Sunday, Jun 21, 2009
Rich Man, Poor Man, Goldman, Thief
Observer: Goldman to make record bonus payout
'Vince Cable, the Liberal Democrat treasury spokesman, said: "The investment banks more than any other institutions created the culture of excessive leverage, excessive risk and excessive bonuses that led to the downfall of the financial system. Now they are cashing in and the same bonus culture has returned. The result must be that we are being pushed to the edge of another crash." '
Posted by letthemfall @ 12:42 PM (851 views) Add Comment
6 Comments
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1. The Baldman said...
These banks are again exploiting a monopolistic position and their fees regulated.
2. kruador said...
While they're allowed to effectively declare any asset 'troubled' and stop marking it to its market value, the banks are able to fiddle their balance sheets to their hearts' desire. That allows them to declare huge profits, pay bonuses - and blow huge bubbles. The slightest run, though, will pull the whole thing down.
The point is that those assets are meant to be liquid, to be able to cover withdrawals beyond the expected, in exchange for actually keeping back percentages of deposits. Therefore the only value that matters is the amount that the bank can get for those assets in a rapid fire sale. If we get into a sequence where people run on multiple banks at once, the value of those assets will crash fast as there will be a glut of them. Even the current market price may be an overestimate of what the recoverable value of the assets are.
The argument has been that securitised mortgages must be worth more than market price because they pay regular income. That's completely irrelevant to the situation. It's the risk of default and not recovering the full value loaned, and the time taken to recover any value at all.
3. paul said...
What's most unbelievable is that the Brown government will think this is all very good news.
Not one will question or worry about the implications of a bumper profits forecast in the middle of the worst financial crisis in living memory.
4. bystander said...
How very dare they!!!!!!!!
5. musn't grumble said...
Anyone got a shotgun?
6. alan said...
Local companies in my part of Essex (BT, Ford) have sliced contractors rates with a "take it or leave it" attitude. Bankers who caused the problem get a bonus!