Wednesday, October 22, 2008

More on rating agencies and sukuk

During the boom years, many were cheering the absurdly mispriced and risky sukuk issuances, and the rating agencies who approved them. I have listed a number of the problems with sukuk structures in my book and elsewhere. Now, it has become clear that those S&P and Moody's were simply engaged in a race to the bottom:

Oct. 22 (Bloomberg) -- Former executives from Standard & Poor's and Moody's Investors Service told lawmakers today that credit raters relied on outdated models in a ``race to the bottom'' to maximize profits.

Jerome Fons, a former managing director of credit policy at New York-based Moody's, told the House Oversight and Government Reform Committee today that originators of structured securities ``typically chose the agency with the lowest standards, engendering a race to the bottom in terms of rating quality.''

Representative Henry Waxman, the committee chairman, said that the recent history of the credit rating companies ``is a story of colossal failure.'' ``The result is that our entire financial system is now at risk,'' Waxman said.

29 Comments:

Blogger heraish said...

Ralph Nader's single payer not for profit health insurance program is close to the islamic takaful concept.

8:43 PM  
Blogger heraish said...

http://www.arabnews.com/?page=6&section=0&article=115802&d=26&m=10&y=2008

According to this the us government is interested in learning about Islamic finance features that may be useful in preventing future crises.

11:11 PM  
Blogger Adel Al-Zawm said...

Dr
critique is path to develop. Yet, in all your statements you do not offer subtitute or recommendations, or at least are unknown. Is not to try better than to only chastise, I wish we hear and read of solutions. we are keen to learn.

12:11 PM  
Blogger heraish said...

Japan may lower their rates to .25%and moving forward will use monetary supply alone independent of interest rates as a monetary policy tool. The fed will reduce their rates to 1% soon. If a central bank reduces their rates to 0% will conventional home financing become halal? As they are borrowing from the central bank at 0% and then lending to the end user whilst charging a service fee/rate.

9:35 PM  
Blogger heraish said...

رفيق المصري/ جدة: السلام عليكم، أحييكم أخ عثمان وأحيي الضيف الكريم الأستاذ علي السالوس وأقول إن أعضاء هيئات الرقابة الشرعية الأساسيون منهم حوالي عشرة تجدهم في هيئة المعايير في البحرين في هيئة الزكاة والأوقاف في الكويت، في شركات التأمين في المجامع الفقهية، في مكة، جدة، القاهرة، فهي هيئات معولمة يقومون بعبء كبير يتجاوز إمكاناتهم فتجد الواحد منهم مثلا عضو في عدد كبير من المؤسسات المالية بالإضافة إلى قائمة طويلة له من أنشطة أخرى ينوء بها جميعها، ليس عضو هيئة الرقابة الشرعية هو الأعلم بل هو الألين وكلما زادت ليونته زاد الطلب عليه، فهذه الهيئات هي هيئات فتوى ورقابة في آن معا ولكن كثيرا ما يحصل أن الفتوى في واد مجرد ديكور والعمل في واد، أفتوا بما شئتم ونحن نعمل بما نشاء والغرض من الفتوى والاجتماعات والمؤتمرات قد يصبح مجرد ضجيج للدعاية والإعلام، ومن أجل إشعار جمهور الناس من أن الأمر جدي، ماذا كانت حصيلة جهود الرقابة؟ البنك الإسلامي في الحصيلة كالبنك التقليدي إلا أن الفرق بينهما أن البنك الإسلامي فيه هيئة رقابة، ماذا كانت حصيلة هذه الجهود؟ كلا البنكين يهدف إلى الربح، يعني الإسلامي والتقليدي، كلا البنكين يتعامل بالمداينات أو الديون، كلا البنكين وسيط مالي، كلا البنكين يفصل التمويل عن البيع، وإذا كان ثمة بيع في البنك الإسلامي فهو بيع صوري، كلا البنكين يأخذ الفائدة أحدهما يأخذها صريحة والآخر يأخذها مستترة تحت أسماء مختلفة، يغلب على أعمال الهيئات الحيل ولا أقول الرخص كما يقول البعض، فالرخصة في موضعها كالعزيمة في موضعها لا اعتراض عليها أما الحيلة فهي شيء آخر، ومن نتائج الحيل أن كان البنك الإسلام كغيره وربما أصبح أحيانا أسوأ إذ صارت معدلات الفائدة المستترة فيه أعلى من غيره، فهم يسمون الفائدة ربحا والربح لا حد له بخلاف الفائدة الخاضعة لرقابة البنك المركزي، المهم أن أعضاء الهيئات لم يتركوا حيلة قديمة ولا حديثة إلا وأحييوها فهم لم يحيوا فقه المعاملات كما يقول البعض بل أحيوا فقه الحيل وكلما جاءت حيلة جديدة لعنت أختها، مسابقة حيل وهذه الحيل لا شك مريحة لرجال السياسة ولرجال المال ولرجال الفتوى لأنها مجرد تغيير صوري سلس لا يترتب عليه أي إزّة ولا ما هو أقل من الإزّة..

