30 October 2011
It is, as you might expect, a depressing read. Yet in its way compelling.
I wonder about the following passage. Does the character "Zawadzki the smuggler" represent anybody historic?
"When the Germans heard that the Jews had caught Zawadzki themselves, they rang for a car from the centre of Litzmannstadt. The Jewish officers realised this was the end for Zawadzki and asked him if he had a final request. He replied that he wished to go to the toilet. Two policemen escorted Zawadzki to the latrines out in the yard. They handcuffed Zawadzki to the latrine door and then stood guard outside, keeping a careful watch on the shoes clearly visible beneath the locked door. The policemen stood staring at Zawadzki's shoes for a good hour. Then one of them plucked up the courage to break down the door. The shoes were still there, and the handcuffs, but no Zawadzki."
29 October 2011
28 October 2011
It is a fine book, and I continue to re-read bits of it and discover new points.
Two quick ones today.
1) In their chapter 13, "The Wrap," the authors discuss AIG-FP, the financial products division of the vast insurance company AIG, and its contribution to the crisis. They introduce us to a fellow named Al Frost, who marketed credit default swaps (CDS) for AIG-FP.
After making this introduction, they mention that various CDS' held by AIG-FP included collateral triggers, i.e. contract clauses that allowed "counterparties to demand that AIG put up ... cold, hard cash -- if certain events took place."
Then there is this masterpiece of concision, in which Frost is allowed to hang himself.
"It is hard to know for sure if these triggers were there from the start. Frost ran his department like a little fiefdom; he tended to impart information on a need-to-know basis. (Through his attorney, Frost denies that he didn't talk freely about what was going on in his business.)"
Am I the only one who has chuckled at that?
2) Also in chapter 13, the authors briefly mention Gary Gorton, a Yale economist hired by AIG-FP to develop their risk models. His models obligingly told the division what everyone there wanted to hear, that the triggers weren't at all risky.
Gorton is mentioned again, much later, in chapter 16, about Treasury Secretary Hank Paulson. "Yale economist Gary Gorton -- the game man who did risk modeling for AIG-FP -- explains the repo market this way...."
That wasn't a typo. Or at least it wasn't my typo. They don't write that this is the "same man" mentioned earlier. He is the "game man." I imagine him telling his AIG-FP acquaintances: "Yes, I'll create a model that suits your desired conclusions. I'm game!"
I suspect this isn't their typo either, that it is a deliberate play on the two words. But hey, what do I know? I'm just the game man who keeps reading their book.
27 October 2011
You can access the notice of claim on Scribd: here.
The Supreme Court of British Columbia has issued a court order shutting the site down, which is why you get a blank screen if you try to go here: www.deepcapture.com
Stockwatch quotes the complaint quoting the website saying that Nazerali is affiliated with "an impressive number of securities traders who are also narco-traffickers (such as Paul Combs, until Combs was whacked by Nazerali's mobster friend Egor Chernov)" and that he has "working relationships with ... members of Al Qaeda's Golden Chain, the regime in Iran, Pakistan's ISI, the chief of Saudi intelligence, the ruler of Dubai, the royals of Abu Dhabi, La Cosa Nostra, the Russian Mafia, and others in the Milken network."
I first learned of this from Gary Weiss' blog. Weiss is especially interested in the (intimate) relationship between Deep Capture and Overstock,com, nowadays also known as O.co, and Overstock boss Patrick Byrne.
Regular readers of Pragmatism Refreshed might recall that to Byrne the phrase "the Milken network" in the above quotation has a special resonance. Ex-con Michael Milken, is one-half of the collective Sith Lord (the other half is Steven Cohen). This Sith Lord -- a term of course taken from the Star Wars movies -- is at the center of a vast worldwide web of corruption -- perhaps the web of corruption, since there hardly seems to be anything wrong with the world in recent decades that doesn't get introduced into Deep Capture's theories.
Anyway, Deep Capture has apparently assigned Nazerali a key role in this same awesome/awful network linking (as Weiss puts it) "every crime since Jack the Ripper."
Nazerali has named as defendants not only Deep Capture LLC and Byrne, but High Plains Investments LLC, GoDaddy Inc., (the site's registrar), NoZone Inc. (its host), Google Inc., Google's Canadian subsidiary, and Illinois resident Mark Mitchell.
