and later arrivals had to leave their jackets crumpled on a bench (apparently a source of grade school ignominy for order-loving Swedes). So the “market” for coat hooks began to unravel backward in much the same way that, in the absence of a centralized clearinghouse, residency programs and judges raced to recruit medical and law students earlier and earlier. Now, Jonas Vlachos is hardly an apologist for the glories of free enterprise and markets. He’s from Sweden, for one thing, and Scandinavians are known worldwide for their love of big taxes and big government.

INDEX Abidjan, Ivory Coast, 167–168 Adfibs.com, 69 adverse selection, 48, 51–55, 57, 59 advertising, as money burning, 70–71 Super Bowl advertising, 70–71 AdWords, 14, 101 Airbnb, 3, 6, 50, 109, 125, 170–172 Akerlof, George, 43–51, 58–59, 64, 112 Alaskoil experiment, 55–57, 58–59 algebraic topology, 44–45 Amazon, 2, 3, 16, 50, 51, 52, 59, 74, 91, 95, 97, 108, 110, 119, 126, 128–129 American Express, 115–116 America’s Second Harvest, 154–160 Amoroso, Luigi, 21 Angie’s List, 120 “animal spirits,” 50 applied theory in economics, 45, 50, 75–76 Arnold, John, 156–158, 160 Arrow, Kenneth, 30–34, 36–37, 40, 76, 117, 180 ascending price English auctions, 83, 100 asymmetric information, 41, 44–55 attribution theory, 177–178 auctions AdWords, 14, 101 auction theory, 82–84 coat hooks, 151–152, 174 design, 14, 101–102 first-price sealed-bid, 86–87, 99–100 first-price (live), 84 internet, 94–97 types of, 81–82 wireless spectrum, 102–103 See also eBay; Vickrey auctions AuctionWeb, 40 Ausubel, Larry, 98 Azoulay, Pierre, 112 Bank of America, 113–115 barriers to entry, in marketplace, 173 baseball posting system, 79–81 Bazerman, Max, 55–57 Becker, Gary, 35, 161–162 Berman, Eli, 67 Berners-Lee, Tim, 41–42 Big Data, Age of, 15 Blu-ray-HD DVD format war, Sony, 125–126 Book Stacks Unlimited, 42–43 Boston public schools, 144–149 Boston University MBA students experiment (Bazerman and Samuelson), 55–57, 58–59 See also Alaskoil experiment bridge design, 141–142 Brown, William P., 83–84 Brownian motion, 28–29 cab drivers, Uber vs., 169–170, 172 Camp, Garrett, 170 candle auctions, 82 capitalism, free-market, 172–173 car service platform, 169–171 cash-back bonus, 116 cash-for-sludge transactions, 167–169 See also Summers, Larry centralized clearinghouses, 140–141 Champagne fairs, 105–106, 126–128 Changi POW camp, 175–177 Le Chatelier, Henry Louis, 29 Le Chatelier’s principle, 29 cheap talk, 62–66, 69 chess, difference between Cold War and, 26 See also poker, bluffing in child labor, 180 cigarettes, as currency in German POW camp, 8–9 Clarke, Edward, 93 Clavell, James, 175 clerkship offers, with federal judges, 140 coat hook, 151–152, 174 Codes of the Underworld (Gambetta), 68 Cold War, difference between chess and, 26 See also poker, bluffing in Collectible Supplies, 128–129 “College Admissions and the Stability of Marriage” (Gale and Shapley), 137 commitment, signs of, 62–63, 69–71, 72–75 community game, 178–179 competition models of, 35, 166, 172–173 platform, 124–126 unethical conduct with, 180–181 “Competition is for Losers” (Thiel), 173 competitive equilibrium, existence of, 29, 31–34, 36–37, 40, 45, 76 competitive markets, 35, 124–126, 172–174, 180–181 See also platforms competitive signaling, 70–71 congestion pricing model, 86, 94 constrained optimization, 85–86, 133 contractorsfromhell.com, 120 copycat competitors, 172–173 corporate philanthropy, 72–75 Cowles, Alfred, 25, 27 Cowles Commission for Research in Economics, 25, 27, 31, 134 “creative destruction,” 50 credit card platforms, 113–116, 123–124 criminal organizations, informational challenges of, 68 currency, at Stalag VII-A POW camp, 8–9 customer feedback, 52, 74–75 Davis, Harry, 154, 157 Debreu, Gérard, 20, 24, 25, 32–33, 36–37 decentralized match, 139–140 deferred acceptance algorithm, 137–141, 145–149 Delmonico, Frank, 164 descending price auctions, 81–82 design, auction, 14, 101–102 Digital Dealing (Hall), 94 Discover card, 115–116 distribution of income, 22 Domar, Evsey, 36–37 Dorosin, Neil, 142–144 Douglas Aircraft Company, 25 Dow, Bob, 1–2 Dow, Edna, 1–2 Drèze, Jacques, 85–86 dumping toxic waste, transactions for, 167–169 Dutch auctions, 81–82 dysfunction, market, 36, 75–77, 143 eBay adverse selection on, 51–55, 57 auction listings, 94–97 concerns on model for, 43, 46, 48 on seller motivation for giving to charities, 73–75 start of, 39–41 as two-sided market, 109, 119 e-commerce, 41–43, 52–55 “The Economic Organization of a P.O.W.


pages: 526 words: 144,019

A First-Class Catastrophe: The Road to Black Monday, the Worst Day in Wall Street History by Diana B. Henriques

Alan Greenspan, asset allocation, bank run, banking crisis, Bear Stearns, behavioural economics, Bernie Madoff, Black Monday: stock market crash in 1987, break the buck, buttonwood tree, buy and hold, buy low sell high, call centre, Carl Icahn, centralized clearinghouse, computerized trading, Cornelius Vanderbilt, corporate governance, corporate raider, Credit Default Swap, cuban missile crisis, Dennis Tito, Edward Thorp, Elliott wave, financial deregulation, financial engineering, financial innovation, Flash crash, friendly fire, Glass-Steagall Act, index arbitrage, index fund, intangible asset, interest rate swap, It's morning again in America, junk bonds, laissez-faire capitalism, locking in a profit, Long Term Capital Management, margin call, Michael Milken, money market fund, Myron Scholes, plutocrats, Ponzi scheme, pre–internet, price stability, proprietary trading, quantitative trading / quantitative finance, random walk, Ronald Reagan, Savings and loan crisis, short selling, Silicon Valley, stock buybacks, The Chicago School, The Myth of the Rational Market, the payments system, tulip mania, uptick rule, Vanguard fund, web of trust

He chose to explore the Chicago Board Options Exchange, which was just opening its doors, and gained a solid legal grounding in the world of options. Meanwhile, he landed a job in the legal department of the American Stock Exchange, where he was soon overseeing the Amex’s ambitious options trading operation. A few years later, he was appointed to the board of the Options Clearing Corporation, which acted as the central clearinghouse for settling all options trades, and he traveled regularly to Chicago for board meetings. The trips had become a bit of a romance for the lifelong New Yorker. “I was smitten by the ingenuity and creativity and willingness to take risks that I found in Chicago,” he later recalled. “There was an openness, a freshness, a lack of haughtiness in Chicago.

* * * IN CHICAGO, THE torrent of trading in the stock index futures and options pits had mirrored the deluge in New York. The options market had been under intense pressure. Some firms were racking up enormous losses. First Options, the Continental Bank subsidiary that was the largest clearing firm in the options market, was a special concern of the Options Clearing Corporation, the market’s central clearinghouse. First Options essentially backstopped all the trades of its twelve hundred client firms; and the clearinghouse backstopped First Options. By the close of trading on Friday, nine First Options clients, all firmly in the black on Wednesday night, were in serious trouble. Only three of them had not run up big losses, and one of those was near the edge.

Unfortunately, it had to pay the Merc before it collected its money from the CBOE. If the two exchanges didn’t agree to net out the firm’s position, a default was inevitable. Before that happened, Brodsky worked out an ad hoc payment deal with a longtime friend who ran the options market’s central clearinghouse. It was done virtually on a handshake. “There was no writing, no lawyers,” Brodsky said. “It was the middle of the night.” The deal had forestalled a devastating chain of defaults that could have crippled both markets. Now the Merc was facing another default threat. By 7 a.m., Chicago time, Morgan Stanley still had not fully settled its account.


pages: 102 words: 29,596

The Alliance: Managing Talent in the Networked Age by Reid Hoffman, Ben Casnocha, Chris Yeh

Airbnb, Amazon Web Services, centralized clearinghouse, cloud computing, disruptive innovation, Jeff Bezos, Jony Ive, Larry Ellison, Marc Andreessen, new economy, pre–internet, Salesforce, Sheryl Sandberg, Silicon Valley, Silicon Valley startup, software as a service, Steve Jobs

Perhaps your industry has unique dynamics, and you want to know how the alliance needs to adapt to those dynamics. Perhaps there’s a variation on the tour of duty framework that would work best in your company. That’s why we’ve created TheAllianceFramework.com. This website and the related LinkedIn group will act as a central clearinghouse for additional content, interactive assessments, and even practical worksheets and training guides, to expand our collective understanding of the alliance. You’ll also find information about keynote speaking, training sessions, and webinars. We invite you to join us at TheAllianceFramework.com, to help us explore these issues and to help you bring the alliance to your organization.


pages: 161 words: 44,488

The Business Blockchain: Promise, Practice, and Application of the Next Internet Technology by William Mougayar

Airbnb, airport security, Albert Einstein, altcoin, Amazon Web Services, bitcoin, Black Swan, blockchain, business logic, business process, centralized clearinghouse, Clayton Christensen, cloud computing, cryptocurrency, decentralized internet, disintermediation, distributed ledger, Edward Snowden, en.wikipedia.org, Ethereum, ethereum blockchain, fault tolerance, fiat currency, fixed income, Ford Model T, global value chain, Innovator's Dilemma, Internet of things, Kevin Kelly, Kickstarter, market clearing, Network effects, new economy, peer-to-peer, peer-to-peer lending, prediction markets, pull request, QR code, ride hailing / ride sharing, Satoshi Nakamoto, sharing economy, smart contracts, social web, software as a service, too big to fail, Turing complete, Vitalik Buterin, web application, Yochai Benkler

Although a global bank or exchange is not happening any time soon, the feelings and behaviors of a global bank are needed. The blockchain can help. The Financial Services sector will need to stall new regulation while simultaneously updating the existing regulation to accommodate the innovation introduced by the blockchain. The litmus test is to run transactions without a central clearinghouse in the middle. Verifying identity and validating counterparties can be done in a peer-to-peer manner on the blockchain, and that is the preferred method that organizations should be trying to perfect. Strategic decisions await financial institutions, and they must have the courage to leapfrog, and not just advance to the next level playing field and be content with it.


pages: 454 words: 134,482

Money Free and Unfree by George A. Selgin

Alan Greenspan, asset-backed security, bank run, banking crisis, barriers to entry, Bear Stearns, break the buck, Bretton Woods, business cycle, capital controls, central bank independence, centralized clearinghouse, Charles Lindbergh, credit crunch, Credit Default Swap, crony capitalism, disintermediation, Dutch auction, fear of failure, fiat currency, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, foreign exchange controls, Fractional reserve banking, German hyperinflation, Glass-Steagall Act, Hyman Minsky, incomplete markets, inflation targeting, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, large denomination, liquidity trap, Long Term Capital Management, low interest rates, market microstructure, Money creation, money market fund, moral hazard, Network effects, Northern Rock, oil shock, Paul Samuelson, Phillips curve, plutocrats, price stability, profit maximization, purchasing power parity, quantitative easing, random walk, rent-seeking, reserve currency, Robert Gordon, Robert Solow, Savings and loan crisis, savings glut, seigniorage, special drawing rights, The Great Moderation, the payments system, too big to fail, transaction costs, Tyler Cowen, unorthodox policies, vertical integration, Y2K

In a free-banking system, banks treat rival banks’ notes much as they treat checks drawn on rival banks today: they routinely return them to their sources for redemption. Indeed, the modern practice of “clearing” checks daily, with net dues settled by transfer of base money, usually on a central bank’s books, grew out of the pre–central banking practice of regular note exchange, with banks returning rivals’ notes directly to them or to central clearinghouses and settling accounts in specie. This routine note-exchange and settlement process imposes strict limits on credit expansion by individual note-issuing banks and, hence, by the banking system as a whole, creating a tight connection between those limits and the available supply of specie reserves.