عثمان عثمان (مقاطعا): فضيلة الدكتور يعني أنت الآن رسمت ربما صورة سوداوية عن البنوك الإسلامية، ماذا يفعل المسلم أمام هذه الصورة التي رسمتها؟

رفيق المصري: يعني أنا أقول إذا كان الوقت ليس فيه متسع..

عثمان عثمان: باختصار نعم.

رفيق المصري: نعم؟

عثمان عثمان: باختصار لو سمحتم.

رفيق المصري: يعني أنا أختصر فأقول في الوقت الراهن وتحت ضغط النظام الرأسمالي المهيمن على العالم يجب الاعتراف، يجب الاعتراف على أعضاء هيئات الرقابة الشرعية وغيرهم بأن هناك صعوبة كبيرة في إلغاء الفائدة ومن يظن أن الفائدة قد ألغيت فهو واهم والحل الآن هو أن نتعامل مع البنوك القائمة كلها أيها أكفأ وأرخص وأخيرا علينا أن نكون جادين في فتاوانا وفي بحوثنا في الاقتصاد والفقه لكي نعيد الحيوية والابتكار إلى الاقتصاد الإسلامي والفقه المالي ونبعد عنهما الحيل والتشويشات وشكرا، هذا باختصار


علي السالوس: الصورة التي رسمها تمثل جزءا من البنوك الإسلامية لا كل البنوك الإسلامية، ليست كل البنوك الإسلامية بهذه الصورة القاتمة وليس صحيحا أنه لا فرق بين البنك الربوي والبنك الإسلامي وأن البنك الربوي الفائدة محددة ومنضبطة وهنا الفائدة تسمى ربحا وليس فيها انضباط، فالأخ الصديق الدكتور رفيق مصري وأنا أعرفه جيدا وهو صديق عزيز وأخ حبيب، أرى أن هذه الصورة القاتمة ليست كل البنوك الإسلامية لأنه أنا اطلعت بنفسي على معاملات في البنوك الإسلامية، معاملات صحيحة ليس فيها لا حيل ولا رخص، حتى رخص، وإنما فيها معاملات سليمة تماما، إنما هذا ما أشرت إليه من أنه دخل في هيئات الرقابة الشرعية بعض من لا يتقي الله عز وجل، بعض لا كل، أما التعميم هذا لا يجوز

This is an interesting interaction between a researcher and a scholar. The researcher essentially says that islamic finacne both in practice and theory currently is bogus. The scholar replies that he has seen banks apply islamic principles properly and that it is not correct to generalize.

http://www.aljazeera.net/NR/exeres/E102F157-C32C-4DCC-820C-2CE6C1B7D85E.htm

10:03 PM  
Blogger Mahmoud El-Gamal said...

I know Dr. Rafiq Al-Misri reasonably well, through a number of visits to Jeddah where he works at the Islamic Economics Center in King Abdul-Aziz University. Dr. Al-Misri is a former student of the late Dr. Mustafa Al-Zarqa (r). I have read his writings and the writings of Dr. Al-Salaus, and based on those readings, I can say categorically that Dr. Al-Misri is much more of a "scholar" (both in the academic and in the religious sense) than Dr. Al-Salus. I agree fullly with what Dr. Rafiq said. Perhaps I should dedicate a blog entry to this.

6:41 AM  
Blogger heraish said...

http://alheweny.org/html/modules.php?name=Video_Stream&page=watch&id=130

Here the shaikh slams muslims for trusting the islamic banks.

8:44 AM  
Blogger heraish said...

Is'nt pumping all this liquidity by the central bank going to result in inflation as it is essentially debasing the currency.

4:09 PM  
Blogger heraish said...

Religion and State By Leon Carl Brown

This is another book discussion the relationship between mosque and state.

8:55 PM  
Blogger heraish said...

Is it permissable to sell diamonds on an installment basis? The reason i am asking as it may be a usefull tool in tawarruq.

5:34 PM  
Blogger heraish said...

http://news.bbc.co.uk/2/hi/middle_east/7764657.stm

According to this the lebanese banking system is thriving in spite of the world financial crisis.