Let's pause on Mitchell, described in the court filing as the principal author of the defamatory articles. This is the first time I've mentioned him on Pragmatism Refreshed. He was once the assistant managing editor of CJR Daily, a web outlet of the Columbia Journalism Review. During his tenure, the CJR was often accused of ... well ... just missing the point when it touched upon finance journalism. Missing various points. Among those making that case was Joseph Weisenthal of The Stalwart.
Under his watch, too, Gal Beckerman penned an incomprehensible complaint about a perfectly routine WSJ story about nervousness among some Berkshire Hathaway stockholders, and Mitchell came riding to the defense of that complaint, without in the process making it any more comprehensible.
By the end of Mitchell's time there the CJR Daily had essentially given up on tracking finance journalism. Yet he had the name and reputation that came from his time there and he was, excuse the expression, a big capture for Deep Capture, when he started writing for them, apparently some time in 2008.
I'm just trying to keep all the players straight here.
Meanwhile, a commenter on Weiss' blog suggests that "Mr. Nazerali took umbrage with journalist
It will be fascinating watching how this plays out in the courts of the Great White North.
23 October 2011
Before 999, the future Pope was known as Gerbert of Aurillac, and the author of this book, Nancy Marie Brown, makes a case for Gerbert as a note-worthy scholar and (to use an anachronistic term) a scientist.
Brown has built her own reputation as a popularizer of science. Her best known book before this one was "Mendel in the Kitchen," a discussion of genetically modified foods, which she co-authored with geneticist Nina Fedoroff.
Here she seems to have an apologetic intent. She wants to be sure we know that the 10th century Europeans did not believe in a flat earth, were not terrified of the arrival of the year 1000, didn't argue over angels dancing on the heads of pins, and were quite interested in the advance of science. Indeed, among the achievements of Gerbert she chronicles is this: he became curious about how organ pipes behave acoustically, so he built and tested models and devised an equation to match the results. In a word, he experimented.
But sometimes her apologetic designs get in the way of her story. She tells of us one debate between Gerbert and an ecclesiastical rival over whether physics should be taught in universities as a subdivision of mathematics, or as a separate field. She doesn't want us to think that this is a silly subject, since "Professors today hold the same debates: Twenty-first century academics are at odds over whether archeology is a type of history or should be taught as a science."
Well, yes, but it is rather silly when it happens in the 21st century too. Those debates are mostly about turf. The history department is larger if the archeologists are included therein than if it isn't, and the head of the history department of that university will surely want to include them. The rest of us should be uninterested in their turf wars except, perhaps, as a matter of ... well ... a specialized sort of anthropology.
As to Gerbert's debate with a fellow named Otric, it doesn't appear to have amounted to much pragmatically except amusement for some privileged observers. You can of course treat physics under the heading of math if you want (Gerbert's experiments with organ pipes were aimed at finding the right equation, after all). You can treat them as separate though of course closely related disciplines if you want. Putting too much emphasis on which is the 'right' categorization is inane.
Not as inane as belief in a flat earth, but still inane.
22 October 2011
21 October 2011
It was on October 16, 2001, in particular, that Enron issued a dramatic series of announcements. It had a 3d quarter loss of $618 million. It took a $1.2 billion hit against shareholder equity related to the unwinding of a partnership that its Chief Financial Officer, Andrew Fastow, had been running on the side (LJM2). And it acknowledged an after-tax charge against earnings of $544 million ... again, related to LJM2.
On October 17th, the SEC sent Enron a letter. Actually, three letters and three question marks: "WTF???"
On October 22, the existence of an SEC investigation became public knowledge and the price of shares of Enron fell 20 percent.
On October 24, the board finally fired Fastow, replacing him with Jeffrey McMahon, who himself had been deeply involved with many of the very Fastowian transactions that were doing in the company.
By October 29th it was obvious that Moodys was going to downgrade the company's credit status. Ken Lay talked on the phone on that day with President Bush's Commerce Secretary, Donald Evans. Nobody in the administration lifted a finger for Enron -- and I am nobody's idea of a Bushie, but I have to say this was to their credit.
Anyway, all of that provided excitement to the October of 2001. In this October we deal with different crises and the characters as they unfold have different names. Yet "the more things change...."
20 October 2011
"In the 1950s and 1960s when the top tax rate was 70 - 90%, we laid the interstate system, built the internet, put a man on the moon, defeated Communism, our education system was the envy of the world, our middle class was thriving, our economy unparalleled.
"You want that back?
"Raise taxes on the rich."
That might just be the most lame argument I've ever encountered.
Begin at the beginning: were the rich actually paying 70% or more during that period, or were they availing themselves of various loopholes and paying a good deal less? My guess (subject to correction) would be that they probably weren't actually paying much more than they are now.