Many asset currency proposals called upon the comptroller of the currency to allow national banks to branch, while also requiring banks to redeem their notes—that is, to exchange them, on demand, for gold or greenbacks—at their branches as well as at their head offices, both as an alternative to correspondent banking (and the consequent pyramiding of reserves) and as the most straightforward means for absorbing redundant bank notes: unlike unit banks, banks with nationwide branch networks could resort to local exchanges or “clearings” of notes and checks as a less costly and more expeditious alternative to shipping them to one or more central clearinghouses or redemption agencies. Besides aiding the prompt mopping-up of excess currency, and reducing interior banks’ reliance upon city correspondents, branch banking would also enhance banks’ safety through greater diversification of bank assets and liabilities. For these reasons, pleas for branch banking quickly became “an integral part” of the asset currency movement (Livingston 1986: 80).


pages: 491 words: 131,769

Crisis Economics: A Crash Course in the Future of Finance by Nouriel Roubini, Stephen Mihm

Alan Greenspan, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Carmen Reinhart, central bank independence, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, dark matter, David Ricardo: comparative advantage, debt deflation, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, George Akerlof, Glass-Steagall Act, global pandemic, global reserve currency, Gordon Gekko, Greenspan put, Growth in a Time of Debt, housing crisis, Hyman Minsky, information asymmetry, interest rate swap, invisible hand, Joseph Schumpeter, junk bonds, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, market bubble, market fundamentalism, Martin Wolf, means of production, Minsky moment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, Northern Rock, offshore financial centre, oil shock, Paradox of Choice, paradox of thrift, Paul Samuelson, Ponzi scheme, price stability, principal–agent problem, private sector deleveraging, proprietary trading, pushing on a string, quantitative easing, quantitative trading / quantitative finance, race to the bottom, random walk, regulatory arbitrage, reserve currency, risk tolerance, Robert Shiller, Satyajit Das, Savings and loan crisis, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, subprime mortgage crisis, Suez crisis 1956, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, too big to fail, tulip mania, Tyler Cowen, unorthodox policies, value at risk, We are all Keynesians now, Works Progress Administration, yield curve, Yom Kippur War

Unfortunately, while some of the existing credit derivatives could be standardized and traded on such a central exchange, not all of them can be: many of the OTC derivatives are next to impossible to standardize and are not traded in sufficient volumes; their price can’t be consistently quantified like a stock or bond (or a common derivative). These more esoteric credit derivatives should be registered in a central clearinghouse. Such institutions already exist for other, simpler kinds of derivatives: the Options Clearing Corporation, for example, handles a host of derivatives related to equities and commodities. Though a private organization, it has the imprimatur of both the SEC and the CFTC. Part of its job is to make certain that the parties to a derivatives contract have sufficient collateral to make good on their promises.

The mortgages and other loans must be high quality, or if not, they must be very clearly identified as less than prime and therefore risky. Equally comprehensive reforms must be imposed on the kinds of deadly derivatives that blew up in the recent crisis. So-called over-the-counter derivatives—better described as under-the-table—must be hauled into the light of day, put on central clearinghouses and exchanges, and registered in databases; their use must be appropriately restricted. Moreover, the regulation of derivatives should be consolidated under a single regulator. The rating agencies must also be collared and forced to change their business model. That they now derive their revenue from the firms they rate has created a massive conflict of interest.


pages: 1,242 words: 317,903

The Man Who Knew: The Life and Times of Alan Greenspan by Sebastian Mallaby

airline deregulation, airport security, Alan Greenspan, Alvin Toffler, Andrei Shleifer, anti-communist, Asian financial crisis, balance sheet recession, bank run, barriers to entry, Bear Stearns, behavioural economics, Benoit Mandelbrot, Black Monday: stock market crash in 1987, bond market vigilante , book value, Bretton Woods, business cycle, central bank independence, centralized clearinghouse, classic study, collateralized debt obligation, conceptual framework, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, Dr. Strangelove, energy security, equity premium, fiat currency, financial deregulation, financial engineering, financial innovation, fixed income, Flash crash, forward guidance, full employment, Future Shock, Glass-Steagall Act, Greenspan put, Hyman Minsky, inflation targeting, information asymmetry, interest rate swap, inventory management, invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", junk bonds, Kenneth Rogoff, Kickstarter, Kitchen Debate, laissez-faire capitalism, Lewis Mumford, Long Term Capital Management, low interest rates, low skilled workers, market bubble, market clearing, Martin Wolf, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, Neil Armstrong, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, Northern Rock, paper trading, paradox of thrift, Paul Samuelson, Phillips curve, plutocrats, popular capitalism, price stability, RAND corporation, Reminiscences of a Stock Operator, rent-seeking, Robert Shiller, Robert Solow, rolodex, Ronald Reagan, Saturday Night Live, Savings and loan crisis, savings glut, secular stagnation, short selling, stock buybacks, subprime mortgage crisis, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Tipper Gore, too big to fail, trade liberalization, unorthodox policies, upwardly mobile, We are all Keynesians now, WikiLeaks, women in the workforce, Y2K, yield curve, zero-sum game

Moreover, the thrust of her regulatory instincts came to be widely accepted after the 2008 crisis, providing a belated vindication.9 In essence, her chief worry was that the fastest-growing parts of the derivatives market lacked the stabilizing institutions of traditional, exchange-traded equities or futures, with the result that the whole market could descend into chaos if a large trading firm declared bankruptcy. One such stabilizing institution was the central clearinghouse, which stood between buyer and seller and guaranteed payments on trades; unnervingly, non-exchange-based derivatives were traded “over the counter,” with banks entering into swap contracts directly with each other—there was no third-party guarantee that obligations would be honored. Another stabilizing institution was the requirement that traders put down money, or “margin,” to cover their potential debts; in over-the-counter markets, there were no standard margin requirements, so the potential losses from nonpayment were larger.

Unlike Fannie and Freddie, Lehman Brothers fell into the Bear Stearns category: it was a poster child for the financial practices that Greenspan had defended.40 It was party to almost a million bilateral derivatives contracts, those over-the-counter deals that Brooksley Born had wanted to move into centralized clearinghouses. It was also an enthusiastic responder to the incentives created by the Fed: it had borrowed billions in short-term funds, loading up on cheap money while interest rates were low and using it to buy higher-yielding mortgages. In Greenspan’s more hopeful moments, he had trusted that Lehman would take such risks only if it had sufficient capital to absorb losses.

Understanding that market discipline was fallible, but fearing correctly that regulation might also fail, Greenspan could have pushed harder for that regulatory third way: mechanisms to ensure that when the inevitable failures did occur, the damage could be minimized. Thicker capital cushions were an obvious example—Timothy Geithner had tried and failed to get this done, but he might have achieved more given stronger support from the Fed chairman. Pushing over-the-counter derivatives into central clearinghouses was another example: had Greenspan thrown his weight behind a sounder version of Brooksley Born’s proposal, it might have been harder for AIG to accumulate a swaps portfolio so large that it menaced the entire economy.42 Discouraging too-big-to-fail lenders was yet a third example of a path not taken: during the crisis, large banks, investment banks, and shadow banks were exposed as having been more reckless than supposedly risky hedge funds, because the latter were small enough to fail, and so had fewer corrupting incentives.43 Forcing more regulation onto the shadow-banking sector could have been the final item on a resiliency agenda.


pages: 598 words: 169,194

Bernie Madoff, the Wizard of Lies: Inside the Infamous $65 Billion Swindle by Diana B. Henriques

accounting loophole / creative accounting, airport security, Albert Einstein, AOL-Time Warner, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, break the buck, British Empire, buy and hold, centralized clearinghouse, collapse of Lehman Brothers, computerized trading, corporate raider, diversified portfolio, Donald Trump, dumpster diving, Edward Thorp, financial deregulation, financial engineering, financial thriller, fixed income, forensic accounting, Gordon Gekko, index fund, locking in a profit, low interest rates, mail merge, merger arbitrage, messenger bag, money market fund, payment for order flow, plutocrats, Ponzi scheme, Potemkin village, proprietary trading, random walk, Renaissance Technologies, riskless arbitrage, Ronald Reagan, Savings and loan crisis, short selling, short squeeze, Small Order Execution System, source of truth, sovereign wealth fund, too big to fail, transaction costs, traveling salesman

Besides the phoney trade confirmations and account statements that had been generated for more than a decade, he had set up the bogus “trading platform” that made it appear as if actual trades were being conducted with European counterparties, although the reciprocal trader was actually an employee on another computer terminal hidden in a different room. And he had the clincher: apparent proof that all the stocks he claimed to have purchased were safely held in Madoff’s account at Wall Street’s central clear-inghouse, the Depository Trust & Clearing Corporation, officially called the DTCC but known informally among veteran traders as “the DTC”. This was the acid test for DiPascali’s masterpiece, a computer simulation of a live feed from the DTCC. He had taken care to duplicate exactly the clearinghouse’s logo, the page format, the printer font and type sizes, and the paper quality of actual DTCC reports.

(Excerpts were also cited as Exhibit 85 in Picard v. Fairfield Greenwich Amended Complaint.) 119 “Come up this afternoon”: According to Tucker’s testimony, Madoff extended a similar invitation that day to Carlo Grosso, a principal of the Kingate funds based in London, who was visiting New York. 119 Wall Street’s central clearinghouse, the Depository Trust & Clearing Corporation: Originally named the Depository Trust Company, the clearinghouse later combined with a separate clearinghouse called the National Securities Clearing Corporation, on whose board Madoff served in the late 1980s, and was renamed the Depository Trust & Clearing Corporation, or DTCC.


pages: 223 words: 63,484

Making Ideas Happen: Overcoming the Obstacles Between Vision and Reality by Scott Belsky

centralized clearinghouse, index card, lone genius, market bubble, Merlin Mann, New Journalism, Results Only Work Environment, rolodex, side project, Silicon Valley, Steve Jobs, Steve Wozniak, supply-chain management, the long tail, Tim Cook: Apple, Tony Hsieh, young professional

However, you will still need time for processing—going through all of your day’s notes and communications and distilling them down to the primary elements. For those who still take paper notes and appreciate tangible project management, you will want to use a tangible in-box—a general pile of stuff that has yet to be classified. Most productivity frameworks—like David Allen’s Getting Things Done—suggest such a central clearing-house for all of the stuff that you accumulate but can’t immediately execute or file. This in-box is not a final destination, but rather a transit terminal where items await processing. During a busy day of meetings, you will not have time to start taking action or filing things away. How about all of the digital stuff that flows in every day?


pages: 667 words: 186,968

The Great Influenza: The Story of the Deadliest Pandemic in History by John M. Barry

Albert Einstein, Brownian motion, centralized clearinghouse, conceptual framework, coronavirus, discovery of penicillin, double helix, Edward Jenner, Fellow of the Royal Society, germ theory of disease, index card, Louis Pasteur, Marshall McLuhan, Mason jar, means of production, scientific management, seminal paper, statistical model, the medium is the message, the scientific method, traveling salesman, women in the workforce

