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  #2381  
Old 22.05.2015, 11:20
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Spilt the banks into usable bits:
* 1. Deposit taking institutions manage monies - maybe with a targeted 5% return. Perhaps it'll be 0%, but with the deposit taking institutions, monies in are guaranteed to always >= monies out (realistically in a semi-deflationary environment, it'll be near zero). This is the minority 'safe' bit that will always get bailed out.

* 2. Risk taking institutions - trust the fund manager, based on DYOR. Might be 1000%+ return, maybe 0% return - but the best will float to the top - hopefully in our internet enabled age we'll have some feedback as to... which... won't die. But if the fund managers get it wrong, it dies = 0% return.

Free choice, each makes own decisions, apportioning as necessary... [1] gets bonuses related to the difference between [1] and base rate, and [2] gets bonuses related to how much wealth they generate for clients (on a cash paid, out of income basis)

Simples
Not really. Look up the S&L crisis, for example. Mom-and-pop non-gambling banks got crushed by rising interest rates, the end result was huge cost to the public. And no, these were neither oligopolies nor TBTF.

Its' anything but simples.
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  #2382  
Old 22.05.2015, 13:45
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Not really. Look up the S&L crisis, for example. Mom-and-pop non-gambling banks got crushed by rising interest rates, the end result was huge cost to the public. And no, these were neither oligopolies nor TBTF.

Its' anything but simples.
Yes, of course it impossible to remove all risks from banks.

But that doesn't mean that the main risk (bankers gambling with peoples' deposits) shouldn't be removed.
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  #2383  
Old 22.05.2015, 14:17
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Yes, of course it impossible to remove all risks from banks.

But that doesn't mean that the main risk (bankers gambling with peoples' deposits) shouldn't be removed.
So you mean don't do mortgages then? Or overdrafts?

I assume you don't have a credit card, or any form of credit, which is of course a gamble on your reliability by a banker?

And if you want a foreign currency, you go into the bank and wait for someone who wants to do the opposite trade to show up, since obviously the bank couldn't risk doing it with their own money?
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  #2384  
Old 22.05.2015, 14:32
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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So you mean don't do mortgages then? Or overdrafts?

I assume you don't have a credit card, or any form of credit, which is of course a gamble on your reliability by a banker?

And if you want a foreign currency, you go into the bank and wait for someone who wants to do the opposite trade to show up, since obviously the bank couldn't risk doing it with their own money?
No, that's not what i mean at all. The gambling banks could do anything they wanted, the safe banks would only be allowed to operate in areas directly related to, and necessary for, their retail business. The safe banks would have very strict capital ratios.

Combined with breaking up the TPTF banks, this would result in a much safer banking industry.

Unfortunately, the banksters own the politicians, and doing this would result in smaller fees and bonuses - so it won't happen.

*******

BTW, just saw this:

Jamie McGeever ‏@ReutersJamie
Great chart tracking the people sent to jail over the myriad banking scandals, market-rigging and frauds:
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  #2385  
Old 22.05.2015, 14:46
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Yeah but, no but, yeah but, no but, yeah but no.....

There is maybe no need for arbitrary limits.

Spilt the banks into usable bits:
* 1. Deposit taking institutions manage monies - maybe with a targeted 5% return. Perhaps it'll be 0%, but with the deposit taking institutions, monies in are guaranteed to always >= monies out (realistically in a semi-deflationary environment, it'll be near zero). This is the minority 'safe' bit that will always get bailed out.
* 2. Risk taking institutions - trust the fund manager, based on DYOR. Might be 1000%+ return, maybe 0% return - but the best will float to the top - hopefully in our internet enabled age we'll have some feedback as to... which... won't die. But if the fund managers get it wrong, it dies = 0% return.