6:05 PM  
Blogger heraish said...

I wish you a happy eid

8:00 AM  
Blogger heraish said...

i am considering opening a mortgage company and naming it zabihah mortgage!

5:10 PM  
Blogger hsaad9112 said...

FOR ALMOST A YEAR I WAS READING ISLMIC PHILOSOPHICAL BOOKS.
I READ A FEW DOZEN BOOKS A LOT OF BIOGRAPHIES, AND ARTICLES.
SOMETIMES IT FILLS DIZZINYING AND CONFUSING. I WAS ALMOST SOLD TO A MUTAZILAH THOUGHT. LAST MONTH I STARTED READING QADI ABDULJBAR’S “SHERH USUL ALKHAMSAH”. STILL ON THE FIRST CHAPTR, COULDN’T GO FORWARD…,
SUDDENLY I READ UN ARTICLE BY U. CHAPRA, AND LEAD ME TO YOUR ARTICLE. IT WAS VERY ENLIGHTINIG AND EDUCATIONAL. MY BACKGROUD WAS ECONOMICS; I DON’T KNOW HOW I GOT TO PHILOSOPHY AND FREE WILL THING. ( I THINK I’M GETTING OLDER)
NOW I’M READING MORE ARTICLES OF YOURS.
BUT I SEE THE SAME PROBLEM AS THE ISLAMIC PHILOSOPHY.
‘INTEREST IS HARAM BUT OURS IS HALAL’ ‘EVERYTHINGIS PREDISTINED BUT YOU ARE FREE TO CHOOSE….’
MAY BE I AM CONFUSED I GOT READ MORE. BACK TO YOUR ARTICLES AND SOME FEW OTHERS. ANY SUGGESTION...?

6:00 PM  
Blogger heraish said...

as a response to the previous post let me give an example:

A teacher is standing in front of a class. In the middle of the semester the teacher can tell which students are likely to fail and which are likely to pass. At the end he may be wrong on some but however he could be correct 90% of the time for example. This does not take away from the fact that the students projected to fail have the equal oppurtunity to get an A.

Similarly God gives people free will but due to his comprehensive knowledge he knows who will pass and who will fail.

11:12 AM  
Blogger heraish said...

Ron Paul's economic advisor Peter Schiff uses analogies to describe our current economic crisis. Topics include debt-financed consumption, business cycles, the Federal Reserve, the cronies in Washington, and the modern American service economy.

Peter is a follower of the Austrian School of economics, to learn more please visit


http://www.youtube.com/watch?v=vweLBpE4mso

11:15 AM  
Blogger heraish said...

Its official! Fed rate is going to zero%. We are now approaching real islamic banking!

7:31 PM  
Blogger heraish said...

hedge product is back: You can hedge your house equity against an index of the market prices in your area.

http://www.equitylockfinancial.com/

9:52 AM  
Blogger heraish said...

http://www.youtube.com/watch?v=9dqbojrXooc&feature=PlayList&p=39DE8A9DC37BC819&index=9

Qaradaghi talks about the history of insurance and Islamic insurance

11:46 AM  
Blogger heraish said...

a solution to the mortgage crises is to convert all the loans to 0% and let 100% of the payment go towards principal. And not allow home owners to buy anything else until they pay off their houses.

8:31 AM  
Blogger Armageddon Thru To You said...

Armageddon Thru To You

If you've been wondering why it seems like the world around us is unraveling, it's because the last days as foretold in the bible are now upon us. Just as it was 2000 years ago, many were unable to discern the signs of Jesus Christ's first coming (Mat 16:3), as will many concerning his second coming, which will occur very soon. Yes many have proclaimed a similar sentiment many times in the past, but their errors have no bearing on today other than to lull you into spiritual apathy, and that too was prophesied to occur in the last days.


If you're not a believer in Jesus Christ because you're an atheist, consider that the underlying impetus for your disbelief is most likely borne of pride and here's why:

When we die, if you as an atheist were right, then there is no upside or downside for anyone regarding the afterlife. We will all simply cease to exist

However if we Christians were right about our belief in the afterlife, then we will be given eternal life and you as an atheist will receive eternal damnation

Given the choices, the position held by an atheist is a fools bet any way you look at it because the atheist has everything to lose and nothing to gain. It is tantamount to accepting a “heads I win, tails you lose” coin toss proposition from someone. And that someone by the way is Satan (see Ephesians 6:12).