Doctors ruled, for me, so gently, the whole still concert.” Behind this still concert lay Welch, the impresario. By the first decade of the twentieth century, Welch had become the glue that cemented together the entire American medical establishment. His own person became a central clearinghouse of scientific medicine. Indeed, he became the central clearinghouse. As founding editor of the Journal of Experimental Medicine, the first and most important American research journal, he read submissions that made him familiar with every promising new idea and young investigator in the country. He became a national figure, first within the profession, then within science, then in the larger world, serving as president or chairman of nineteen different major scientific organizations, including the American Medical Association, the American Association for the Advancement of Science, and the National Academy of Sciences.


pages: 267 words: 72,552

Reinventing Capitalism in the Age of Big Data by Viktor Mayer-Schönberger, Thomas Ramge

accounting loophole / creative accounting, Air France Flight 447, Airbnb, Alvin Roth, Apollo 11, Atul Gawande, augmented reality, banking crisis, basic income, Bayesian statistics, Bear Stearns, behavioural economics, bitcoin, blockchain, book value, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, Cass Sunstein, centralized clearinghouse, Checklist Manifesto, cloud computing, cognitive bias, cognitive load, conceptual framework, creative destruction, Daniel Kahneman / Amos Tversky, data science, Didi Chuxing, disruptive innovation, Donald Trump, double entry bookkeeping, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Evgeny Morozov, flying shuttle, Ford Model T, Ford paid five dollars a day, Frederick Winslow Taylor, fundamental attribution error, George Akerlof, gig economy, Google Glasses, Higgs boson, information asymmetry, interchangeable parts, invention of the telegraph, inventory management, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, job satisfaction, joint-stock company, Joseph Schumpeter, Kickstarter, knowledge worker, labor-force participation, land reform, Large Hadron Collider, lone genius, low cost airline, low interest rates, Marc Andreessen, market bubble, market design, market fundamentalism, means of production, meta-analysis, Moneyball by Michael Lewis explains big data, multi-sided market, natural language processing, Neil Armstrong, Network effects, Nick Bostrom, Norbert Wiener, offshore financial centre, Parag Khanna, payday loans, peer-to-peer lending, Peter Thiel, Ponzi scheme, prediction markets, price anchoring, price mechanism, purchasing power parity, radical decentralization, random walk, recommendation engine, Richard Thaler, ride hailing / ride sharing, Robinhood: mobile stock trading app, Sam Altman, scientific management, Second Machine Age, self-driving car, Silicon Valley, Silicon Valley startup, six sigma, smart grid, smart meter, Snapchat, statistical model, Steve Jobs, subprime mortgage crisis, Suez canal 1869, tacit knowledge, technoutopianism, The Future of Employment, The Market for Lemons, The Nature of the Firm, transaction costs, universal basic income, vertical integration, William Langewiesche, Y Combinator

They work through clever market design combined with a different type of matching algorithm. Think, for example, of choosing which patient gets a donor kidney. Donor kidneys aren’t sold (at least legally, although some economists have suggested they should be), so preferences can’t be condensed and simplified into a stated price. In such markets, a central clearinghouse often collects preference information from all market participants and uses advanced matching algorithms to connect suitable market participants to transact. The goal is to produce as many suitable matches as possible. This sort of matching, too, has recently improved significantly, thanks to enhanced algorithms and a better understanding of which matching algorithm works best for which type of market.


pages: 270 words: 79,992

The End of Big: How the Internet Makes David the New Goliath by Nicco Mele

4chan, A Declaration of the Independence of Cyberspace, Airbnb, Amazon Web Services, Andy Carvin, Any sufficiently advanced technology is indistinguishable from magic, Apple's 1984 Super Bowl advert, barriers to entry, Berlin Wall, big-box store, bitcoin, bread and circuses, business climate, call centre, Cass Sunstein, centralized clearinghouse, Chelsea Manning, citizen journalism, cloud computing, collaborative consumption, collaborative editing, commoditize, Computer Lib, creative destruction, crony capitalism, cross-subsidies, crowdsourcing, David Brooks, death of newspapers, disruptive innovation, Donald Trump, Douglas Engelbart, Douglas Engelbart, en.wikipedia.org, Evgeny Morozov, Exxon Valdez, Fall of the Berlin Wall, Filter Bubble, Firefox, global supply chain, Google Chrome, Gordon Gekko, Hacker Ethic, Ian Bogost, Jaron Lanier, Jeff Bezos, jimmy wales, John Markoff, John Perry Barlow, Julian Assange, Kevin Kelly, Khan Academy, Kickstarter, Lean Startup, lolcat, machine readable, Mark Zuckerberg, military-industrial complex, minimum viable product, Mitch Kapor, Mohammed Bouazizi, Mother of all demos, Narrative Science, new economy, Occupy movement, off-the-grid, old-boy network, One Laptop per Child (OLPC), peer-to-peer, period drama, Peter Thiel, pirate software, public intellectual, publication bias, Robert Metcalfe, Ronald Reagan, Ronald Reagan: Tear down this wall, satellite internet, Seymour Hersh, sharing economy, Silicon Valley, Skype, social web, Steve Jobs, Steve Wozniak, Stewart Brand, Stuxnet, Ted Nelson, Ted Sorensen, Telecommunications Act of 1996, telemarketer, the Cathedral and the Bazaar, the long tail, The Wisdom of Crowds, transaction costs, uranium enrichment, Whole Earth Catalog, WikiLeaks, Zipcar

It demolishes the “bigness” of the old institution—the “invisible primary” of money and major donor access—by taking advantage of a fundamental characteristic of radical connectivity: the ability to connect everyone equally. With enough time and energy, anyone can use ActBlue to build a political money power base within the Democratic Party—not just W. Averell Harriman or Hillary Clinton. And yet as a central clearinghouse, ActBlue is in its own way Big; it just hasn’t wielded its big power yet, preferring to remain a boring (but vital) piece of infrastructure. To that extent, ActBlue may provide one important structure for revamping our parties so that they are democratic and yet still capable of producing serious leaders addressing serious issues.


pages: 304 words: 80,965

What They Do With Your Money: How the Financial System Fails Us, and How to Fix It by Stephen Davis, Jon Lukomnik, David Pitt-Watson

activist fund / activist shareholder / activist investor, Admiral Zheng, banking crisis, Basel III, Bear Stearns, behavioural economics, Bernie Madoff, Black Swan, buy and hold, Carl Icahn, centralized clearinghouse, clean water, compensation consultant, computerized trading, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crowdsourcing, David Brooks, Dissolution of the Soviet Union, diversification, diversified portfolio, en.wikipedia.org, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, Glass-Steagall Act, income inequality, index fund, information asymmetry, invisible hand, John Bogle, Kenneth Arrow, Kickstarter, light touch regulation, London Whale, Long Term Capital Management, moral hazard, Myron Scholes, Northern Rock, passive investing, Paul Volcker talking about ATMs, payment for order flow, performance metric, Ponzi scheme, post-work, principal–agent problem, rent-seeking, Ronald Coase, seminal paper, shareholder value, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, Steve Jobs, the market place, The Wealth of Nations by Adam Smith, transaction costs, Upton Sinclair, value at risk, WikiLeaks

Other financial instruments can also, in Warren Buffett’s memorable phrase, become “financial weapons of mass destruction.” Public disclosure of terms and conditions should be a requirement before any financial instrument can be tradable or transferable.38 While CDS terms are becoming standardized, thanks to the International Swaps and Derivatives Association, there is no central clearinghouse of such instruments.39 We could also use information to keep our regulators on their toes. If we want financial markets around the world to be effective, why isn’t there a global rating of regulators? Since investors can be expected to gravitate to the most trustworthy financial centers, such a rating might help create a race to the top, rather than one to the bottom.


pages: 366 words: 94,209

Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity by Douglas Rushkoff

activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, bank run, banking crisis, barriers to entry, benefit corporation, bitcoin, blockchain, Burning Man, business process, buy and hold, buy low sell high, California gold rush, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, centralized clearinghouse, citizen journalism, clean water, cloud computing, collaborative economy, collective bargaining, colonial exploitation, Community Supported Agriculture, corporate personhood, corporate raider, creative destruction, crowdsourcing, cryptocurrency, data science, deep learning, disintermediation, diversified portfolio, Dutch auction, Elon Musk, Erik Brynjolfsson, Ethereum, ethereum blockchain, fiat currency, Firefox, Flash crash, full employment, future of work, gamification, Garrett Hardin, gentrification, gig economy, Gini coefficient, global supply chain, global village, Google bus, Howard Rheingold, IBM and the Holocaust, impulse control, income inequality, independent contractor, index fund, iterative process, Jaron Lanier, Jeff Bezos, jimmy wales, job automation, Joseph Schumpeter, Kickstarter, Large Hadron Collider, loss aversion, low interest rates, Lyft, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, Marshall McLuhan, means of production, medical bankruptcy, minimum viable product, Mitch Kapor, Naomi Klein, Network effects, new economy, Norbert Wiener, Oculus Rift, passive investing, payday loans, peer-to-peer lending, Peter Thiel, post-industrial society, power law, profit motive, quantitative easing, race to the bottom, recommendation engine, reserve currency, RFID, Richard Stallman, ride hailing / ride sharing, Ronald Reagan, Russell Brand, Satoshi Nakamoto, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, social graph, software patent, Steve Jobs, stock buybacks, TaskRabbit, the Cathedral and the Bazaar, The Future of Employment, the long tail, trade route, Tragedy of the Commons, transportation-network company, Turing test, Uber and Lyft, Uber for X, uber lyft, unpaid internship, Vitalik Buterin, warehouse robotics, Wayback Machine, Y Combinator, young professional, zero-sum game, Zipcar

This, as we have seen, is an even bigger drag on the potential velocity of money. What good is a distributed network like the Internet if all the actors on it still depend on central authorities in order to engage in peer-to-peer activity? How is it truly peer-to-peer if it goes through a central clearinghouse? It’s still a bunch of decentralized individuals, each interacting with a monopoly platform—a new front end on the same old system. These are the problems that the next generation of digital transaction networks are aiming to address. How can a distributed network of participants transfer and verify value collectively, without the need for a central authority?


pages: 340 words: 96,149

@War: The Rise of the Military-Internet Complex by Shane Harris

air gap, Amazon Web Services, barriers to entry, Berlin Wall, Brian Krebs, centralized clearinghouse, Citizen Lab, clean water, computer age, crowdsourcing, data acquisition, don't be evil, Edward Snowden, end-to-end encryption, failed state, Firefox, information security, John Markoff, Julian Assange, military-industrial complex, mutually assured destruction, peer-to-peer, Silicon Valley, Silicon Valley startup, Skype, Stuxnet, systems thinking, undersea cable, uranium enrichment, WikiLeaks, zero day

Operators of “critical infrastructure”—which could be broadly defined to include electrical companies, nuclear power plant operators, banks, software manufacturers, transportation and logistics companies, even hospitals and medical device suppliers, whose equipment could be hacked remotely—would be required by law or regulation to submit the traffic to and from their networks for scanning by an Internet service provider. The provider would use the signatures supplied by the NSA to look for malware or signs of a cyber campaign by a foreign government. It was a version of Alexander’s original plan to make the NSA the central clearinghouse for cyber threat intelligence. The NSA wouldn’t do the scanning, but it would give all the requisite threat signatures to the scanner. That helped the NSA avoid the impression that it was horning its way into private computer networks, even though it was actually in control of the whole operation.


