A bit of economic panic and ...

[DodgyAgent]

Whether its shoring up reckless Casino Capitalism or War - its allways the taxpayer who takes the hit.

Thats what they pay their taxes for.

And it is the capitalist financial systems that create the very wealth that priviliged little knuckleheads like you can pay the tax out of in the first place.

[BrilloPad]

I admit I am no economic guru, but my understanding is that in regulating itself the market came to the verge of collapse but was prevented from doing so by the state.

Is my understanding wrong (I admit it may be, so this is a genuine question) ? If so then fair enough, if not then should we not investigate how to prevent this happening again so that the taxpayer is not involved in future ?

My understanding is that SOX caused so much "red tape" regulation that the instruments were moved OBS and made so complex that the regulators could not catch them.

What is needed is less red tape and more asking of "what if".

There is a way round every regulation - and a loophole to every law. What is needed is transparency and common sense.

[swamp]

Cost 135k. Selling 160k on delivery. Am I missing something, this looks in the black to me?

Yes it's a rubbish deal.

Better idea would be to go into a Porsche garage and buy a new GT2, with the options you want. And I'm sure the price would be negotiable in the current economic climate...

[DodgyAgent]

Whether its shoring up reckless Casino Capitalism or War - its allways the taxpayer who takes the hit.

Thats what they pay their taxes for.

And it is because we live in a free modern society that it is confident enough to confer equal status and opportunities for all. If you bothered to look beyond your very own oversimplified narrow and bigoted mind of yours then you would see that those who wish to destroy these hard one freedoms have no financial services of their own, and who furthermore bandage their women from head to toe in cloth.

[AlfredJPruffock]

that those who wish to destroy these hard one freedoms have no financial services of their own, and who furthermore bandage their women from head to toe in cloth.

Now then - dont be beastly to the Glaswegians Dodgy Old Bean - as for this free modern society stuff - such wishy washy liberal talk makes me reach for my pistol.

[DodgyAgent]

that those who wish to destroy these hard one freedoms have no financial services of their own, and who furthermore bandage their women from head to toe in cloth.

Now then - dont be beastly to the Glaswegians Dodgy Old Bean - as for this free modern society stuff - such wishy washy liberal talk makes me reach for my pistol.

I suggest then that you stick to poetry and leave the job of running the world to us agents

[IR35 Avoider]

In a different forum I came across an explanation of why government can't leave banking entirely to the free market.

The assets of banks are their loans. If all their money came from capital raised from their shareholders, there wouldn't be a problem and government could stay out of things. Unfortunately this would also mean that banks would have less than a tenth as much to lend as they currently do, which would be a huge constraint on the economy.

In real life most of a banks capital comes from deposits. Deposits are short-term and can mostly be withdrawn on demand, and loans are long-term and mostly cannot be cancelled whenever it suits the bank. A bank is therefore like a highly leveraged and fundamentally unstable hedge fund. If there is ever a loss of confidence in the bank, and the short-term depositors start withdrawing their money at a rate higher than the average, the bank won't be able to meet demands, and will fail. Note that the failure is caused by a cashflow problem, the net worth of the bank is not a problem.

Governments can prevent problems arising by giving guarantees so that depositors don't loss confidence. However the price the government pays for preventing a cashflow problem is that it may have to pick up the bill if there is a net worth problem that more than wipes out shareholder capital. Therefore government has to regulate the quantity and quality of lending the bank does, to mitigate its own risks.

My formulation of what I read obviously applies to a highly simplified idea of what a bank does, but I guess analagous arguements will apply to the range of activities of an investment bank.

[AtW]

A bank is therefore like a highly leveraged and fundamentally unstable hedge fund.

No no no! High leverage is completely different thing! Short deposits vs same amount put into long loans is a problem, however this is NOT a hedge fund leverage! Hedge funds use leverage so they have 10% of the money or even less - so in effect their liabilities are much greater than their assets, in banks there might be time lag deposits/loans, but with leverage situation is much worse. Sadly some banks started playing like hedge funds - using leverage by getting money not from deposits but from lending market (like Norther Rock), that made them highly unstable as well as buying junk paper that was based on leverage. Govt regulation should have never allowed this to happen.

[IR35 Avoider]

The most straight-foward form of leverage is borrowing money to invest. Banks assets are their loans, more than 90% of the money they lend is borrowed from depositors, hence they are more than 10x leveraged. If they lose 10% of their assets in bad loans, they are bankrupt.

[ace00]

I suggest then that you stick to poetry and leave the job of running the world to us agents

Wow. What a World that would be. Mind boggles.




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