The only way to explain the attitude held by an atheist is pride, pure and simple. The intellectually dishonest and/or tortured reasoning used by atheists to try and disprove the existence of God is nothing more than attempts to posture themselves as superior (a symptom of pride). And as anyone who has read their bible knows, this is precisely the character flaw that befell Lucifer, God's formerly most high angel. (Isaiah 14:12-15). Is it any wonder then why the bible is so replete with references to pride as the cause of mankind's downfall?

Pride permeates our lives and burdens us in ways that most of us seldom recognize. Ironically, pride is the one thing that can blind someone to things even the unsighted can see. And sadly pride will blind many with an otherwise good heart, to accepting the offer of eternal salvation that Christ bought and paid for with his life.


In any event, if you're an atheist, I wish you only the best for every day of the rest of your life because for you, this life is as close to heaven as you'll ever get, but for believers in Christ, this life is as close to hell as we'll ever get.





If you're not a believer and follower of Jesus Christ because you are of another faith, please take the time to very carefully compare your faith to Christianity and ask yourself, why is the bible the only religious book with both hundreds of proven prophecies already fulfilled as well as those being fulfilled today? No other religion can claim anything remotely close to this fact. Many Christians who are serious students of bible prophecy are already aware of the role and significance of bible prophecy in foretelling end time events. God gave us prophecy as evidence of his divine holiness to know the begining from the end (Isa 46:10). God also believed prophecy to be so important that to those willing to read the most prophetic book in the bible, the Book of Revelation, he promised a special blessing (see Rev 1:3), and this is the only book in the bible that God gives its reader a special blessing for reading. Something to think about.


Don't risk losing Christ's offer of eternal life by not accepting him as your savior and by thinking that the bible is nothing more than a compilation of unrelated and scattered stories about people who lived 2,000 plus years ago. If you take the time to study (not just read) the bible, you will literally be shocked to learn things you would have never imagined would be revealed in it. Did you know that like parables, God also uses particular months and days in the Jewish calendar, Jewish Feasts and customs, solar and lunar phases, celestial alignments, gematria (Hebrew numerology) early bible events and more as patterns and models to foretell future events?


Consider the following interesting facts about the bible that testify to its God-inspired authorship:

Did you know that in Gen 12:2, God said he would bless Israel?. How else can you explain the grossly disproportionate level of success achieved by Jewish people as a tiny minority in the world, especially after all they have gone through? And how can you explain the success achieved by the tiny nation of Israel, surrounded by enemies outnumbering them 100 to 1 and yet still they remain victorious in all their wars?


Did you know that as evidence to indicate that Israel is the epicenter of the world from God's point of view is the fact that languages to the west of Israel are written and read from left to right as if pointing to Israel, and languages from countries to the east of Israel are written and read from right to left, again as though pointing to Israel. Just a coincidence, you say? I think not.


Did you know that the six days of creation and seventh day of rest in Genesis is a model for the six thousand years of this age (ending very soon), that is to be followed by a 1,000 year millennial reign by Christ (see 2 Peter 3:8)? Adam was born sometime prior to 4000 B.C., therefore our 6000 years are almost up.


Did you kow that the Gospel of Jesus Christ is hidden in the meaning of the Hebrew names listed in the genealogy of the book of Genesis (Research it online)? To deny this was God-inspired, one has to instead believe that a group of Jewish rabbis conspired to hide the Christian Gospel right inside a genealogy of their venerated Torah, which is not a very plausible explanation.


Did you know that solar eclipses, which the bible describes as the sun being black as sackcloth, and lunar eclipses, which the bible refers to as blood red moons, have prophetic meaning? Research it online. God showed Adam (and us) his plan for man's redemption through the use of celestial alignments. (research Mazzaroth online)

Did you know that much of the symbolism in the book of revelation refers to planetary alignments that will occur when certain events occur as prophesied? These planetary alignments also explained the birth of Christ, just search out The Bethlehem Star movie on the Internet.

Did you know that the references in Eze 39:4-17 and Rev 19:17-21 in the battle of Gog/Magog and Armageddon respectively, in which birds of prey will eat the flesh of the dead in battle from two enormous wars is based on fact? The largest bird migration in the world consisting of bilions of birds (34 species of raptors and various carrion birds) from several continents converge and fly over Israel every spring and fall. Coincidence? I think not.

Did you know that Hebrew numerology, also known as Gematria, and the numbers with biblical and prophetic significance are hidden in the Star of David? Google the video called "Seal of Jesus Christ"

Did you know that the seven Churches mentioned at the beginning of the Book of Revelation describe the seven stages the Church will go through?

