Wednesday, Oct 14, 2009
Vampire squid morphs into Bambi
FT: To avoid crises we need more transparency
Lloyd Blankfein, CEO of Goldman Sachs, has lots of sound advice on how regulators should have reined in the big investment banks and prevented the crisis. GS, of course, didn't need to be regulated because they regulated themselves just fine.
Posted by icarus @ 02:06 PM (783 views) Add Comment
9 Comments
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1. icarus said...
Best way to access the article is to google the FT title.
2. Crunchy said...
http://www.youtube.com/watch?v=MuptoEDU2CY
We're alright Sach!
3. crunchy said...
We're alright Sach.
http://www.youtube.com/watch?v=MuptoEDU2CY
4. crunchy said...
http://www.youtube.com/watch?v=t7OEkhkKAUI&NR=1
5. mark wadsworth said...
This credit bubble had nothing to do with lack of transparency.
You could look at banks' published accounts and they gave you a reasonably good picture as to how they were funded, to whom they were lending and what they invested in (and if it wasn't clear, then at least it was clear that it was unclear, to paraphrase Donald Rumsfeld). We all knew that by 2005 UK banks were charging less interest than they were paying, and that particularly the Northern Rock had doubled in size in about three years. And that house prices had doubled in the space of five years.
Only nobody wanted to spoil the party.
6. crunchy said...
4. mark
That also included David and his party of non-poppers!
That's the two party system for ya!
Live in hope, die in despair.
7. icarus said...
mark w @ 5 - but the investment banks ran a huge, unregulated, undercapitalised and opaque shadow banking system for the purpose of expanding leverage (capitalism without capital) - SIVs, conduits, those hedge funds that were offshots of the banks etc. Plus Rating agencies with their AAA securities and OTC derivatives - bonds without idenfiable sources (no operator with known cashflow and creditworthiness) and no secondary market to price them.
8. Mark Wadsworth said...
"opaque shadow banking system"
That isn't really true either. All these SIVs were, as far as I can see, properly accounted for on balance sheets*. The only bank I've looked at in depth was NR and it is all there, plain to see. I've skim read other banks' accounts and it all seems to be signalling "Red alert! Danger here!". The NR and B&B made no secret about the fact that they were "aggressively expanding" into BTL mortgages or that it was all short term money market finance, not deposits, that was funding them.
* Or, as I said, with a bit of digging it was quite clear that things were mighty unclear, which is always a warning sign.
The AAA ratings were all complete fiction, of course.
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