This matters because the general 'point' is that good things happened at time X, and Y was true through the time X, so Y must be the cause of the good things in X. That is either valid for EVERY pertinent Y, given the EXACT Y involved, or it is not valid at all.
Thus, as to taxes, every loophole that existed for the avoidance of taxes by the wealthy during the period in question must be scrupulously preserved or restored in order for us to get back to the wonderful postulated good old days. For the loopholes are all part of the Y, right?
And there are other candidate Ys that had nothing to do with the tax system. Those were the years of the Bretton Woods accords, after all, which lasted from 1944 until 1971. These accords created a gold standard with regard to international financing. So maybe it was the gold that was behind all those good things! (Indeed, personally I take this quite seriously, although I acknowledge that just daydreaming about good old days would not make up an argument for it.)
The 1950s and 1960s were also a period when neither the US nor the UN recognized the People's Republic of China. In both contexts, only the government in Taipai was China. So ... withdraw recognition from Beijing! and go back to spelling it Peking! You want those good things "back," right?
But ... look at the list of "good things" again. The US "defeated Communism" in the 1950s and 1960s? Assuming that the word "Communism" in that sentence refers to the bloc of nations led by the old Soviet Union: didn't its "defeat" come after the reduction of the highest marginal taxes? In the late '80s and early '90s?
What the US did in the 1950s and 1960s was "contain" Communism. By, for example, making a point of committing to the defense of Quemoy and Matsu, the forward posts of the regime in Taipai that we continued to recognize as the only legitimate China. So why should this lead us to the conclusion that we should replicate the tax system of the period without also replicating its diplomacy? Rescind the recognition of Beijing! (Or, recognize reality and don't do that -- but drop silly arguments.)
The US created the interstate system during the period. Yes: but should we pay no attention now to the possibility that that is one of the causes of subsequent troubles? After all, it made the rapid consumption of gasoline a lot more easy and a lot more tempting. That in time became a geostrategic imperative: we have to keep importing the crude oil that makes that possible in ever-increasing quantaties. In the good old days, the best way to get to California was to take route 66. It made for a nice TV show but unwieldy travel. You want those good old days back? Tear up the interstates!
Does that sound silly? Well, consider again where I got the idea for such an absurd conclusion!
16 October 2011
Of course, Mubarak didn't quite make it this year to his 30th anniversary in office. He is on trial on charges of the murder of peaceful protestors during the "Arab spring."
Further, the new government of Egypt is looking into an accusation that Mubarak was complicit in Sadat's death. I don't know what to think about that accusation. It might be akin to the various horrible crimes that were attributed to Richard III during the Tudor era. The worse Richard III came to look, hump-backed and all, the better were the Tudors for having delivered England from such a misfigured tyrant.
15 October 2011
A representative from "Nobel Media" spoke to each man soon after they learned of their award, and recorded the interview. I'll just quote a snippet of each here.
The rep said to Sargent, "It's quite a time to be chosen to be a Novel Laureate, with so much of the world's attention focused on the economy," and then asked, "Do you find it a daunting prospect to be the subject of so much media attention?"
Sargent replied: "Well, I ... sorry, I don't know what's involved in that. You know, we're just ... yeah, we're just bookish types that look at numbers and try to figure out what's going on. So, I don't know what to say to that!"
In the interview with Sims, the rep asked about the difference between the two new laureates and their approaches to getting at macroeconomic causality.
Sims said that Sargent's aproach "is to start with a model economy for the most part ... and then [he] tries to fit it to data and run his experients in it. I usually start with a statistical model of the data and then add economic assumptions sparingly until I can begin to get answers."
14 October 2011
For those of you who enjoy fantasy -- this book is, as its title hints -- designed as the first volume of a projected trilogy.
From the publisher;'s press release:
"Carcium - The Conflict Begins” begins with the story about Nina, a young naive ruler, who was one of the last to fall into the darkness. She was put to the test of worthiness by the mystical elves and had failed. Her kingdom and its people were enslaved. Now, all of the kingdoms of Phygeria are on the brink of destruction and have succumbed to evil - except for Carcium. For years, a great king ruled the Kingdom of Carcium in the land of Phygeria. Brave and just, the king protected Carcium from the evils of the outside world and within the kingdom. But when the brave king falls, the days of peace in Carcium fall with him. The king’s young son, Prince Troy, assumes the throne and the evil that has threatened Carcium for so long moves ever closer to the kingdom’s walls. Prince Troy must face the test of the elves which many rulers in the past have failed. He must also find the mystical sword - the only weapon that can destroy Duras Carcer, a demon who draws his life force from overthrown rulers and fallen kingdoms. As a force – will Troy, Brutus and Nina have the strength to save the Kingdom of Carcium? Do they have the wisdom and abilities to restore Carcium to its former glory and overcome the evil ways of Duras Carcer?