There are literally hundreds of hidden messages in the bible like these that testify to the fact that the bible was God inspired, and statistically speaking, are all exponentially beyond the likelihood of any coincidence. You can find them yourselves if you only take the time to look into it. Remember Proverbs 25:2 "It is the glory of God to conceal a matter; to search out a matter is the glory of kings".


And finally, if you are Catholic, or one who subscribes to the emergent Church or seeker-friendly Church movement, please compare the doctrine taught, advocated or accepted by your Church, with the actual bible, notwithstanding some new-age version of the bible. And remember that although the bible is often referred to as the living bible, the word "living" was never intended to imply in any way that the bible "evolves" over time to meet, or be consistent with, the standards of man. It's just the opposite.


Well, am I getting through to you? If not, the answer might be explained in the response given by Jesus Christ in his Olivet discourse when he was asked by his disciples why he spoke the way he did (in parables, etc.) in the book of Matthew 13:10-16. What Jesus said could have easily been paraphrased more clearly as "so that the damned won't get it". Why did Christ respond the way he did when asked why he spoke this way? Is there something about pride (the bible says there is) that closes one's heart to seeing or hearing the messages supernaturally hidden in bible parables, models, typologies, and similes, etc.? That should give you something to think about, but don't take too long. Time is now very short.


If it sometimes seems like there are powers at work behind the powers we know, remember what it says in Ephesians 6:12 "For our struggle is not against flesh and blood, but against the rulers, against the authorities, against the powers of this dark world and against the spiritual forces of evil in the heavenly realms." If you study the bible, it will become clearer.


And by the way, if you are a scoffer, this too was prophesied to occur in the last days. See 2 Peter 3:3.


Thank you and God Bless you!
Armageddon.thru.to.you (at) gmail.com

1:36 PM  
Blogger heraish said...

http://www.cnbc.com/id/15840232?video=1027496846&play=1

Nassim Taleb and Roubini blast the system.

6:53 PM  
Blogger heraish said...

http://www.bloomberg.com/apps/news?pid=20601080&sid=a.w.XnZAb4wI&refer=asia

Japan is introducing halal 0% interest bonds in return for a tax break. Interesting. Are taxes itself halal though?

6:40 PM  
Blogger heraish said...

Shaikh Bin Bayah gave a fatwa at the The 7th annual convention of 'Reviving the Islamic Spirit' will be held in Toronto, saying that if a student loan is at a low percentage rate near or lower then the inflation rate it is permitted.

Also the new mortgage program by Obama could lower interest rates to 2% for five years for some people. Those people must be underwater and the rate would go as low as 2% to bring their housing payment/income ratio to 31%. If that is the case that would be islamically accpetable for at least 5 years according to the principal set by Bin Bayah.

http://money.cnn.com/2009/02/18/real_estate/Obama_foreclosure_plan/?postversion=2009021819

8:52 PM  
Blogger heraish said...

http://news.bbc.co.uk/2/hi/africa/7903953.stm

Recently the border between Morocco and Algeria has been opened for a Gaza convoy to pass through. Boutefleka is a dumb ass to keep the border closed as has been the case for the past 15 years. What a selfish and narrow minded person he is. The Morrocans want it open as this has resulted in a stifling of economic activity.

11:13 AM  
Blogger heraish said...

Many Islamic scholars have forbidden insurance. In the case of mortgage insurance we have seen the companies providing this insurance as having taken huge losses. The government needs to just shut these companies down as they have proven to be a failed concept. They have taken losses and cannot insure all that they had committed to insuring. The other big failure in the insurance business is AIG which is just sucking up tax payer money.

8:28 AM  
Blogger heraish said...

This guy is saying that Indian Intelligence did it as a response. The first 10 minutes were useless information. His recommendations are also ridiclous blocking Indian commercial traffic. The commentator is in denial thinking Pakistan is not involved in Mumbai but the guest is saying that RAW is simply responding to perceived ISI action in Mumbai. Meaning that ISI was responsible for Mumbai! According to the guest's analysis.

Also the expert says that none of the terrorists were injured proving they were well trained. It also proves that Pakistani Police were useless. The weapons analysis was interesting though.

There should be a fully transparent investigation including of the security failures. Before any policy decisions are made.

http://pakistanfirst.com/video.html?task=viewvideo&video_id=70

10:41 PM  
Blogger heraish said...

http://www.gulfnews.com/nation/Police_and_The_Courts/10293241.html

$1.8 billion fraud in Dubai Islamic Bank

Your prediction came true!

9:45 AM  
Blogger willson said...

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5:40 AM  

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