Cataloging the World: Paul Otlet and the Birth of the Information Age by Alex Wright

1960s counterculture, Ada Lovelace, barriers to entry, British Empire, business climate, business intelligence, Cape to Cairo, card file, centralized clearinghouse, Charles Babbage, Computer Lib, corporate governance, crowdsourcing, Danny Hillis, Deng Xiaoping, don't be evil, Douglas Engelbart, Douglas Engelbart, Electric Kool-Aid Acid Test, European colonialism, folksonomy, Frederick Winslow Taylor, Great Leap Forward, hive mind, Howard Rheingold, index card, information retrieval, invention of movable type, invention of the printing press, Jane Jacobs, John Markoff, Kevin Kelly, knowledge worker, Law of Accelerating Returns, Lewis Mumford, linked data, Livingstone, I presume, lone genius, machine readable, Menlo Park, military-industrial complex, Mother of all demos, Norman Mailer, out of africa, packet switching, pneumatic tube, profit motive, RAND corporation, Ray Kurzweil, scientific management, Scramble for Africa, self-driving car, semantic web, Silicon Valley, speech recognition, Steve Jobs, Stewart Brand, systems thinking, Ted Nelson, The Death and Life of Great American Cities, the scientific method, Thomas L Friedman, urban planning, Vannevar Bush, W. E. B. Du Bois, Whole Earth Catalog

Located near the Royal L ­ ibrary 92 T he Microphotic B oo k and Museum on the Rue de la Villa Hermosa in Brussels, the museum served as a professional gathering place as well as a public exhibition space with classrooms and a lecture hall outfitted with a lantern projector and screen.7 Building on his success with the Museum of the Book and his new role as president of the newspaper association, Otlet saw an opportunity to apply his ideas about cataloging and classification to the world of periodicals, by creating a similar hub for the international newspaper industry. He hoped that such an institution could serve as not just an exhibition hall, but also as a central clearinghouse for all the world’s newspapers. He began directing his colleagues at the IIB to put extra effort into expanding its collections of newspapers and journals and initiated plans for an international newspaper museum whose charter would be to collect and curate periodicals from all over the world, to create “a collection as complete as possible of works on the Press as well as forming a complete collection of older periodicals and newspapers.”8 It would also collect works on newspaper history and key works on copyright law and freedom of expression.


pages: 406 words: 105,602

The Startup Way: Making Entrepreneurship a Fundamental Discipline of Every Enterprise by Eric Ries

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Airbnb, AOL-Time Warner, autonomous vehicles, barriers to entry, basic income, Ben Horowitz, billion-dollar mistake, Black-Scholes formula, Blitzscaling, call centre, centralized clearinghouse, Clayton Christensen, cognitive dissonance, connected car, corporate governance, DevOps, Elon Musk, en.wikipedia.org, fault tolerance, financial engineering, Frederick Winslow Taylor, global supply chain, Great Leap Forward, hockey-stick growth, index card, Jeff Bezos, Kickstarter, Lean Startup, loss aversion, machine readable, Marc Andreessen, Mark Zuckerberg, means of production, minimum viable product, moral hazard, move fast and break things, obamacare, PalmPilot, peer-to-peer, place-making, rent-seeking, Richard Florida, Sam Altman, Sand Hill Road, scientific management, secular stagnation, shareholder value, Sheryl Sandberg, Silicon Valley, Silicon Valley startup, six sigma, skunkworks, Steve Jobs, TechCrunch disrupt, the scientific method, time value of money, Toyota Production System, two-pizza team, Uber for X, universal basic income, web of trust, Y Combinator

HOW GROWTH BOARDS OPERATE Apart from its legal and compliance obligations, a startup board has three primary responsibilities: To be a sounding board for the founders and executives, helping them plot strategy, and hosting the pivot-or-persevere meeting (see Chapter 4). To act as the central clearinghouse for information about the startup, taking on the burden of reporting on behalf of the founders to key financial stakeholders like general partners and limited partners of the investment firm (see Chapter 3). To be the gatekeepers of future funding, either by writing checks themselves or by encouraging (or vetoing) sources of outside funding (see Chapter 3).


pages: 391 words: 105,382

Utopia Is Creepy: And Other Provocations by Nicholas Carr

Abraham Maslow, Air France Flight 447, Airbnb, Airbus A320, AltaVista, Amazon Mechanical Turk, augmented reality, autonomous vehicles, Bernie Sanders, book scanning, Brewster Kahle, Buckminster Fuller, Burning Man, Captain Sullenberger Hudson, centralized clearinghouse, Charles Lindbergh, cloud computing, cognitive bias, collaborative consumption, computer age, corporate governance, CRISPR, crowdsourcing, Danny Hillis, data science, deskilling, digital capitalism, digital map, disruptive innovation, Donald Trump, driverless car, Electric Kool-Aid Acid Test, Elon Musk, Evgeny Morozov, factory automation, failed state, feminist movement, Frederick Winslow Taylor, friendly fire, game design, global village, Google bus, Google Glasses, Google X / Alphabet X, Googley, hive mind, impulse control, indoor plumbing, interchangeable parts, Internet Archive, invention of movable type, invention of the steam engine, invisible hand, Isaac Newton, Jeff Bezos, jimmy wales, Joan Didion, job automation, John Perry Barlow, Kevin Kelly, Larry Ellison, Lewis Mumford, lifelogging, lolcat, low skilled workers, machine readable, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Max Levchin, means of production, Menlo Park, mental accounting, natural language processing, Neal Stephenson, Network effects, new economy, Nicholas Carr, Nick Bostrom, Norman Mailer, off grid, oil shale / tar sands, Peter Thiel, plutocrats, profit motive, Ralph Waldo Emerson, Ray Kurzweil, recommendation engine, Republic of Letters, robot derives from the Czech word robota Czech, meaning slave, Ronald Reagan, scientific management, self-driving car, SETI@home, side project, Silicon Valley, Silicon Valley ideology, Singularitarianism, Snapchat, social graph, social web, speech recognition, Startup school, stem cell, Stephen Hawking, Steve Jobs, Steven Levy, technoutopianism, TED Talk, the long tail, the medium is the message, theory of mind, Turing test, Tyler Cowen, Whole Earth Catalog, Y Combinator, Yochai Benkler

Such a blinkered and self-serving view of the world may be forgivable in a young entrepreneur trying to get an ambitious technology company off the ground, but as Google has grown and its influence expanded, its hubris has become a problem. It accounts for many of the missteps that have stained the company’s reputation in recent years. EDWARDS’S STORY ends when he leaves the company in March of 2005. In the years since, Google’s power and influence have only grown. It has become the web’s central clearinghouse for information and one of the internet’s principal tollgates. As people spend more time and do more things online, they also perform more Google searches and click on more Google ads—and the business’s coffers swell. But the company’s recent history is not quite as buoyant as its bottom line suggests.


pages: 354 words: 26,550

High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems by Irene Aldridge

algorithmic trading, asset allocation, asset-backed security, automated trading system, backtesting, Black Swan, Brownian motion, business cycle, business process, buy and hold, capital asset pricing model, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, computerized trading, diversification, equity premium, fault tolerance, financial engineering, financial intermediation, fixed income, global macro, high net worth, implied volatility, index arbitrage, information asymmetry, interest rate swap, inventory management, Jim Simons, law of one price, Long Term Capital Management, Louis Bachelier, machine readable, margin call, market friction, market microstructure, martingale, Myron Scholes, New Journalism, p-value, paper trading, performance metric, Performance of Mutual Funds in the Period, pneumatic tube, profit motive, proprietary trading, purchasing power parity, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Sharpe ratio, short selling, Small Order Execution System, statistical arbitrage, statistical model, stochastic process, stochastic volatility, systematic trading, tail risk, trade route, transaction costs, value at risk, yield curve, zero-sum game

A similar effect was documented by Stoll and Whaley (1990): for returns measured in 5-minute intervals, both S&P 500 and money market index futures led stock market returns by 5 to 10 minutes. The quicker adjustment of the futures markets relative to the equities markets is likely due to the historical development of the futures and 198 HIGH-FREQUENCY TRADING equities markets. The Chicago Mercantile Exchange, the central clearinghouse for futures contracts in North America, rolled out a fully functional electronic trading platform during the early 1990s; most equity exchanges still relied on a hybrid clearing mechanism that involved both human traders and machines up to the year 2005. As a result, faster informationarbitraging strategies have been perfected for the futures market, while systematic equity strategies remain underdeveloped to this day.


pages: 412 words: 113,782

Business Lessons From a Radical Industrialist by Ray C. Anderson

"Friedman doctrine" OR "shareholder theory", addicted to oil, Alan Greenspan, Albert Einstein, An Inconvenient Truth, banking crisis, Bear Stearns, biodiversity loss, business cycle, carbon credits, carbon footprint, carbon tax, centralized clearinghouse, clean tech, clean water, corporate social responsibility, Credit Default Swap, dematerialisation, distributed generation, do well by doing good, Easter island, energy security, Exxon Valdez, fear of failure, Gordon Gekko, greed is good, Indoor air pollution, Intergovernmental Panel on Climate Change (IPCC), intermodal, invisible hand, junk bonds, late fees, Mahatma Gandhi, market bubble, music of the spheres, Negawatt, Neil Armstrong, new economy, off-the-grid, oil shale / tar sands, oil shock, old-boy network, peak oil, precautionary principle, renewable energy credits, retail therapy, shareholder value, Silicon Valley, six sigma, subprime mortgage crisis, supply-chain management, urban renewal, Y2K

Those offsets allow a university to burn the same fossil fuels, operate the same inefficient buildings, and waste as much material as ever, but pay for someone else to plant trees, perhaps in another country, or develop a wind farm in Texas. I can understand why they might find this approach attractive. Compared with the costs of reducing their own footprint, buying an offset can look very cost effective. And, very often, these offsets are both real and meaningful. Though there is no central clearinghouse to certify their legitimacy, they can still be examined and certified by independent third parties. When the offsets meet a set standard—and that standard requires independent verification, record keeping, and auditing measures—colleges and universities can have some faith in them. Are there abuses?


pages: 374 words: 114,600

The Quants by Scott Patterson

Alan Greenspan, Albert Einstein, AOL-Time Warner, asset allocation, automated trading system, Bear Stearns, beat the dealer, Benoit Mandelbrot, Bernie Madoff, Bernie Sanders, Black Monday: stock market crash in 1987, Black Swan, Black-Scholes formula, Blythe Masters, Bonfire of the Vanities, book value, Brownian motion, buttonwood tree, buy and hold, buy low sell high, capital asset pricing model, Carl Icahn, centralized clearinghouse, Claude Shannon: information theory, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, Doomsday Clock, Dr. Strangelove, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial engineering, Financial Modelers Manifesto, fixed income, Glass-Steagall Act, global macro, Gordon Gekko, greed is good, Haight Ashbury, I will remember that I didn’t make the world, and it doesn’t satisfy my equations, index fund, invention of the telegraph, invisible hand, Isaac Newton, Jim Simons, job automation, John Meriwether, John Nash: game theory, junk bonds, Kickstarter, law of one price, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, Mark Spitznagel, merger arbitrage, Michael Milken, military-industrial complex, money market fund, Myron Scholes, NetJets, new economy, offshore financial centre, old-boy network, Paul Lévy, Paul Samuelson, Ponzi scheme, proprietary trading, quantitative hedge fund, quantitative trading / quantitative finance, race to the bottom, random walk, Renaissance Technologies, risk-adjusted returns, Robert Mercer, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Savings and loan crisis, Sergey Aleynikov, short selling, short squeeze, South Sea Bubble, speech recognition, statistical arbitrage, The Chicago School, The Great Moderation, The Predators' Ball, too big to fail, transaction costs, value at risk, volatility smile, yield curve, éminence grise