A shout-out and congrats to Mr. Calvanese.
13 October 2011
The passage of time has proven her right in this. In last week's entries, though, I found something to say about eachof the allusions -- except for those below. Today we conclude our self-appointed task as annoator for Sayer's hypoithetical poem.
"the Officer in the Tower" -- Norman Baillie-Stewart (1909-1966), a Subaltern in the Seaforth Highlanders, who was court martialled in 1933 for selling military secrets to Germany. The two countries were not yet at war, so he was not in danger of execution for treason, but he did become the last British citizen ever imprisoned in the Tower of London, and earned the italicized nickname.
Peter the Painter -- the pseudonym of a Latvian Communist revolutionary, who was involved in street fighting in London (the "siege of Sydney Street") in 1910-11. His "real identity" is still a matter of some dispute, but it may well have been Yakov Peters (1886 - 1938).
Jenkins 'of the Ear', -- Robert Jenkins -- the birth and death dates are uncertain. He was captain of a commercial brig sailing the West Indies in 1731. His vessel was stopped and boarded by a Spanish ship, and his ear was severed. The incident became the professed cause of a war between England and Spain.
Dick Sheppard (1880 - 1937), the Dean of Canterbury Cathedral from 1929 until illness forced him to retire two years later. Sheppard was was of the outstanding clerical pacifists of the inter-war period.
Jack Sheppard (1702-1724), a thief was was repeatedly arrested by, and who repeatedly escaped from, the authorities in 18th century London, making him a Robin-Hood type figure in the eyes of some.
'the Widow at Windsor' -- A phrase popularized by Rudyard Kipling for Queen Victoria (1819-1901). It refers of course to the period of her rule after the death of Prince Albert in 1861.
The writer of this hypothetical poem also "holds strong views on" the following issues, on each of which I'll say a very few words:
Trade Unionism -- nowadays we would probably speak of "labor unions," and "collective bargaining." The phrase "trade unions" with or without an "ism" seems antique.
the constitution of the UNO -- of course the United Nations' constitution was and continues to be a target of objection both by nationalists who believe it constrains the sovereignty of member nations and by full-blooded internationalists who complain that it doesn't.
the 'theology of crisis' -- a phrase associated especially with Karl Barth (1886-1968), emphasizing the utter Otherness of God, and thus His unknowability. Reliance on scripture doesn't remove this unknowability, for: "The Bible is God's Word so far as God lets it be His Word," Barth wrote.
Freudian psychology -- Sigmund Freud (1856 - 1939) hardly needs comment from me, except to say that his influence was at something of a peak in the post-war British context of Sayers' hypothetical poet.
Einsteinian astronomy -- refers of course to Albert Einstein (1879 - 1955) and the profound changes he introduced into how we think about Space, Time, Matter, and Energy.
and the art of Mr. Jacob Epstein (1880 - 1959), an influential sculptor, whose art includes for example "St. Michael's Victory Over the Devil," a work affixed to the wall of Coventry Cathedral.
09 October 2011
the Tolpuddle Martyrs, a group of farm workers who were convicted in 1834 for swearing an oath of solidarity to one another. The prosecution was part of the broader anti-union backlash of the day, and the convicts were transported to Australia.
Brown and Kennedy, Both of these names are of course quite common, and it isn't obvious who Sayers meant. My first suspicion was an American one -- she was linking the two men who separately defeated Richard Nixon's political aspirations in the early 1960s! But Says seems to have completed this introduction by 1949. My present suspicion, since this item comes right after the Tolpuddle Martyrs, is that the reference is to James Brown (1862-1939), the head of the National Union of Scottish Mineworkers from 1917 to1936. Perhaps Sayers is coupling Brown with an American counterpart, Thomas Kennedy (1887- 1963), an important figure in the United Mine Workers (in the US) from at least 1925 until his death. If anybody has a better idea for what this pairing means in this context, please let me know.
the Dean of St Patrick's, this is an allusion to Anglo-Irish novelist Jonathan Swift (1667-1745). The St Patrick's in question is the Cathedral in Dublin.
the Dean of St Paul's, John Donne (1572 - 1631), the paradigmatic figure of what is nowadays called "metaphysical poetry." The author of the famous Meditation XVII, "And therefore never send to know for whom the bell tolls; It tolls for thee."