Free choice, each makes own decisions, apportioning as necessary... [1] gets bonuses related to the difference between [1] and base rate, and [2] gets bonuses related to how much wealth they generate for clients (on a cash paid, out of income basis)

Simples
this is the situation we have today and basically everybody picks #2 (the banks) because sticking your money into a safe deposit box gives no return and costs money.

i guess you could run a checking account with 100% reserve but then i suspect few people will be willing to forgo interest and pay the high banking fees to sustain that business.
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  #2386  
Old 22.05.2015, 15:05
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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But if the fund managers get it wrong, it dies = 0% return.
Minor nitpick but if a fund 'dies' which I assume you mean a total loss, the return is not 0% but -100%. 0% return (ignoring risk free rates, etc...) means no change at all to the investment.

Also, words like `bankster` make you come across as a silly conspiracy nutcase which in turn makes it hard to take your arguments seriously.

I believe the obvious way to enact change is to start actually jailing the culprits. Jail is a really scary prospect for most white collar criminals, and if the threat was actually there, a fair amount of these kind of shenanigans would suddenly become a lot less attractive.

The legal framework is already there, perhaps a few laws would need tweaking but it is certainly much simpler to implement than a structural change like what you are suggesting. It is a simple choice between an evolutionary step that goes 90% of the way as opposed to a revolutionary way that might possibly go 95% but also has the potential to backfire really badly in non-obvious ways.

Finally, I have to agree with Urs Max that this is a topic that is anything but "simples".
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Old 22.05.2015, 15:43
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

I think it is a great idea to make individuals personally liable - and I believe this idea should spread further.

For example any warranty claim made on a car should be directly removed from the pay packet of the person who made that part and/or fitted that part.

Train drivers should be made personally liable for each minute the train is late - the same goes for bus drivers - with fine being based on the average number of people on a train multiplied by a hourly rate. If a train is delayed due to an outside event (eg Suicide) that amount is transferred to the victims family.

To ensure equality - all insurances will be removed and you'll be entirely liable for all your medical costs - in case of illness or accident. In the case of the latter you'd claim from the person who caused the accident - who would then try to claim from the person/company who may or may not have made or built the item they were using at the time of the accident.

This will make sure there are plenty of jobs for lawyers - who will no longer carry legal insurance - meaning their fees are even higher.

Sounds like paradise doens't it
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  #2388  
Old 22.05.2015, 16:31
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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this is the situation we have today and basically everybody picks #2 (the banks) because sticking your money into a safe deposit box gives no return and costs money.

i guess you could run a checking account with 100% reserve but then i suspect few people will be willing to forgo interest and pay the high banking fees to sustain that business.
Do the banks' gambling operations really subsidise their retail arms?
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  #2389  
Old 22.05.2015, 16:37
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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No, that's not what i mean at all. The gambling banks could do anything they wanted, the safe banks would only be allowed to operate in areas directly related to, and necessary for, their retail business. The safe banks would have very strict capital ratios.

Combined with breaking up the TPTF banks, this would result in a much safer banking industry.

Unfortunately, the banksters own the politicians, and doing this would result in smaller fees and bonuses - so it won't happen.
Your approach has been refuted almost twenty years ago already. LTCM was only a hedge fund, not even a bank, they "only" did what you would allow them to do and used (IIRC) about 50-100x leverage. The result was the need for an orchestrated action by all major players under the Feds' lead.
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Old 22.05.2015, 16:43
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Your approach has been refuted almost twenty years ago already. LTCM was only a hedge fund, not even a bank, they "only" did what you would allow them to do and used (IIRC) about 50-100x leverage. The result was the need for an orchestrated action by all major players under the Feds' lead.
Very good point. TBTF hedge funds are a problem too.
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  #2391  
Old 22.05.2015, 16:49
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Do the banks' gambling operations really subsidise their retail arms?
I guess by your continued use of the prejudicial words "gambling" and "bankster" your position is pretty clear.

But if you want to replace this with a more neutral term "risk taking" then the simple answer is yes; this is why the small retail cantonal banks merged because they couldn't be competitive, and banks like Raiffeisen act as a cooperative.