More commonly, swaps are written on baskets of hundreds or thousands of bonds and on other kinds of loans. They could metastasize without end—and did—reaching a value of more than $60 trillion a decade after Weinstein arrived on the scene. What’s more, since the trades were commonly done on a case-by-case basis on the so-called over-the-counter market, with no central clearinghouse to track the action, CDS trading was done in the shadow world of Wall Street, with virtually no regulatory oversight and zero transparency. And that was just the way the industry wanted it. Soon after Weinstein took the job, his boss (not Tanemura) jumped ship. Suddenly he was the only trader at Deutsche in New York juggling the new derivatives.


pages: 476 words: 118,381

Space Chronicles: Facing the Ultimate Frontier by Neil Degrasse Tyson, Avis Lang

Albert Einstein, Apollo 11, Apollo 13, Arthur Eddington, asset allocation, Berlin Wall, Boeing 747, carbon-based life, centralized clearinghouse, cosmic abundance, cosmic microwave background, dark matter, Gordon Gekko, high-speed rail, informal economy, invention of movable type, invention of the telescope, Isaac Newton, James Webb Space Telescope, Johannes Kepler, Karl Jansky, Kuiper Belt, Large Hadron Collider, Louis Blériot, low earth orbit, Mars Rover, Mars Society, mutually assured destruction, Neil Armstrong, orbital mechanics / astrodynamics, Pluto: dwarf planet, RAND corporation, Ronald Reagan, Search for Extraterrestrial Intelligence, SETI@home, space junk, space pen, stem cell, Stephen Hawking, Steve Jobs, the scientific method, trade route

No Office of Research and Technology Applications or other organizational structures performing the functions of this subsection shall substantially compete with similar services available in the private sector. (d) Dissemination of technical information The National Technical Information Service shall (1) serve as a central clearinghouse for the collection, dissemination and transfer of information on federally owned or originated technologies having potential application to State and local governments and to private industry; (2) utilize the expertise and services of the National Science Foundation and the Federal Laboratory Consortium for Technology Transfer, particularly in dealing with State and local governments; (3) receive requests for technical assistance from State and local governments, respond to such requests with published information available to the Service, and refer such requests to the Federal Laboratory Consortium for Technology Transfer to the extent that such requests require a response involving more than the published information available to the Service; (4) provide funding, at the discretion of the Secretary, for Federal laboratories to provide the assistance specified in subsection (c) (3) of this section; (5) use appropriate technology transfer mechanisms such as personnel exchanges and computer-based systems; and (6) maintain a permanent archival repository and clearinghouse for the collection and dissemination of nonclassified scientific, technical, and engineering information.


pages: 392 words: 114,189

The Ransomware Hunting Team: A Band of Misfits' Improbable Crusade to Save the World From Cybercrime by Renee Dudley, Daniel Golden

2021 United States Capitol attack, Amazon Web Services, Bellingcat, Berlin Wall, bitcoin, Black Lives Matter, blockchain, Brian Krebs, call centre, centralized clearinghouse, company town, coronavirus, corporate governance, COVID-19, cryptocurrency, data science, disinformation, Donald Trump, fake it until you make it, Hacker News, heat death of the universe, information security, late fees, lockdown, Menlo Park, Minecraft, moral hazard, offshore financial centre, Oklahoma City bombing, operational security, opioid epidemic / opioid crisis, Picturephone, pirate software, publish or perish, ransomware, Richard Feynman, Ross Ulbricht, seminal paper, smart meter, social distancing, strikebreaker, subprime mortgage crisis, tech worker, Timothy McVeigh, union organizing, War on Poverty, Y2K, zero day

It was a monumental task. Within a month of its launch, ID Ransomware was receiving fifteen hundred submissions a day. Most of them came from countries other than the United States; volunteers worldwide eventually translated it into almost two dozen languages, from Swedish to Nepali. As a central clearinghouse, ID Ransomware also proved invaluable to team members, identifying newly discovered strains to analyze and decrypt. Michael gave Lawrence full access to all the raw material that poured into ID Ransomware but made him promise not to use it to break news. Michael didn’t want to inadvertently interfere with a law enforcement investigation.


pages: 472 words: 117,093

Machine, Platform, Crowd: Harnessing Our Digital Future by Andrew McAfee, Erik Brynjolfsson

"World Economic Forum" Davos, 3D printing, additive manufacturing, AI winter, Airbnb, airline deregulation, airport security, Albert Einstein, algorithmic bias, AlphaGo, Amazon Mechanical Turk, Amazon Web Services, Andy Rubin, AOL-Time Warner, artificial general intelligence, asset light, augmented reality, autism spectrum disorder, autonomous vehicles, backpropagation, backtesting, barriers to entry, behavioural economics, bitcoin, blockchain, blood diamond, British Empire, business cycle, business process, carbon footprint, Cass Sunstein, centralized clearinghouse, Chris Urmson, cloud computing, cognitive bias, commoditize, complexity theory, computer age, creative destruction, CRISPR, crony capitalism, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, data science, Dean Kamen, deep learning, DeepMind, Demis Hassabis, discovery of DNA, disintermediation, disruptive innovation, distributed ledger, double helix, driverless car, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Ethereum, ethereum blockchain, everywhere but in the productivity statistics, Evgeny Morozov, fake news, family office, fiat currency, financial innovation, general purpose technology, Geoffrey Hinton, George Akerlof, global supply chain, Great Leap Forward, Gregor Mendel, Hernando de Soto, hive mind, independent contractor, information asymmetry, Internet of things, inventory management, iterative process, Jean Tirole, Jeff Bezos, Jim Simons, jimmy wales, John Markoff, joint-stock company, Joseph Schumpeter, Kickstarter, Kiva Systems, law of one price, longitudinal study, low interest rates, Lyft, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, Marc Andreessen, Marc Benioff, Mark Zuckerberg, meta-analysis, Mitch Kapor, moral hazard, multi-sided market, Mustafa Suleyman, Myron Scholes, natural language processing, Network effects, new economy, Norbert Wiener, Oculus Rift, PageRank, pattern recognition, peer-to-peer lending, performance metric, plutocrats, precision agriculture, prediction markets, pre–internet, price stability, principal–agent problem, Project Xanadu, radical decentralization, Ray Kurzweil, Renaissance Technologies, Richard Stallman, ride hailing / ride sharing, risk tolerance, Robert Solow, Ronald Coase, Salesforce, Satoshi Nakamoto, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, speech recognition, statistical model, Steve Ballmer, Steve Jobs, Steven Pinker, supply-chain management, synthetic biology, tacit knowledge, TaskRabbit, Ted Nelson, TED Talk, the Cathedral and the Bazaar, The Market for Lemons, The Nature of the Firm, the strength of weak ties, Thomas Davenport, Thomas L Friedman, too big to fail, transaction costs, transportation-network company, traveling salesman, Travis Kalanick, Two Sigma, two-sided market, Tyler Cowen, Uber and Lyft, Uber for X, uber lyft, ubercab, Vitalik Buterin, warehouse robotics, Watson beat the top human players on Jeopardy!, winner-take-all economy, yield management, zero day

For instance, increasingly ubiquitous sensors, as we are seeing with the Internet of things, could make possible the monitoring of far more of our actions and outcomes. Increased computer power could make it possible to simulate, choose, and store decisions for many future possible outcomes, and networks could make it possible to bring all this data and information to central clearinghouses for adjudication and resolution. But as fast as computers enable one party to anticipate outcomes, they enable other parties to consider more complex possibilities. Like the Red Queen in Alice in Wonderland, machines would have to run ever faster just to keep track of all the contingencies being generated.


pages: 410 words: 119,823

Radical Technologies: The Design of Everyday Life by Adam Greenfield

3D printing, Airbnb, algorithmic bias, algorithmic management, AlphaGo, augmented reality, autonomous vehicles, bank run, barriers to entry, basic income, bitcoin, Black Lives Matter, blockchain, Boston Dynamics, business intelligence, business process, Californian Ideology, call centre, cellular automata, centralized clearinghouse, centre right, Chuck Templeton: OpenTable:, circular economy, cloud computing, Cody Wilson, collective bargaining, combinatorial explosion, Computer Numeric Control, computer vision, Conway's Game of Life, CRISPR, cryptocurrency, David Graeber, deep learning, DeepMind, dematerialisation, digital map, disruptive innovation, distributed ledger, driverless car, drone strike, Elon Musk, Ethereum, ethereum blockchain, facts on the ground, fiat currency, fulfillment center, gentrification, global supply chain, global village, Goodhart's law, Google Glasses, Herman Kahn, Ian Bogost, IBM and the Holocaust, industrial robot, informal economy, information retrieval, Internet of things, Jacob Silverman, James Watt: steam engine, Jane Jacobs, Jeff Bezos, Jeff Hawkins, job automation, jobs below the API, John Conway, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, John Perry Barlow, John von Neumann, joint-stock company, Kevin Kelly, Kickstarter, Kiva Systems, late capitalism, Leo Hollis, license plate recognition, lifelogging, M-Pesa, Mark Zuckerberg, means of production, megacity, megastructure, minimum viable product, money: store of value / unit of account / medium of exchange, natural language processing, Network effects, New Urbanism, Nick Bostrom, Occupy movement, Oculus Rift, off-the-grid, PalmPilot, Pareto efficiency, pattern recognition, Pearl River Delta, performance metric, Peter Eisenman, Peter Thiel, planetary scale, Ponzi scheme, post scarcity, post-work, printed gun, proprietary trading, RAND corporation, recommendation engine, RFID, rolodex, Rutger Bregman, Satoshi Nakamoto, self-driving car, sentiment analysis, shareholder value, sharing economy, Shenzhen special economic zone , Sidewalk Labs, Silicon Valley, smart cities, smart contracts, social intelligence, sorting algorithm, special economic zone, speech recognition, stakhanovite, statistical model, stem cell, technoutopianism, Tesla Model S, the built environment, The Death and Life of Great American Cities, The Future of Employment, Tony Fadell, transaction costs, Uber for X, undersea cable, universal basic income, urban planning, urban sprawl, vertical integration, Vitalik Buterin, warehouse robotics, When a measure becomes a target, Whole Earth Review, WikiLeaks, women in the workforce

It neatly circumvents the problem of a mint arbitrarily diluting the value of existing currency by flooding the market with new coinage: we know the exact schedule on which new coins will be minted, and by what rules. It eliminates any need for a trusted intermediary to reconcile transactions: not through recourse to any central clearinghouse, but by consulting the local copy of a shared record that is annealed with all the others every time a block is confirmed. And it cunningly allows the network to insulate itself against forgery via proof-of-work, the very mechanism of artificial scarcity that underwrites Bitcoin’s value in the first place.


pages: 400 words: 121,988

Trading at the Speed of Light: How Ultrafast Algorithms Are Transforming Financial Markets by Donald MacKenzie

algorithmic trading, automated trading system, banking crisis, barriers to entry, bitcoin, blockchain, Bonfire of the Vanities, Bretton Woods, Cambridge Analytica, centralized clearinghouse, Claude Shannon: information theory, coronavirus, COVID-19, cryptocurrency, disintermediation, diversification, en.wikipedia.org, Ethereum, ethereum blockchain, family office, financial intermediation, fixed income, Flash crash, Google Earth, Hacker Ethic, Hibernia Atlantic: Project Express, interest rate derivative, interest rate swap, inventory management, Jim Simons, level 1 cache, light touch regulation, linked data, lockdown, low earth orbit, machine readable, market design, market microstructure, Martin Wolf, proprietary trading, Renaissance Technologies, Satoshi Nakamoto, Small Order Execution System, Spread Networks laid a new fibre optics cable between New York and Chicago, statistical arbitrage, statistical model, Steven Levy, The Great Moderation, transaction costs, UUNET, zero-sum game

