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Repo 105: Creative accounting at Lehman Brothers | 55 comments (55 topical, 0 editorial, 0 hidden)
Re: A run on the banking system by itself (4.00 / 2)
So if you look at the bell curve of banks pay out rates, You have a few at the top which are paying out at excessive rates, either because their staff are more skilled, or they are lucky or they are running Madoff style schemes.  There's then pressure to push the peak of the bell-curve up towards those high pay-out rates to attract customers. If you look at the difference between the average on that bell curve and the rate at which GDP is actually growing (I know its a dubious figure at best) then the difference between the two could be called a ponzi gap

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu Mar 18th, 2010 at 06:37:26 PM EST
[ Parent ]
Re: A run on the banking system by itself (none / 0)
That's actually a good insight.

Of course, as soon as you make it the basis for regulatory action, the thus regulated entities will try to figure out ways to game it. So we'd need to figure out whether it's robust against accounting gimmicks.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 18th, 2010 at 09:24:53 PM EST
[ Parent ]
Re: A run on the banking system by itself (none / 0)
The profit motive will ensure that, through "innovation", banks operate on the edge of regulatory compliance.

The brainless should not be in banking -- Willem Buiter
by Carrie (migeru at eurotrib dot com) on Fri Mar 19th, 2010 at 12:36:35 AM EST
[ Parent ]
Re: A run on the banking system by itself (none / 0)
Which is why it is so crucial to have simple and very clear rules without any complexity.

This is the opposite of the US financial regulation system, and in a large part depends on the political system, where banks can fund individual congressmen and senators to add complexity and exemptions.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Fri Mar 19th, 2010 at 07:25:02 AM EST
[ Parent ]
Re: A run on the banking system by itself (none / 0)
Yes, but that just means that they will try to avoid reporting the parameter you're using to regulate them.

Which is why that parameter needs to be reasonably robust against accounting gimmicks.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 19th, 2010 at 09:42:51 AM EST
[ Parent ]

Repo 105: Creative accounting at Lehman Brothers | 55 comments (55 topical, 0 editorial, 0 hidden)
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