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The Cost of 'Reform' | 21 comments (21 topical, editorial, 0 hidden)
Hehe! (4.00 / 2)

Banks take blame for credit crisis

The world's leading banks on Wednesday publicly accepted much of the blame for the credit crisis in an attempt to stave off calls for more regulation, even as the International Monetary Fund slashed its estimates for global growth and warned that the US would suffer a recession.

The Institute of International Finance, representing more than 375 of the world's largest financial companies, acknowledged "major points of weaknesses in business practices", including bankers' pay and the management of risk.

But it said it would be "completely wrong" for the authorities to impose much greater regulation on the industry.

(...)

The IIF report detailed banks' failings in managing risks, conflicts of interest over bankers' pay, over-reliance on models, and inadequate protection against liquidity shortages. It also pointed to failures in credit ratings agencies and the dangers of mark-to-market accounting at times of illiquidity in creating a vicious circle of forced asset sales, lower prices, further writedowns and more asset sales.

Bwahahahaha.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Apr 9th, 2008 at 04:25:11 PM EST
Re: Hehe! (none / 1)

Money markets signal fears over banks

Money markets in the US and Europe are signalling renewed fears about the financial strength of banks, with key confidence barometers almost returning to the levels that preceded the collapse of Bear Stearns.

The concerns are being highlighted by the difference between overnight lending rates set by central banks and three-month Libor, the rate at which banks lend to each other. This spread, known as the overnight index swap rate, has been rising in the US and remains elevated in Europe, indicating that banks are reluctant to lend to each other.



In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Apr 9th, 2008 at 04:27:52 PM EST
[ Parent ]
Re: Hehe! (4.00 / 2)
That chart indicates that, if anything, the interbank rate drives the base rate. Changes in the base rate have no effect on the interbank rate.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Carrie (migeru at eurotrib dot com) on Wed Apr 9th, 2008 at 04:36:44 PM EST
[ Parent ]
Not necessarily (4.00 / 2)
It can also mean that the central bank communicates effectively in advance what it will do, and thus the markets anticipate its movements correctly - they're "priced in" in advance.

What's more noticeable are the big jumps, which mark the times of financial acute crisis, and which suggest that we're entering a new one now.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Apr 9th, 2008 at 04:57:27 PM EST
[ Parent ]
Re: Hehe! (4.00 / 2)
So mark-to-model is bad because models may bear no relationship to reality, and mark-to-market is bad because it leads to forced sales?

Maybe the problem lies elsewhere, in the rigid rule-based risk framework.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Carrie (migeru at eurotrib dot com) on Wed Apr 9th, 2008 at 04:39:50 PM EST
[ Parent ]
Well yes (4.00 / 2)
the problem is in forgetting that economic risk is, utlimately, a qualitative problem, not a quantitative one.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Apr 9th, 2008 at 04:58:23 PM EST
[ Parent ]
Please excuse me (4.00 / 2)
It's been a long day.

But. I'm trying to imagine you actually saying out loud:

Bwahahahaha.

by vicki on Wed Apr 9th, 2008 at 07:54:53 PM EST
[ Parent ]
Re: Please excuse me (none / 1)
North America: a culture of infectious corruption. He'll be drinking Coke and eating at McDo's any day now.
by PIGL (stevec@boreal.gmail@com) on Wed Apr 9th, 2008 at 08:18:30 PM EST
[ Parent ]

The Cost of 'Reform' | 21 comments (21 topical, 0 editorial, 0 hidden)
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