If Direct Match had succeeded as Island had, the combination of high-frequency trading and anonymous order books might have transformed the entire Treasurys market, not just its interdealer segment. The chief obstacle to Direct Match turned out to be clearing. As noted earlier, in the trading of shares and of futures a central clearinghouse stands between the two parties to a trade (buying from the seller, and selling to the buyer), preserving anonymity and protecting each party from a default by the anonymous other. In the Treasurys market, that role is played by the Fixed Income Clearing Corporation (FICC), making it essential for a trading platform to have access to FICC.


pages: 513 words: 141,153

The Spider Network: The Wild Story of a Math Genius, a Gang of Backstabbing Bankers, and One of the Greatest Scams in Financial History by David Enrich

Bear Stearns, Bernie Sanders, Black Monday: stock market crash in 1987, call centre, centralized clearinghouse, computerized trading, Credit Default Swap, Downton Abbey, eat what you kill, electricity market, Flash crash, Glass-Steagall Act, Goldman Sachs: Vampire Squid, information asymmetry, interest rate derivative, interest rate swap, London Interbank Offered Rate, London Whale, Long Term Capital Management, Michael Milken, Navinder Sarao, Nick Leeson, Northern Rock, Occupy movement, performance metric, profit maximization, proprietary trading, Savings and loan crisis, tulip mania, work culture , zero-sum game

He broke the news to his sleepy employee: Lehman was filing for bankruptcy and Hayes needed to get to work immediately. In UBS’s mostly deserted office (Pieri himself was overseas on vacation), Hayes spent the day trying to identify every outstanding trade that his desk had with Lehman that hadn’t been routed through a central clearinghouse. A bankrupt financial institution couldn’t be counted on to follow through on its trades, so Hayes had to go through each transaction and figure out where UBS stood after negating all deals with Lehman. He was in the office until 3 a.m. working with a tech guy to complete the task. Hayes had another challenge that day: He had invested millions of dollars in derivatives that were due to pay off soon if yen Libor inched lower, a speculative bet that banks’ overall costs to borrow money in the Japanese currency—or at least what banks reported those borrowing costs to be—would decline.


pages: 419 words: 130,627

Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase by Duff McDonald

"World Economic Forum" Davos, Alan Greenspan, AOL-Time Warner, bank run, Bear Stearns, Blythe Masters, Bonfire of the Vanities, book value, business logic, centralized clearinghouse, collateralized debt obligation, conceptual framework, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Exxon Valdez, financial innovation, fixed income, G4S, Glass-Steagall Act, Greenspan put, housing crisis, interest rate swap, Jeff Bezos, John Meriwether, junk bonds, Kickstarter, laissez-faire capitalism, Long Term Capital Management, margin call, market bubble, Michael Milken, money market fund, moral hazard, negative equity, Nelson Mandela, Northern Rock, profit motive, proprietary trading, Renaissance Technologies, risk/return, Rod Stewart played at Stephen Schwarzman birthday party, Saturday Night Live, sovereign wealth fund, statistical model, Steve Ballmer, Steve Jobs, technology bubble, The Chicago School, too big to fail, Vanguard fund, zero-coupon bond, zero-sum game

There have been some suggestions that the interplay between a company’s bonds and its credit default swaps actually exacerbated problems—George Soros wrote convincingly about this phenomenon in the New York Times—but that phenomenon was arguably on the margin of a much larger problem: abandonment of risk management controls in pursuit of higher profits. When it came time for the first big test of credit default swaps—in the aftermath of Lehman Brothers’ bankruptcy—the settlement of those contracts took place without incident on October 21, 2008. Dimon has endorsed the creation of a central clearinghouse so derivatives exposures can be more closely monitored. But he considers the bank’s CDS business a valuable franchise and doesn’t consider it JPMorgan Chase’s problem if other investors hurt themselves by mishandling them. (Pointing to a healthy lobbying budget on this score, critics argue that even though he’s said the right thing publicly, Dimon and his team are actually stonewalling derivatives reform in order to protect the outsize margins the business generates.)


pages: 433 words: 129,636

Dreamland: The True Tale of America's Opiate Epidemic by Sam Quinones

1960s counterculture, Affordable Care Act / Obamacare, Albert Einstein, British Empire, call centre, centralized clearinghouse, correlation does not imply causation, crack epidemic, deindustrialization, do what you love, feminist movement, illegal immigration, mass immigration, Maui Hawaii, McMansion, obamacare, pill mill, TED Talk, zero-sum game

Brownlee said the records showed how the company was training salespeople to sell OxyContin as if it were nonaddictive and did not provoke withdrawal symptoms. Physicians, therefore, could feel comfortable prescribing it for many kinds of pain. “One of the pieces of evidence that was looked at were ‘call notes.’ The company had a process in which salesmen would go to a doctor, then summarize what was discussed. That went back to a central clearinghouse. Once we were able to see those, we began to see a pattern of conduct. Is this a few rogue guys or is this more of a corporate policy? It became clear that this was more than a few rogue [salesmen]. They were trained to sell the drug in a way that was simply not accurate. That was some of the best evidence of misbranding.


pages: 545 words: 137,789

How Markets Fail: The Logic of Economic Calamities by John Cassidy

Abraham Wald, Alan Greenspan, Albert Einstein, An Inconvenient Truth, Andrei Shleifer, anti-communist, AOL-Time Warner, asset allocation, asset-backed security, availability heuristic, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black-Scholes formula, Blythe Masters, book value, Bretton Woods, British Empire, business cycle, capital asset pricing model, carbon tax, Carl Icahn, centralized clearinghouse, collateralized debt obligation, Columbine, conceptual framework, Corn Laws, corporate raider, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Daniel Kahneman / Amos Tversky, debt deflation, different worldview, diversification, Elliott wave, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, Garrett Hardin, George Akerlof, Glass-Steagall Act, global supply chain, Gunnar Myrdal, Haight Ashbury, hiring and firing, Hyman Minsky, income per capita, incomplete markets, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Nash: game theory, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kickstarter, laissez-faire capitalism, Landlord’s Game, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, mental accounting, Mikhail Gorbachev, military-industrial complex, Minsky moment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, Naomi Klein, negative equity, Network effects, Nick Leeson, Nixon triggered the end of the Bretton Woods system, Northern Rock, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, Ponzi scheme, precautionary principle, price discrimination, price stability, principal–agent problem, profit maximization, proprietary trading, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, RAND corporation, random walk, Renaissance Technologies, rent control, Richard Thaler, risk tolerance, risk-adjusted returns, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, subprime mortgage crisis, tail risk, Tax Reform Act of 1986, technology bubble, The Chicago School, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, too big to fail, Tragedy of the Commons, transaction costs, Two Sigma, unorthodox policies, value at risk, Vanguard fund, Vilfredo Pareto, wealth creators, zero-sum game

Imposing restrictions on the biggest hedge funds and private equity firms could well lead to a drastic shrinkage in these industries, which would be no great loss. Much of the activity that such firms engage in amounts to a zero-sum game, which doesn’t yield any economic gains for society at large. The proposed central clearinghouse for derivatives transactions is a good idea that doesn’t go far enough. By imposing leverage limits on traders, and demanding adequate collateral for exposed positions, the clearinghouse could eliminate a lot of counterparty credit risk. Unfortunately, the administration’s proposal applies only to “standardized” derivatives.


pages: 515 words: 132,295

Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, Alan Greenspan, algorithmic trading, Alvin Roth, Asian financial crisis, asset allocation, bank run, Basel III, Bear Stearns, behavioural economics, Big Tech, bonus culture, Bretton Woods, British Empire, business cycle, buy and hold, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carl Icahn, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, commoditize, computerized trading, corporate governance, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, data science, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, electricity market, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial intermediation, Ford Model T, Frederick Winslow Taylor, George Akerlof, gig economy, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Greenspan put, guns versus butter model, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, information asymmetry, interest rate derivative, interest rate swap, Internet of things, invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", John Bogle, John Markoff, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, London Whale, Long Term Capital Management, low interest rates, manufacturing employment, market design, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, Paul Samuelson, pensions crisis, Ponzi scheme, principal–agent problem, proprietary trading, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Ronald Reagan, Satyajit Das, Savings and loan crisis, scientific management, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Steve Jobs, stock buybacks, subprime mortgage crisis, technology bubble, TED Talk, The Chicago School, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, Tragedy of the Commons, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund, vertical integration, zero-sum game

To do that, you have to increase transparency about what’s happening in the first place. In the commodities arena, former CFTC chairman Gary Gensler fought the good fight for stricter regulation of derivatives, bringing a large chunk of the swaps market out of the shadowy darkness and into central clearinghouses where it can be more easily regulated. In the United States most commodities-linked OTC derivatives are now subject to central clearing. The CFTC has also made big progress on real-time reporting and registration of brokers, so that people actually know who’s doing the trading. But achieving even this level of regulation has been a long, hard slog.


pages: 431 words: 132,416

No One Would Listen: A True Financial Thriller by Harry Markopolos

Alan Greenspan, backtesting, barriers to entry, Bernie Madoff, buy and hold, call centre, centralized clearinghouse, correlation coefficient, diversified portfolio, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, family office, financial engineering, financial thriller, fixed income, forensic accounting, high net worth, index card, Long Term Capital Management, Louis Bachelier, low interest rates, Market Wizards by Jack D. Schwager, offshore financial centre, payment for order flow, Ponzi scheme, price mechanism, proprietary trading, quantitative trading / quantitative finance, regulatory arbitrage, Renaissance Technologies, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, statistical arbitrage, too big to fail, transaction costs, two and twenty, your tax dollars at work

Not funding these machines saves money but costs a fortune. Eleventh, as a policy, encourage whistleblowers. This is nearest and dearest to my heart and is the bottom line if the SEC intends to recover its reputation from this debacle. It has to open up an active Office of the Whistleblower to provide a central clearinghouse for complaints, which currently are handled ad hoc by 11 regional offices. According to the Association of Certified Fraud Examiners’ 2008 Report to the Nation, whistleblower tips detected 54.1 percent of uncovered fraud schemes in public companies. External auditors (and the SEC exam teams would certainly be considered external auditors) detected a mere 4.1 percent of the uncovered fraud schemes.


pages: 440 words: 132,685

The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World by Randall E. Stross

Albert Einstein, centralized clearinghouse, Charles Lindbergh, cotton gin, death of newspapers, distributed generation, East Village, Ford Model T, Ford paid five dollars a day, I think there is a world market for maybe five computers, interchangeable parts, Isaac Newton, Livingstone, I presume, Marshall McLuhan, Menlo Park, plutocrats, Saturday Night Live, side project, Silicon Valley, Steve Jobs, Steven Levy, urban renewal, vertical integration, world market for maybe five computers

The film would be run through once, showing the images on one edge, then the film-transport mechanism would be shifted so that the images in the middle, which ran in the opposite direction, would be visible, and then the home projectionist would adjust the projector one more time to project the third row. This arrangement yielded a show that ran sixteen minutes. Along with the home projector, the company introduced a central clearinghouse for used films, which offered customers a way of replenishing the family’s entertainment supply by using the postal service to swap titles with others for a nominal processing fee. Edison, however, wanted to use his projector not for entertainment but for education. For preschoolers, his idea was nothing less than brilliant.


pages: 453 words: 132,400

Flow by Mihaly Csikszentmihalyi

Abraham Maslow, Albert Einstein, Bonfire of the Vanities, centralized clearinghouse, Charles Lindbergh, conceptual framework, correlation does not imply causation, double helix, fear of failure, Gregor Mendel, Herbert Marcuse, Ignaz Semmelweis: hand washing, invisible hand, Isaac Newton, job satisfaction, longitudinal study, Mahatma Gandhi, meta-analysis, Necker cube, pattern recognition, place-making, Ralph Waldo Emerson, the scientific method, Thomas Kuhn: the structure of scientific revolutions, Vilfredo Pareto

Thus, while consciousness is a mirror that reflects what our senses tell us about what happens both outside our bodies and within the nervous system, it reflects those changes selectively, actively shaping events, imposing on them a reality of its own. The reflection consciousness provides is what we call our life: the sum of all we have heard, seen, felt, hoped, and suffered from birth to death. Although we believe that there are “things” outside consciousness, we have direct evidence only of those that find a place in it. As the central clearinghouse in which varied events processed by different senses can be represented and compared, consciousness can contain a famine in Africa, the smell of a rose, the performance of the Dow Jones, and a plan to stop at the store to buy some bread all at the same time. But that does not mean that its content is a shapeless jumble.


