david dissadent
New Member
Former head of Godman Sachs Ben Bernanke is now..... head of the Federal Reserve.
Lehmans goes down, global banking in crisis
- Thread starter durruti02
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Henry Paulson the US Treasury Secretary was head of Goldman Sachs. Don't think Bernanke was.
The USA not AAA!
*laugh out loud* Hasn't really been that way for a long time. Got the world's best armed forces though. That's what counts. Might makes right.
ymu
Niall Ferguson's deep-cover sock-puppet
Indeed.When the people that you are rating are the very same people that are paying you to give them the "AAA" rating they crave..........
I'm smart, but not that smart, and yet I simply can't understand how or why this state of affairs - this massive conflict of interest inherent at the very core of the integrity of the global financial system - has not been pointed out and laughed at for the last two decades.
As an aside, this is exactly how the CE mark (EU replacement for the British Safety Institute kite mark) works. It covers medical devices, helmets, kid's toys etc etc. All awarded by private profit-making companies who are competing with other private profit-making companies for business from the companies seeking a CE safety certification.
I'd love it if this scandal opens up that can of worms.
*starts writing letters*
newbie
undisambiguated
because those of us on the outside don't understand what they're up to, and those that do understand know which side their bread is buttered.
many, many people have said for years that the whole thing- the 'global financial system'- is rotten to the core and should be dismantled, but we've been patted on the head and told we just don't understand.
you're not the only one who is angry.
I know the system is pretty rotten & state that as an insider - and we will see fallout from this in every aspect of our lives.
I have witnessed someone pumping his profits ( & thus his 20% of gross profits bonus ) by a seven figure sum by a bit of sleight of hand - I formally reported it , but nothing was ever done. pretty galling when you can see this happening
but human nature - weve had say 15 years of increading incomes & the ability to spend money we dont have without thinking of the consequences - property fetishment/ wide screen tellys / mobile phone pre planned obselescence / - you could go on and one - but we/ most of us have been willing participants in the system that has allowed us to feed our selfish desires with no thought of the end result
The system will sort itself out - quicker than you may imagine as well - those who survive will use their intelligence to exploit new areas and devgelop new products - maybe at this juncture we must ask outrselves - what are the new products and how can we regulate these / restrict these at the onset- not just when it all goes tits up
proactive not reactive
the Big boys have always demanded hands off regulation - they will look after themselves thank you very much & thats great when the markets are booming and there is cash slopping about - now perhaps, seeing as we are in some ways covering their fuckups, its time to bring in active and intelligent regulation on a global scale
but this wont happen
I have witnessed someone pumping his profits ( & thus his 20% of gross profits bonus ) by a seven figure sum by a bit of sleight of hand - I formally reported it , but nothing was ever done. pretty galling when you can see this happening
but human nature - weve had say 15 years of increading incomes & the ability to spend money we dont have without thinking of the consequences - property fetishment/ wide screen tellys / mobile phone pre planned obselescence / - you could go on and one - but we/ most of us have been willing participants in the system that has allowed us to feed our selfish desires with no thought of the end result
The system will sort itself out - quicker than you may imagine as well - those who survive will use their intelligence to exploit new areas and devgelop new products - maybe at this juncture we must ask outrselves - what are the new products and how can we regulate these / restrict these at the onset- not just when it all goes tits up
proactive not reactive
the Big boys have always demanded hands off regulation - they will look after themselves thank you very much & thats great when the markets are booming and there is cash slopping about - now perhaps, seeing as we are in some ways covering their fuckups, its time to bring in active and intelligent regulation on a global scale
but this wont happen
marty21
One on one? You're crazy.
so short selling has contributed to this mess, I'm not sure i understand it fully, but dealers sell stocks they don't own, in the hope of a drop in the value in the shares so that they can buy them back at a profit and trouser the difference.
is that right - so if you could only sell shares you did own, would that be better for the market, or is that too simple?
is that right - so if you could only sell shares you did own, would that be better for the market, or is that too simple?
Like most things, there is a good reason why short-selling and derivatives came about, before it was fucked up by speculators. If you need to change your asset portfolio in a hurry (for instance you get rid of a load of US liabilities and you consequently need to switch US assets to UK assets), actually buying and selling the stocks can cripple you with frictional costs. Instead, you go short on what you own but don't want any more and go long on what you don't own but do want to own and then you gradually shift your actual assets over a period of months to its new position.
Not having the capability to do this would cause a lot of problems in well-run portfolios.
cesare
shady's dreams ♥
Thanks
Weird that the Beeb graph doesn't reflect that though
http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/stockmarket/3/default.stm
Well, from a purely pragmatic perspective, given how much money is currently sloshing through these instruments, I reckon it would be very hard to do without creating a crash that makes the other crashes look like bumper cars.
From a theoretical perspective -- no, I don't think you deal with a grazed knee by cutting off the leg. (Or maybe more aptly, you don't deal with a gangrenous leg by cutting it off until you have at least tried antibiotics). The issue is speculation, so from a theoretical perspective I say that you try to tackle the speculation. You could require huge collatoralisation, for example. There must be other things too -- it's really, really not my field of expertise so I can't claim to have the answers.