Everybody wants a high interest savings account and a low interest mortgage, and a account with good services but low charges; anybody can see this doesn't add up without some other fees coming in from using the money to do other things.

You're also looking at it from a very simplistic individual customer viewpoint - banks have customers across the whole spectrum, including a lot who cross over between the "simple" two models you claim, for example moderately wealthy people and small companies.
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  #2392  
Old 22.05.2015, 16:59
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Very good point. TBTF hedge funds are a problem too.
Is that just another simplistic statement or do you have an example of a hedge fund which is now TBTF?

It's interesting that the rules around bank funding are now very strong, yet people think it's acceptable to indiscriminately call them "banksters". Do you have any friends that work for a bank - would you actually say that to their face? Or is it, as usual, just the other people you don't know who are bad?
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  #2393  
Old 22.05.2015, 17:03
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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So you mean don't do mortgages then? Or overdrafts?

I assume you don't have a credit card, or any form of credit, which is of course a gamble on your reliability by a banker?
No, the banker is gambling on the aggregate reliability of all his credit card customers. One customer may be a gamble, but an aggregate of thousands of individual gamblers betting on different horses and running different races is simply a give-some / take-some game. In some cases the banks even take out an insurance on losing bets, so its not even their own risk, but of course the extra costs of that are passed onto you as comsumer.

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And if you want a foreign currency, you go into the bank and wait for someone who wants to do the opposite trade to show up, since obviously the bank couldn't risk doing it with their own money?
Many banks already do this, in as far as you pay a higher premium or rate if you're not a customer.

The banks have their base well covered.

The banking crisis was caused by greed, not by banking being inherently dangeous.
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  #2394  
Old 22.05.2015, 17:09
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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I think it is a great idea to make individuals personally liable - and I believe this idea should spread further.

For example any warranty claim made on a car should be directly removed from the pay packet of the person who made that part and/or fitted that part.

Train drivers should be made personally liable for each minute the train is late - the same goes for bus drivers - with fine being based on the average number of people on a train multiplied by a hourly rate. If a train is delayed due to an outside event (eg Suicide) that amount is transferred to the victims family.

To ensure equality - all insurances will be removed and you'll be entirely liable for all your medical costs - in case of illness or accident. In the case of the latter you'd claim from the person who caused the accident - who would then try to claim from the person/company who may or may not have made or built the item they were using at the time of the accident.

This will make sure there are plenty of jobs for lawyers - who will no longer carry legal insurance - meaning their fees are even higher.

Sounds like paradise doens't it
Which of these are breaking the law, criminal law to boot, let alone repeatedly?
Which of these are creating incentives that make breaking the law all the more attractive?
Which of these neglect their oversight and control duties?

A bus driver will be held personally liable for speeding or running over a pedestrian, including jail time where applicable. There's zero reason white collar crime should be exempt.

Edit:
Even billionaire Thomas Schmidheiny was prosecuted and convicted (though the Appellationsgericht voided the judgement due to time limit) in the Eternit case in Italy.

Last edited by Urs Max; 22.05.2015 at 17:49.
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  #2395  
Old 22.05.2015, 17:11
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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No, the banker is gambling on the aggregate reliability of all his credit card customers. One customer may be a gamble, but an aggregate of thousands of individual gamblers betting on different horses is simply a give-some / take-some game. In some cases the banks even take out an insurance on losing bets, so its not even their own risk, but of course the extra costs of that are passed onto you as comsumer.
Not sure why you are quoting me and not @carver ? This is my point exactly.

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Many banks already do this, in as far as you pay a higher premium or rate if you're not a customer.
They don't do direct exchange matching! If I want to get some EUR for CHF I don't have to wait for someone else to want CHF for EUR. Banks do FX with their own pool of money, and try to match the currency flows to reduce their risk. It's extremely complex to manage all the different currency combinations without being at risk of rate fluctuations, and it requires some level of risk taking.