Mastering Blockchain, Second Edition by Imran Bashir

3D printing, altcoin, augmented reality, autonomous vehicles, bitcoin, blockchain, business logic, business process, carbon footprint, centralized clearinghouse, cloud computing, connected car, cryptocurrency, data acquisition, Debian, disintermediation, disruptive innovation, distributed ledger, Dogecoin, domain-specific language, en.wikipedia.org, Ethereum, ethereum blockchain, fault tolerance, fiat currency, Firefox, full stack developer, general-purpose programming language, gravity well, information security, initial coin offering, interest rate swap, Internet of things, litecoin, loose coupling, machine readable, MITM: man-in-the-middle, MVC pattern, Network effects, new economy, node package manager, Oculus Rift, peer-to-peer, platform as a service, prediction markets, QR code, RAND corporation, Real Time Gross Settlement, reversible computing, RFC: Request For Comment, RFID, ride hailing / ride sharing, Satoshi Nakamoto, seminal paper, single page application, smart cities, smart contracts, smart grid, smart meter, supply-chain management, transaction costs, Turing complete, Turing machine, Vitalik Buterin, web application, x509 certificate

Clearing is the next step whereby the trade is matched between the seller and buyer based on certain attributes such as price and quantity. At this stage, accounts that are involved in payment are also identified. Finally, the settlement is where eventually the security is exchanged for payment between the buyer and seller. In the traditional trade life cycle model, a central clearinghouse is required to facilitate trading between parties which bears the credit risk of both parties. The current scheme is somewhat complicated, whereby a seller and buyer have to take a complicated route to trade with each other. This comprises of various firms, brokers, clearing houses, and custodians but with blockchain, a single distributed ledger with appropriate smart contracts can simplify this whole process and can enable buyers and sellers to talk directly to each other.


pages: 559 words: 155,372

Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley by Antonio Garcia Martinez

Airbnb, airport security, always be closing, Amazon Web Services, Big Tech, Burning Man, business logic, Celtic Tiger, centralized clearinghouse, cognitive dissonance, collective bargaining, content marketing, corporate governance, Credit Default Swap, crowdsourcing, data science, deal flow, death of newspapers, disruptive innovation, Dr. Strangelove, drone strike, drop ship, El Camino Real, Elon Musk, Emanuel Derman, Fairchild Semiconductor, fake it until you make it, financial engineering, financial independence, Gary Kildall, global supply chain, Goldman Sachs: Vampire Squid, Hacker News, hive mind, How many piano tuners are there in Chicago?, income inequality, industrial research laboratory, information asymmetry, information security, interest rate swap, intermodal, Jeff Bezos, Kickstarter, Malcom McLean invented shipping containers, Marc Andreessen, Mark Zuckerberg, Maui Hawaii, means of production, Menlo Park, messenger bag, minimum viable product, MITM: man-in-the-middle, move fast and break things, Neal Stephenson, Network effects, orbital mechanics / astrodynamics, Paul Graham, performance metric, Peter Thiel, Ponzi scheme, pre–internet, public intellectual, Ralph Waldo Emerson, random walk, Reminiscences of a Stock Operator, Ruby on Rails, Salesforce, Sam Altman, Sand Hill Road, Scientific racism, second-price auction, self-driving car, Sheryl Sandberg, Silicon Valley, Silicon Valley startup, Skype, Snapchat, social graph, Social Justice Warrior, social web, Socratic dialogue, source of truth, Steve Jobs, tech worker, telemarketer, the long tail, undersea cable, urban renewal, Y Combinator, zero-sum game, éminence grise

This glittering vision in Facebook Blue of everything running on Facebook would take years to realize. By comparison, the value of the open plan would be realized instantaneously. If FBX had access to the identity matching we’d built on the Custom Audiences side, not to mention ads inventory on mobile, then the exchange could serve as a central clearinghouse for online identity everywhere. Everything we were ideating around identity, that entire spiel I regaled you with about names, both online and off, could be realized in a few weeks, all due to the open and standardized nature of FBX. And all of it implemented with three engineers and one cocky product manager, and not the roomful of bickering, big-company clowns that every meeting on the matter tended to feature.


pages: 495 words: 144,101

Goddess of the Market: Ayn Rand and the American Right by Jennifer Burns

Abraham Maslow, Alan Greenspan, Alvin Toffler, anti-communist, Apollo 11, bank run, barriers to entry, centralized clearinghouse, collective bargaining, creative destruction, desegregation, feminist movement, financial independence, gentleman farmer, George Gilder, Herbert Marcuse, invisible hand, jimmy wales, Joan Didion, John Markoff, Joseph Schumpeter, knowledge worker, laissez-faire capitalism, Lewis Mumford, lone genius, Menlo Park, minimum wage unemployment, Mont Pelerin Society, new economy, Norman Mailer, offshore financial centre, Ponzi scheme, profit motive, public intellectual, RAND corporation, rent control, road to serfdom, Robert Bork, rolodex, Ronald Reagan, side project, Stewart Brand, The Chicago School, The Wisdom of Crowds, union organizing, urban renewal, We are as Gods, white flight, Whole Earth Catalog

The small band of libertarians waving black flags with dollar signs in front of the Philadelphia Federal Courthouse was largely misunderstood, with several passersby accusing them of Communist sympathies.27 Even a reading of Galt’s individualist oath did little to clarify the protest’s intent. However inscrutable to outsiders, SIL quickly emerged as the central clearinghouse for the libertarian movement by dint of its free-form membership structure and the enthusiasm of its founders. Immediately after its birth SIL claimed 103 chapters, and at its first-year anniversary boasted thirteen hundred members, three thousand persons in contact with the organization, and 175,000 pieces of literature distributed.28 The 1972 directory of SIL was fat with libertarian organizations.


pages: 553 words: 151,139

The Teeth of the Tiger by Tom Clancy

airport security, centralized clearinghouse, complexity theory, false flag, flag carrier, forensic accounting, gentleman farmer, illegal immigration, information security, Occam's razor, operational security, sensible shoes

Too free a use of signal-intelligence information revealed its existence, causing the targets to change their methods of encryption, and so compromising the source. Using it too little, on the other hand, was as bad as not having it at all. Unfortunately, the intelligence services leaned more to the latter than the former. The creation of a new Department of Homeland Security had, theoretically, set up a central clearinghouse for all threat-related information, but the size of the new superagency had crippled it from the get-go. The information was all there, but in too great a quantity to be processed, and with too many processors to turn out a viable product. But old habits died hard. The intelligence community remained intact, a super-agency overtop its own bureaucracy or not, and its segments talked to each other.


pages: 726 words: 172,988

The Bankers' New Clothes: What's Wrong With Banking and What to Do About It by Anat Admati, Martin Hellwig

Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bonus culture, book value, break the buck, business cycle, Carmen Reinhart, central bank independence, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversified portfolio, en.wikipedia.org, Exxon Valdez, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, George Akerlof, Glass-Steagall Act, Growth in a Time of Debt, income inequality, information asymmetry, invisible hand, Jean Tirole, joint-stock company, joint-stock limited liability company, junk bonds, Kenneth Rogoff, Larry Wall, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, margin call, Martin Wolf, Money creation, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Nick Leeson, Northern Rock, open economy, Paul Volcker talking about ATMs, peer-to-peer lending, proprietary trading, regulatory arbitrage, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Satyajit Das, Savings and loan crisis, shareholder value, sovereign wealth fund, subprime mortgage crisis, technology bubble, The Market for Lemons, the payments system, too big to fail, Upton Sinclair, Yogi Berra

An example of such fake arm’s-length relations is provided by the system of German public banks, in which local savings banks, which are active in retail banking, collect more funds from depositors than they can use themselves and automatically invest large parts of their surplus funds with the Landesbanken, which are active in investment banking. In any arrangement, the key question is how to ensure proper governance for the funding of risky investment banking activities. 46. Attempts to form central clearinghouses for derivatives might actually create new and particularly dangerous systemically important institutions. Being owned by the participating banks would make the clearinghouses highly connected. It is essential that they have sufficient ability to absorb losses without needing any support from banks or from the government.


pages: 699 words: 192,704

Heaven's Command (Pax Britannica) by Jan Morris

British Empire, Cape to Cairo, centralized clearinghouse, Corn Laws, European colonialism, Fellow of the Royal Society, gentleman farmer, Khartoum Gordon, Khyber Pass, land reform, land tenure, Livingstone, I presume, Magellanic Cloud, mass immigration, means of production, Monroe Doctrine, plutocrats, profit motive, Ralph Waldo Emerson, sceptred isle, Scramble for Africa, Suez canal 1869, trade route

Since 1841 Kew Gardens, Queen Charlotte’s delicious belvedere beside the Thames outside London, had been a State institution, where all available botanical knowledge was considered, sifted and turned into green delight or sustenance; and by the middle of the century Kew had its derivatives or ancillaries in most of the British possessions—part pleasure-places, part scientific laboratories, with their learned keepers and their catalogues, experimenting, classifying, and sending a copious flow of samples, products or memoranda back to the central clearing-house at home. One important outpost in this chain of research was Jamaica, and a visitor to that island making a tour of its botanical gardens might be deluded into supposing that the British Empire was already a cohesive, centralized organization. Each of the three island gardens, each in a different climatic zone, played its own particular part in research, with its own specialities, its own methods, and its own team of diligent scientific gentlemen.


pages: 603 words: 186,210

Appetite for America: Fred Harvey and the Business of Civilizing the Wild West--One Meal at a Time by Stephen Fried

Albert Einstein, book value, British Empire, business intelligence, centralized clearinghouse, Charles Lindbergh, City Beautiful movement, company town, Cornelius Vanderbilt, disinformation, estate planning, Ford Model T, glass ceiling, Ida Tarbell, In Cold Blood by Truman Capote, indoor plumbing, Livingstone, I presume, Nelson Mandela, new economy, plutocrats, refrigerator car, transcontinental railway, traveling salesman, women in the workforce, Works Progress Administration, young professional

Although Dave had started as little more than a bookkeeper, two years later Fred had him running the day-to-day operations for the entire chain—now more than a dozen different locations spread out over eleven hundred miles between Topeka and the western border of New Mexico. The Kansas City office became the communications hub of the company. It was also the central clearinghouse for the large amounts of cash generated by the eating houses. From the very beginning in Topeka, it was not uncommon for each house to generate at least $250 ($5,200) in pure profit each month. Many of them made much more—enough so that in locations that were less profitable, as long as the managers were doing a good job, they were told to maintain standards even if it meant running deficits.