Dean Farrar, Frederic William Farrar (1831-1903), an advocate of "Christian universalism," the idea that all human souls will in the fullness of time be reconciled with God -- i.e. that there is no everlasting damnation of the sort Dante vividly imagined.
Fred Archer, Frederic Archer (1838-1901) An organist and composer whose career began in England but continued after 1880 in the United States, where he became conductor of the Orotorio Society in Boston, Mass.
Mrs Dyer, Louise Berta Mosson Hanson-Dyer (1884 - 1962) -- Sayers helpfully groups two of her musical referents together here. Mrs Dyer was an Australian born woman, who founded a music publishing operation, Éditions de l'Oiseau-Lyre, in 1932.
Lord George Sanger (1825-1911), an English analog to P.T. Barnum. Sanger ran a variety of shows and circuses and founded an association to lobby for the intrerests of such businesses, the Van Dwellers Protection Association.
Lord George Gordon, (1751-1793), a Scottish nobleman who converted to Judaism in 1787, at 36 years of age. Charles Dickens makes a favorable allusion to George Gordon in the novel Barnaby Rudge.
General Gordon, Major-General Charles George Gordon (1833-1885), best known for his determined defense of the Imperial position at Khartoum, in the face of the Mahdi rebellion, (Islamism, one might say) and his death in that defense in January 1885.
Ouida, The pen name of the novelist Maria Louise Ramé (1839-1908). Her works, considered racy at the time, were quite successful, but she did not manager her money wisely and died in poverty. Jack London cited her as an important influence on his own writing.
William Joyce, (1906-1946), known as Lord Haw-Haw, he was born in New York, but his family returned to his parents' home country, Ireland, while he was a child. They were Unionists in the Irish context, and they moved to England soon after Ireland received its independence. Joyce would found the British Union of Fascists and would broadcast radio propaganda for Hitler during the war. Hence his execution for treason in January 1946.
James Joyce, (1882-1941), one of the defining figures of literary modernism, perhaps best known fo Ulysses (1922).
08 October 2011
the Lady with the Lamp, this is clearly a reference to Florence Nightingale (1820-1910), the founder of nursing as a profession.
the Lady-with-the-Lampshade-made-of-Human-Skin, The story arose out of Buchenwald originally, that the medical personnel were making human souvenirs for themselves and taking them home, and that among these were lampshades made out of human skin. The specifics can't be substantiated, but the "lampshade" story made it into a documentary re: Buchenwald made by director Billy Wilder. Presumably the "lady" Sayers has in mind here was a hausfrau of one of those medical death-camp types.
Titus Oates (1649-1705) -- an Anglican priest who converted to Roman Catholicism in 1677, and thereafter told various tales about a supposed "popish plot" to assassinate King Charles II to which he had become privy. His accusations led to at least 15 executions. Eventually the government decided that Oates had been a perjurer, that the whole plot had been his invention, and he was imprisoned.
Captain Oates (1880 - 1912) -- An antarctic explorer. He decided during a disastrous expedition that there weren't enough supplies for the group of four -- and he sacrified himself -- walking out of the tent into a blizzard and certain death.
Quisling -- a reference to Vidkun Quisling (1887-1945) a Norwegian politican who assisted Nazi Germany in the take-over of his country, and who was executed by firing squad soon after the fall of the collaborationist regime.
the Owner of 'Hermit', -- Hermit, a race horse, won the 1867 Epsom Derby, a race held in a snowstorm. His owner was Henry Chaplin (1840 - 1923), a Tory politician known for his advocacy of protectionist trade policies regarding agriculture.
the French Bluebeard -- Henri Désiré Landru (1869-1922), a serial killer convicted of and executed for the murder of ten women between 1915 and 1919.
Bacon -- Francis Bacon (1561-1626) -- English lawyer, statesman, and philosopher, known for his description of induction, which is still sometimes called the "Baconian method."
Roger Bacon (1214-1294) -- Franciscan friar, author of a work on the place of philosophy within theology, which he sent to Pope Clement in 1265. This Opus Majus also includes a notable discussion of the science of optics.