The alternative would be to offer a spread that was effectively risk-free, say 10%. And then everyone would accuse the banks of charging outrageous fees.
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Old 22.05.2015, 17:17
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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There's zero reason white collar crime should be exempt.
This is certainly true.

Not sure why this is the fault of the banks - recent management of the big banks like UBS have sacked anyone found breaking the rules, clawed back bonuses, and closed down departments doing the riskier trading.

Why the individuals aren't prosecuted is a question for our police, prosecution departments and elected representatives. I exclude the showcase fines being applied to the whole company - that's just a political thing to look good, probably make bonuses for the regulators (sound familiar??) and in effect penalising the bank customers and passing the buck instead of doing real law enforcement against the real criminals.
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Old 22.05.2015, 18:07
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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No, the banker is gambling on the aggregate reliability of all his credit card customers. One customer may be a gamble, but an aggregate of thousands of individual gamblers betting on different horses and running different races is simply a give-some / take-some game. In some cases the banks even take out an insurance on losing bets, so its not even their own risk, but of course the extra costs of that are passed onto you as comsumer.
Insurance/Reinsurance works on exactly the same principles though. You "know" if you issue x number of policies you'll pay out y number of occasions - you price that in across all policies and then hedge that risk. For example you have modelled that in 20 years you'll need 10m CHF to pay estimated claims in 2035. You have the premiums and so you go off and buy a zero coupon bond ensuring that when you get to 20 years you have the cash to pay out. (SIMPLISTIC EXAMPLE).

A banker will know that of his 1,000 mortgage holders, on average 1 will default a year (SIMPLISTIC EXAMPLE), the banker knows that on average that once assets are sold they stand to lose 10,000chf for each default - that means each mortgage holder covers that loss by paying 10chf per year. Except they never see it as 10chf it gets rolled into the margin that is built into the rate - lets say between 50-250bps depending on who you are.

As much as it would be "quaint" to go back to "old-fashioned" banking - the truth of the matter it just doesn't work anymore.
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Old 28.05.2015, 21:32
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Is that just another simplistic statement or do you have an example of a hedge fund which is now TBTF?

It's interesting that the rules around bank funding are now very strong, yet people think it's acceptable to indiscriminately call them "banksters". Do you have any friends that work for a bank - would you actually say that to their face? Or is it, as usual, just the other people you don't know who are bad?
I try to use the term 'banksters' vs 'bankers' to differentiate between the 1% and the 99%.

In my lexicon, banksters are the 1% who threaten financial armegeddon if their failed institutions don't get bailed out with our tax monies - they're the people who e.g. give Chinese politicians' children top banking jobs in return for legislative favours, the people who advise our politicians to act in their own interests, and so on - very happy to expand on this - please ask.

Amongst my acquaintances, there are bankers - I've talked to them about banksters - and haven't come across one that disagrees (to my face at least)
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Old 28.05.2015, 21:36
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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The banking crisis was caused by greed, not by banking being inherently dangeous.
Of course it is - I'd argue that there is no reason to work in banking other than greed.

Why else would one be a banker? It's obviously not the hours. The only reason to be a banker is the money.
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Old 28.05.2015, 21:56
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

Why has debt exploded (almost) exponentially in the world?

Because banksters (and their bankers) live for usury. The more debt, the more profits & fees from that debt. They want more fees, so they want more debt.

The only way we can be free from usury would be from taking the power to create money out of thin air from the bankers (and the banksters).

The (UK) monetary reform party has some excellent ideas on this: http://www.moneyreformparty.org.uk

Fundamentally, why should commercial banks be able to print money out of thin air, and make the 99% work out their lives to repay this magicked-from-nothing-debt?

Because the banksters tell their politicians that this is the only way.

Our hope for freedom from the banksters' (and bankers) yoke is debt free money. The interweb at least gives us 99% the freedom to start to discuss this - one can only hope that recent moves in Iceland are the start:

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