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  #1701  
Old 15.07.2010, 14:51
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Thanks Uncle Groove - looks like an interesting book to read.

The basic summary is that the author feels increased regulation is only going to get us so far (the financiers being generally able to side-step or work around most regulatory requirements) and that splitting the high-risk parts away from the "deposit taking and loan making" parts of banks is the best solution. Thus if the high-risk parts have a problem, they can be left to fail without destroying the more vital/boring bits.

Finally he is proposing a global organization (similar to the WTO) to oversee all financial companies which would ensure that banks can't just move from highly-regulated countries to less-regulated countries.

All in all, it seems to me like a relatively logical proposal.
Unfortunately special interests groups seem to have the upper hand (as usual?) vs. logic (common sense, social well being, freedom, etc)
At the end of the day one does wonder if the various tinfoil-hat wingnuts aren't on to something when they talk of the Bilderbergs, the 7 sisters, etc...
:-/

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Old 15.07.2010, 15:21
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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don't really get what point thats trying to make?
The review is making the point that bankers contribute very little, but take a lot.

Thank you for the interesting book, Uncle GroOve.
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  #1703  
Old 15.07.2010, 15:56
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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The review is making the point that bankers contribute very little, but take a lot.

Thank you for the interesting book, Uncle GroOve.
Thanks for the Daily Mail-style summary

I would say it is definitely NOT saying that. My reading is basically that the high-risk segments of the financial sector need to be split from the low-risk segments, so that if there is a problem and the high-risk parts blow up, it doesn't have a large knock-on effect on the deposits/loans/mortgages retail banking segment.
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  #1704  
Old 15.07.2010, 16:02
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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The review is making the point that bankers contribute very little, but take a lot.

Thank you for the interesting book, Uncle GroOve.
If bankers contribute very little then how is it the world economy starts to decline & unravel when they stop lending?
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  #1705  
Old 15.07.2010, 16:03
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Thanks for the Daily Mail-style summary

I would say it is definitely NOT saying that. My reading is basically that the high-risk segments of the financial sector need to be split from the low-risk segments, so that if there is a problem and the high-risk parts blow up, it doesn't have a large knock-on effect on the deposits/loans/mortgages retail banking segment.
Note I was talking about the review:

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The benefits from banking, broadly defined, on current scale and with its existing incentive structure are – at best – very limited. In contrast, the costs – both in the recent past and likely future – are large and actually quite frightening. The fiscal position of the UK has been literally ruined by the measures the last government had to put in place to support the big banks, directly and indirectly. Whatever your assessment of the fiscal austerity measures being pushed hard by the new government, there is no question that much of the underlying problem arises from the continuing failure of financial regulation.
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Old 15.07.2010, 16:06
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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If bankers contribute very little then how is it the world economy starts to decline & unravel when they stop lending?
Because the banks have an oligopoly on capital. IMO, a proof that they are inefficient is the supernormal profits generally earned. An example of this is the recent revolt by fund managers WRT fees for rights issues.

Personally speaking, I'd much prefer a more efficient system of allocating capital. Maybe something p2p.
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  #1707  
Old 15.07.2010, 16:14
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Because the banks have an oligopoly on capital. IMO, a proof that they are inefficient is the supernormal profits generally earned. An example of this is the recent revolt by fund managers WRT fees for rights issues.

Personally speaking, I'd much prefer a more efficient system of allocating capital. Maybe something p2p.
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  #1708  
Old 15.07.2010, 22:55
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Because the banks have an oligopoly on capital. IMO, a proof that they are inefficient is the supernormal profits generally earned. An example of this is the recent revolt by fund managers WRT fees for rights issues.

Personally speaking, I'd much prefer a more efficient system of allocating capital. Maybe something p2p.
But if you want that rights issue backstopped, want to borrow a few hundred million dollars on an underwritten basis or issue a few billion of new share capital at a guaranteed fixed price, then let me know if you find a more efficient system than via global investment banks.
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Old 16.07.2010, 00:31
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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But if you want that rights issue backstopped, want to borrow a few hundred million dollars on an underwritten basis or issue a few billion of new share capital at a guaranteed fixed price, then let me know if you find a more efficient system than via global investment banks.
Here's a start:

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Clive Cowdery’s Resolution is close to securing a ground-breaking deal to slash investment bank underwriting fees on a rights issue to fund a £2.75 billion acquisition of Axa’s UK life business.

Resolution, which yesterday confirmed an in-principle deal with the French insurance giant Axa, declined to comment on its agreement with the underwriters Barclays Capital and Royal Bank of Canada.