pages: 924 words: 198,159

Blackwater: The Rise of the World's Most Powerful Mercenary Army by Jeremy Scahill

"World Economic Forum" Davos, air freight, anti-communist, Berlin Wall, Bernie Sanders, business climate, business intelligence, centralized clearinghouse, collective bargaining, Columbine, facts on the ground, Fall of the Berlin Wall, independent contractor, Kickstarter, military-industrial complex, multilevel marketing, Naomi Klein, no-fly zone, operational security, private military company, Project for a New American Century, Robert Bork, Ronald Reagan, school choice, school vouchers, Seymour Hersh, stem cell, Timothy McVeigh, urban planning, vertical integration, zero-sum game

The revised report said that 3,646 people were wounded by terror attacks in 2003, more than double the number in Black’s original report, while 625 were killed, dwarfing the report’s original count of 307.92 As Krugman observed, Black and other officials blamed the errors on “‘inattention, personnel shortages and [a] database that is awkward and antiquated.’ Remember: we’re talking about the government’s central clearinghouse for terrorism information, whose creation was touted as part of a ‘dramatic enhancement’ of counterterrorism efforts more than a year before this report was produced. And it still can’t input data into its own computers? It should be no surprise, in this age of Halliburton, that the job of data input was given to and botched by private contractors.”93 Bush’s Democratic challenger in the 2004 presidential election, John Kerry, charged through a spokesperson that Bush was “playing fast and loose with the truth when it comes to the war on terror,” adding that the White House “has now been caught trying to inflate its success on terrorism.”94 There was talk of heads rolling at the State Department over the report, but not Black’s.


pages: 622 words: 194,059

An Empire of Their Own: How the Jews Invented Hollywood by Neal Gabler

Albert Einstein, anti-communist, centralized clearinghouse, Charles Lindbergh, company town, half of the world's population has never made a phone call, haute couture, Louis Pasteur, Norman Mailer, power law, security theater, Upton Sinclair, working poor

Eager to demonstrate their cooperation and protect their own reputations, some officials of organized Jewry, including Gang, began hunting for a mechanism that would somehow rationalize the anarchic clearance system. In doing so, Gang and the others no doubt hoped that they would be demonstrating their patriotism to HUAC and its fellow travelers, while at the same time assisting Jews in need. The idea for a new committee that would serve as a central clearinghouse apparently originated with Edwin Lukas, a staff member of the American Jewish Committee, but it was Gang who seemed to promote the idea most enthusiastically. What Gang proposed early in 1952 was a Citizens Committee for Cooperation with Congress to be composed of representatives from the entertainment world.


pages: 726 words: 210,048

Hard Landing by Thomas Petzinger, Thomas Petzinger Jr.

airline deregulation, Boeing 747, buy and hold, Carl Icahn, centralized clearinghouse, Charles Lindbergh, collective bargaining, cross-subsidies, desegregation, Donald Trump, emotional labour, feminist movement, index card, junk bonds, low cost airline, low skilled workers, Marshall McLuhan, means of production, Michael Milken, mutually assured destruction, Neil Armstrong, Network effects, offshore financial centre, oil shock, Ponzi scheme, postindustrial economy, price stability, profit motive, Ralph Nader, revenue passenger mile, Ronald Reagan, scientific management, Silicon Valley, strikebreaker, technological determinism, the medium is the message, The Predators' Ball, Thomas L Friedman, union organizing, yield management, zero-sum game

Having identified the most appropriate flight for a customer, the agent would then telephone the airline—or multiple airlines, perhaps, in the case of connecting flights—and make the appropriate reservations. The agent wrote each ticket by hand or wheeled it through a typewriter, compiled a written itinerary, collected the fare, and sent the money (less the commission, then fixed by the CAB at 5 percent) to a central clearinghouse, which in turn disbursed it to the airlines. Travel agents had to maintain a bundle of phone lines and a stable of clerks, typists, and reservationists while managing a library of travel literature to advise clients on vacation destinations and business arrangements. But what if the travel agents could go on-line?


Lawrence in Arabia: War, Deceit, Imperial Folly and the Making of the Modern Middle East by Scott Anderson

British Empire, centralized clearinghouse, disinformation, European colonialism, facts on the ground, Ford Model T, gentleman farmer, Islamic Golden Age, operational security, Potemkin village, Scramble for Africa, zero-sum game

That neutrality could also serve as a convenient shield while Germany laid the groundwork for the most important military operation to be conducted in the region, an assault on the Suez Canal. In mid-August, the kaiser signed a secret directive calling for the creation of the Nachrichtenstelle für den Orient (Intelligence Bureau for the East), to be based in Constantinople and to serve as the central clearinghouse for Germany’s subversion campaigns in the Near East. The director of that bureau was to be Max von Oppenheim. Among Oppenheim’s first acts upon assuming the post was to put out an offer of employment to his former protégé, Curt Prüfer. Oppenheim’s confidence in his apprentice was certainly deserved.


pages: 1,590 words: 353,834

God's Bankers: A History of Money and Power at the Vatican by Gerald Posner

Albert Einstein, anti-communist, Ayatollah Khomeini, bank run, banking crisis, book value, Bretton Woods, central bank independence, centralized clearinghouse, centre right, credit crunch, disinformation, dividend-yielding stocks, European colonialism, forensic accounting, God and Mammon, Index librorum prohibitorum, Kevin Roose, Kickstarter, liberation theology, low interest rates, medical malpractice, Murano, Venice glass, offshore financial centre, oil shock, operation paperclip, power law, rent control, Ronald Reagan, Silicon Valley, WikiLeaks, Yom Kippur War

Notwithstanding its mix of international delegates, and even though it boasted an American president, it was firmly under Nazi control from 1940 on.3 The German BIS representatives were Baron Kurt von Schröder, a leading banker and Gestapo officer; Hermann Schmitz, the chief of the industrial conglomerate I. G. Farben; Walter Funk, Reichsbank president; and Emil Puhl, an economist and vice president of the Reichsbank.4 Under their influence, BIS became a central clearinghouse for emptying gold reserves from countries such as Austria, Belgium, and Czechoslovakia.5 “Washing gold” was the euphemism for how BIS described bringing bullion covertly into Switzerland and converting it into untraceable cash, usually Swiss francs.6 About 80 percent of all Reichsbank gold sent abroad was laundered through Switzerland.7 In early 1942, Puhl—who oversaw BIS’s gold program—shared with Funk that the Gestapo had begun depositing gold from concentration camps into the Reichsbank.8 By that November, an internal Reichsbank report noted that it had received an “unusually great” amount of smelted dental gold.9 In 1943, the Reichsbank received the first packets of gold stamped “Auschwitz” (it is impossible to determine precisely how much gold the SS sent to the Reichsbank since the records of those shipments that were seized by the U.S. military later disappeared; the United States failed to make copies before returning the documents to the predecessor of the Bundesbank, where the files were destroyed, allegedly as part of routine maintenance).10,I BIS was involved in far more than washing gold.


pages: 1,202 words: 424,886

Stigum's Money Market, 4E by Marcia Stigum, Anthony Crescenzi

accounting loophole / creative accounting, Alan Greenspan, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Black-Scholes formula, book value, Brownian motion, business climate, buy and hold, capital controls, central bank independence, centralized clearinghouse, corporate governance, credit crunch, Credit Default Swap, cross-border payments, currency manipulation / currency intervention, currency risk, David Ricardo: comparative advantage, disintermediation, distributed generation, diversification, diversified portfolio, Dutch auction, financial innovation, financial intermediation, fixed income, flag carrier, foreign exchange controls, full employment, Glass-Steagall Act, Goodhart's law, Greenspan put, guns versus butter model, high net worth, implied volatility, income per capita, intangible asset, interest rate derivative, interest rate swap, inverted yield curve, junk bonds, land bank, large denomination, locking in a profit, London Interbank Offered Rate, low interest rates, margin call, market bubble, market clearing, market fundamentalism, Money creation, money market fund, mortgage debt, Myron Scholes, offshore financial centre, paper trading, pension reform, Phillips curve, Ponzi scheme, price mechanism, price stability, profit motive, proprietary trading, prudent man rule, Real Time Gross Settlement, reserve currency, risk free rate, risk tolerance, risk/return, Savings and loan crisis, seigniorage, shareholder value, short selling, short squeeze, tail risk, technology bubble, the payments system, too big to fail, transaction costs, two-sided market, value at risk, volatility smile, yield curve, zero-coupon bond, zero-sum game

If the average maturity of the liabilities is less than that of the assets, the bank is running a short and open book. book-entry securities: Securities that are not represented by engraved pieces of paper but are maintained in computerized records. Securities that are not book-entry do not move from holder to holder but are usually kept in a central clearinghouse or by another agent. book value: The value at which a debt security is shown on the holder’s balance sheet. Book value is often acquisition cost plus or minus amortization/accretion, which may differ markedly from market value. It can be further defined as tax book, accreted book, or amortized book value.


pages: 1,336 words: 415,037

The Snowball: Warren Buffett and the Business of Life by Alice Schroeder

affirmative action, Alan Greenspan, Albert Einstein, anti-communist, AOL-Time Warner, Ayatollah Khomeini, barriers to entry, Bear Stearns, Black Monday: stock market crash in 1987, Bob Noyce, Bonfire of the Vanities, book value, Brownian motion, capital asset pricing model, card file, centralized clearinghouse, Charles Lindbergh, collateralized debt obligation, computerized trading, Cornelius Vanderbilt, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, desegregation, do what you love, Donald Trump, Eugene Fama: efficient market hypothesis, Everybody Ought to Be Rich, Fairchild Semiconductor, Fillmore Auditorium, San Francisco, financial engineering, Ford Model T, Garrett Hardin, Glass-Steagall Act, global village, Golden Gate Park, Greenspan put, Haight Ashbury, haute cuisine, Honoré de Balzac, If something cannot go on forever, it will stop - Herbert Stein's Law, In Cold Blood by Truman Capote, index fund, indoor plumbing, intangible asset, interest rate swap, invisible hand, Isaac Newton, it's over 9,000, Jeff Bezos, John Bogle, John Meriwether, joint-stock company, joint-stock limited liability company, junk bonds, Larry Ellison, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, market bubble, Marshall McLuhan, medical malpractice, merger arbitrage, Michael Milken, Mikhail Gorbachev, military-industrial complex, money market fund, moral hazard, NetJets, new economy, New Journalism, North Sea oil, paper trading, passive investing, Paul Samuelson, pets.com, Plato's cave, plutocrats, Ponzi scheme, proprietary trading, Ralph Nader, random walk, Ronald Reagan, Salesforce, Scientific racism, shareholder value, short selling, side project, Silicon Valley, Steve Ballmer, Steve Jobs, supply-chain management, telemarketer, The Predators' Ball, The Wealth of Nations by Adam Smith, Thomas Malthus, tontine, too big to fail, Tragedy of the Commons, transcontinental railway, two and twenty, Upton Sinclair, War on Poverty, Works Progress Administration, Y2K, yellow journalism, zero-coupon bond

On a micro level, Buffett wrote, these things often were true, but on a macro level, derivatives could someday cause midair collisions over Manhattan, London, Frankfurt, Hong Kong, and other parts of the globe. He and Munger believed that derivatives should be regulated, more disclosure should be required, they should be traded through a central clearinghouse, and the Federal Reserve should act as a central banker to the major investment banks, not just the commercial banks. Federal Reserve Chairman Alan Greenspan, however, defended the unregulated market and made sport of Buffett’s wariness.10 Buffett’s “financial weapons of mass destruction” was quoted everywhere, often paired with a question about whether he was overreacting.11 Even as early as 2002, however, the beginnings of mass destruction could be seen in the mobile-home industry.