Thursday, September 6, 2007

The problem is they dont know their losses …

Ackermann urges banks to reveal losses

If this had just been a matter of clarity then it could all have been worked out from day one. I use the word clarity carefully. Clarity is where the banks get together and decide what these things might be worth and hopes everybody buys it. Another word is transparency. This is different. People should be very careful what they call for in this regard as the quants. that put together these instruments have little clue what these things are worth and the answer may be zero. Transparency might lead to "You are insolvent." , "We are insolvent". That kind of thing. One thing that can be guaranteed; they will try to get away with a minimum shift to make as good a set of reports as possible without going to jail. Then the problems will return

Posted by whiteknight @ 12:35 AM (1234 views)
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9 thoughts on “The problem is they dont know their losses …

  • stillthinking says:

    I totally agree with Ackermann, its extremely precocious of these banks. Often over a friendly game of poker I have urged my fellow players to just tell me which hand they have, because its difficult to make a decision otherwise.
    When I was at school I rested assured that an honest confession to my crime would lessen my punishment, due to being a very honourable and decent chap.
    I am sure that any Bank that reveals mind-busting losses will be equally respected. I would leave my money with them as a point of principle, and principle is much more important than money.

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  • Good chap. Very public spirited of you. I would do the same ……..

    …….. Just as I would invest in the funds that are being raised to buy some of this “debt” on the ‘cheap’ and quant. funds in general. I would be the first there with money for those.

    Slightly optimistic of him thinking that he has more knowledge about his losses than other people dont you think?

    This is a game where you make up your hand in the hope that other people will even believe that it is your hand .. when you show them the hand.

    Up until now – unsuprisingly – all the players were claiming to have a hand full of aces and suit cards. Only to find out that this exceeding this exeeded the number of those cards in the deck by some considerable margin

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  • @stillthinking,

    When you played Chess with your chums at school, did you refuse to let them see what moves you had made, in case they could checkmate you. After being checkmated, you could claim that you hadn’t really moved this or that piece there.

    In Chess you can see all the pieces and still not have a clue what is going on.

    Same with many other strategy games. We are SUPPOSED to know what positions people have taken on exchanges, we are SUPPOSED to know what losses banks have – this is the primary purpose of accounting.

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  • Brutal Deluxe says:

    I somehow feel stillthinking’s poker analogy more appropriate than lvmreader’s chess one.

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  • Ivmreader,

    So perhaps we should conclude that the game is more like poker than chess?

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  • Even in Poker, you need to show your hand at sometime to prove you have won. That is the accounting idea, I guess.

    To refuse to reveal your hand and claim that someone should just accept you have won, is not acceptable to many people.

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  • I prefer the chess comparison. Along those lines, it is better to be a black rook than a white pawn (a rich con than an honest hard-working HPC blogger!)

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  • As I understand it the directors and officers of plc’s have a fiduciary duty to disclose factors that may materially affect a company’s performance. In other words they must disclose deals/ losses/ problems etc to inform sharholders – failure to do so can / does lead to jail! Anybody got more info on this?

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  • Quite funny this coming from Ackermann. It was Deutsche Bank who arranged the credit instruments etc. for IKB / Sachsen LB – earning big commissions in the process.
    (In German: http://www.spiegel.de/wirtschaft/0,1518,503920,00.html)
    He is just trying to avert attention from Deutsche Bank’s own risk
    And lobbying for a close down of small german banks (i.e. competition)

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