Roger Fry (1866 - 1934), an art critic, and a member of the Bloomsbury group, stressed the formal properties of works of art at the expense of the "associated ideas."
the Claimant -- this may be a reference to Lambert Simnel (c. 1477 - c. 1525) who as the dust was finally setling after the War of Roses claimed to be the Earl of Warwick, a claim that threatened to ignite the war again.
the Bishop of Zanzibar, Frank Weston (1871 - 1924) the Anglican Bishop of Zanzibar (1908 - 1924) became involved in an intense dispute over whether Anglican clerics should administer sacraments to members of non-conforming Christian congregations such as Methodists, Presbyterians, etc. Weston accused of heresy those who did want to admit the non-conformists.
Clarence Hatry, (1888-1965) a stock speculator who, to support a failing position in 1929, forged a series of municipal bonds. He was sentenced to 14 years in jail in 1930.
I hope to finish this up tomorrow.
07 October 2011
Her point was that these references will become obscure over time, just as the various references of medival Italy now seem quite obscure to us.
The passage of time has proven her right in this. I've decided to see if I can say something about every one of her references, just as if these were for the annotations of a real poem.
06 October 2011
The passage of time has proven her right in this. I've decided to see if I can say something about every one of her references, just as if these were for the annotations of a real poet.
Chamberlain (him of the orchid) – Joseph Chamberlain (1836 – 1914), who wore an orchid as a personal signature, was a prominent political figure of the late 19th and early 20th centuries, and though never prime minister his name was associated with a hawkish policy against the Boers in South Africa. He was also the father of the next figure on our list.
02 October 2011
Here's the ad copy for that one: "In 1877, a young Sigmund Freud met an established physician named Josef Breuer and they began a collaboration that would lead to the publication of the classic work Studies on Hysteria. Freud subsequently minimized Breuer's contributions, betraying his former mentor and benefactor. Psychologist Louis Breger reveals the story behind the creation of Studies as well as the case of Anna O., which helped contribute to Freud's definition of 'neurosis,' showing how Freud's own self-mythologizing and history not only affected everything he did in life, but also helped shape his emerging beliefs about psychoanalysis."
The second of these books is called FREUD's WIZARD. Here is the ad copy.
"The saturation of the English-speaking world with psychoanalytical concepts was instigated by one British analyst, Ernest Jones. As Freud's disciple, collague, and biographer -- and the man who literally rescued Freud and his cabal from the Nazis in 1938 -- Jones led the international psychoanalytic movement, shifting its vortex from Vienna to London and spreading its influence to Toronto, New York, and Boston. Brenda Maddox's biography reveals a brilliant and flawed analyst who both venerated and challenged his mentor, and who well understood and used his own abilities to attract women in a string of liaisons."
Both books, as you can see, focus on the mentor-protege relationship, and together they give us Freud at each side of it.
01 October 2011
A clearinghouse [or "clearing house" -- both forms are in common use] is the entity within an exchange mediated transaction that ensures each party against the default of the other. Joe buys asset X through an exchange, while Jane sells an equal quantity of asset X through that exchange. There is always a risk that the deal will not "settle," that (to put it crudely) Joe's check will bounce.
But it doesn't matter to Jane if Joe's check bounces. She'll never know, She has sold asset X through the exchange, and the exchange, through its contract with the clearinghouse, will see to it that she is paid the agreed-upon amount.
The clearing house requires that market participants make a sort of deposit, known as a performance bond or margin. A margin amount might be, say, 5 percent of a contract's underlying value. By requiring margins, or contractually requiring that the exchange require margins, the clearing house ensures that only financially solvent parties participate in the exchange activities, thus limiting its own risk.
This is a critical difference between exchanges on the one hand and over-the-counter markets on the other. OTC markets have no central clearing. If you enter such a market, you take upon yourself the "counter-party risk" that you'll make a deal that won't settle.
Anyway, there has been a good deal of debate over the years as to whether clearing operations should be internal to an exchange, or whether they should be independent entities, at arm's length from the exchange. Over time, though, independent clearinghouses have been captured by one or the other of the great exchanges, or at least they now have the same holding corporations that one or more of the exchanges they service has. Thus, it is a matter of some significance, it is a landmark, that a rare still-independent clearinghouse has now fallen captive.
Cheers, then, to LCH, and its now-vanishing days as an independent body.
Knowledge is warranted belief -- it is the body of belief that we build up because, while living in this world, we've developed good reasons for believing it. What we know, then, is what works -- and it is, necessarily, what has worked for us, each of us individually, as a first approximation. For my other blog, on the struggles for control in the corporate suites, see www.proxypartisans.blogspot.com.