Thursday, Jan 14, 2010
Shocking Complacency
Money Marketing: Wall Street chiefs admit to not stress testing a fall in housing market
Bosses of some of the biggest Wall Street banks have admitted that their banks did not consider that the US housing market would ever fall before the sub prime crash of 2007. When questioned about risk management, all the chiefs said that their banks had always gone through regular “what if” stress tests in all areas of their business, but all admitted that they failed to test what would happen should house prices fall. When asked directly whether his bank had stress tested for a house price fall, Morgan Stanley chairman John Mack said: “Erm no, that one we missed”.
Posted by wanderinman @ 06:18 PM (1288 views) Add Comment
8 Comments
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1. hpwatcher said...
In the mania stage of a bubble, all the usual controls go completely out of the window.
I fear this bubble will blight the rest of all our lives.
2. paul said...
@hpwatcher it already will have implications for UK government spending until long after we're dead.
3. rumble said...
Crikey, I hope that next to your keyboard is a glass containing your teeth.
4. str 2007 said...
As I understood it from a chat with someone at an HPC meet up RBS stress tested to a 50% fall.
I can only assume that was ok with them as they were selling their debt on to others at the time.
Perhaps someone out there could confirm. And indeed what's going on behind the scenes these days.
5. icarus said...
'Erm, that one we missed' but we're still worth $5m a year each.
6. a saver said...
Imagine if we all sucked that much at our jobs!
There were so many warning signs for such a long time. The US Bay Area House Price Crash were warning of a US crash in 2004. Wasn't it about 2006 that the IMF were recommending stress testing banks in case of a 40% HPC?
7. 51ck-6-51x said...
Is this article just made up?
I don't see ANY of these quotes in the transcripts, which I posted earlier in the day!
8. letthemfall said...
hpwatcher: "I fear this bubble will blight the rest of all our lives."
I think you may well be right. And after listening to Generous George on the news last night, one can get a good idea who is going to be the most blighted. It also occurs to me that the contributors here can possibly be divided into the blighted and non-blighted, the former apparently on the right side of the loaded coin (called hard work), the latter on the other (called envy).