What it all boils down to, however, is (a) credit risk; and (b) systemic risk, neither of which were remotely understood or controlled properly. These are things that could and should be tackled. The FSA makes insurers tackle them for their risks, having learned the lessons of the Lloyd's and London Market spiral problems of the late 80s. This banking crisis is really just a re-run of that spiral in the financial markets. They need to take what was implemented to stop it happening again in insurance and apply it to banking.
marty21
One on one? You're crazy.
ok, but AIG was the biggest insurance company in the world wasn't it?, albeit with other non-insurance business, and that still tanked
But the thing about AIG -- the key thing that you really have to understand about AIG -- is that it is American and hence not regulated in the UK.
The American regulators are toss.
marty21
One on one? You're crazy.
alright, ta, but it has business interests in the uk, so those subsidiaries are regulated?
Is it the UK subsidiary that has fucked it all up?
marty21
One on one? You're crazy.
no, point taken
kyser_soze
Hawking's Angry Eyebrow
One acronym: LTCM. The Fed especially was well aware of the systemic risk posed by derivatives trading and yet didn't set any real rules about it, even after LTCM, other than plastering on a warning about how they were high risk instruments, and you should only play if you can loose cash.
kyser_soze
Hawking's Angry Eyebrow
Yeah, it even managed to make the 1980s S&L collapse look like a bargain for the US taxpayer, at a mere $1.2 trillion
pinkychukkles
Feed Your Head
It's quite an appropriate time to read The Great Crash: 1929 by John Kenneth Galbraith, which I did recently. A point was made in the book about how after crashes the markets become heavily regulated ("this must not be allowed to happen again!") but as the years pass and the memories grow faint, the regulation gradually gets repealed and institutions and individuals start to speculate on what is becoming a bubble by leveraging themselves to high levels. Except that the leverage being employed is cunningly disguised by other exotic instruments or couched in different language to avoid any comparison to the mistakes of the past. We are rather predictable 
IIRC, it wiped out every profit the banks had ever made since their inception. That's quite a loss.
It's what happens with catastrophe insurance too. No hurricanes for a few years and suddenly things like Katrina become something that only happened in the past.
Heh!
Wouldn't hurt a certain profession's career prospects either, eh?
By the way, kabbes, I'm assuming your an Institute (or Faculty,) man, rather than a Society bod - and I'll guess that you're mostly involved on the valuation side rather than pricing, group life maybe?
Woof
Yeah.
The authorities here have prohibited AIA from transferring any assets held locally.
Woof
kyser_soze
Hawking's Angry Eyebrow
Earlier this week, I read a parable along similar lines.
A city is prosperous and wealthy, it's citizens happy, until one day it is invaded. It has no defences, no real army and is quickly overrun. Once the invaders leave with their plunder, the people of the city build a mighty wall to defend themselves, raise a standing army, and pay more in taxes to pay for their defence. The next generation are filled with tales of the horror by their parents (some even remember the invasion), and improve on the defences and expand the army, saying never again.
Their children grow up knowing nothing but peace, safety and prosperity, and they grow tired of having to serve in the army, and paying for the upkeep of the defences, and say 'We don't need the army or the wall anymore', and the army shrinks, the wall is allowed to crumble, and despite the protests of their grandparents and parents, they continue along this path.
Then one day, the invaders return, and sack the city once again, and the grandchildren cry 'We should have listened to our elders!' and begin the task of rebuilding the city again.
The Chinese have a slightly shorter version of the same story:
1st Generation builds a business
2nd generation consolidates and expands the business
3rd generation pisses the business up a wall on earthly pleasures, never having had to struggle and therefore not realising the value of what they have.
A city is prosperous and wealthy, it's citizens happy, until one day it is invaded. It has no defences, no real army and is quickly overrun. Once the invaders leave with their plunder, the people of the city build a mighty wall to defend themselves, raise a standing army, and pay more in taxes to pay for their defence. The next generation are filled with tales of the horror by their parents (some even remember the invasion), and improve on the defences and expand the army, saying never again.
Their children grow up knowing nothing but peace, safety and prosperity, and they grow tired of having to serve in the army, and paying for the upkeep of the defences, and say 'We don't need the army or the wall anymore', and the army shrinks, the wall is allowed to crumble, and despite the protests of their grandparents and parents, they continue along this path.
Then one day, the invaders return, and sack the city once again, and the grandchildren cry 'We should have listened to our elders!' and begin the task of rebuilding the city again.
The Chinese have a slightly shorter version of the same story:
1st Generation builds a business
2nd generation consolidates and expands the business
3rd generation pisses the business up a wall on earthly pleasures, never having had to struggle and therefore not realising the value of what they have.
Heh! Actually, I wouldn't touch that banking mess for all the career prospects in China.Heh!
Wouldn't hurt a certain profession's career prospects either, eh?
Yes, Institute. But I work in the run-off of GI reinsurance (i.e. the London Market) rather than life. I'm a deputy chief actuary, so I get involved in everything my company does. Mostly I am either evaluating potential purchases of other companies that have fucked up and hence gone into run-off or I am helping to deal with the run-off we already have, which includes valuing the liabilities but also attempting to get rid of them via deals with the original risk owner.
It's interesting, actually, get to see a bit of everything in the risk world. And our business model is predicated on other people making mistakes, which means we'll never be short of work...
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