But The Times has learnt that Resolution has devised a new underwriting model with its shareholders — who include some of Britain’s biggest institutional investors — to act as a co-ordinated group of subunderwriters on a deal, reducing the role of the investment banks.
It's not cutting out the supernormal profit earning middlemen, but it's a start. One would have thought that it's possible to cut out the middlemen using IT, but it's not my field. The oligopoly is extremely powerful, but that doesn't mean that a more efficient system isn't possible.
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  #1710  
Old 16.07.2010, 03:12
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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If bankers contribute very little then how is it the world economy starts to decline & unravel when they stop lending?
If drug dealers contribute very little then how is it the worlds drug supply starts to decline & unravel when they stop dealing?

The word 'addiction' comes to mind!
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  #1711  
Old 16.07.2010, 07:22
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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It's not cutting out the supernormal profit earning middlemen, but it's a start. One would have thought that it's possible to cut out the middlemen using IT, but it's not my field. The oligopoly is extremely powerful, but that doesn't mean that a more efficient system isn't possible.
It's called disintermediation and the idea's been around a long while, especially in the context of rights issues. I agree, this deal is a start but I think it's the exception rather than the rule. The Resolution financing is a bit of a special situation because a tight group of non bank subunderwriters in the deal are Resolutions core investors so Resolution was able to get them to commit upfront. That's unusual. The deal was also heavily discounted which means take up of the rights was pretty certain. Not all rights issues are that risk free. It might be hard to believe but most investment banks would be happy to accept lower fees for taking lower risk.

The IT route is a fair point. I remember having discussions 10 years ago about the feasibility of hooking up the providers and users of capital electronically, but the idea never got off the ground. Most capital raisings aren't risk free and where there's risk it's hard to disintermediate.

One side effect of disintermediation, especially vis technology, is that it tends to stifle competiton and concentrate the business in the hands of the big global boys. When the business becomes lower margin it becomes a volume game where size and scale matter.
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  #1712  
Old 16.07.2010, 08:08
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

There are two parts to banking aren't there?

1) Give X% to savers/depositors and lend this money to individuals and business at X+extra%. Difference - Bad Debts - Administration => Profit.

Quite predictable profits.

2) Take depsit funds from savers; create all kinds of financial instruments, Loan Notes; Forward Buy; Options; Derrivatives; CDOs etc etc. that most people don't understand (including as it seems the actual players in the market).

I am surprised that the general public have not realised that they are not going to profit from them but more than likely loose.
The only people that appear to make monet from these schemes are the people that sell the policies to general public and the people that play the markets.
Note that the market players pay them selves nice bonuses when they make profits (paper profits; not realised profits) but when make losses loose nothing. Surely therefore they have nothing to loose by taking large risks?

I also think that if we look at the prices of commodities; the prices have fluctuated with huge swings (especially oil from US$140 to US$32 over less than two years). Prices should not fluctuate that much because in a normal trading market (I mean buyers buying and selling oil for actual use) would not fluctuate that much. It is markets speculating or trying to manipulate the market price to make a paper trading profit with some financial instrument and this is what I believe is the problem.

I also note that as yet China only invest in property and actual shares; not financial instruments. I wonder if they will stick to this.

I actually wonder what (perhaps I am just clueless) what actually goes on in the City of London and New York with all these investment bankers because to me it appears as if they are a bunch of people in effect gambling with each other with monies coming from people that believe that they are investors when in effect sponsors.

I wonder how long it will take for the general public to realise that these financial instruments being sold never work.
If we look back since the 60's when this all started with Unit Trusts then Endowments; Pension Plans, Investment Plans etc etc. Nobody seems to have made a profit. If one was to take off the tax relief that for example the UK government gave, the return is even worse.

The thing is, what would all htese city boys (and girls) do if these instruments didn't exist. The governments are even starting another instrument for them to play with "Carbon Trading"; what a joke.

Something else; that is off subject but relevant is that the future for us in the Western World looks bad. Our parents have been receiveing good pensions. A lot of these monies are being paid by us (a kind of Ponzi Scheme if you look at it) through are current taxes.
However, pensions will not be there for us and our pensions will start later (probably 70 years old as opposed to 65 years) and they will without doubt be means tested.
I think what people have been receiving to date has been taken for granted and we are in for a big shock.
I think I shall start a thread; Pensions and our Future ' for people to give their opinions.
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  #1713  
Old 16.07.2010, 12:15
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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If bankers contribute very little then how is it the world economy starts to decline & unravel when they stop lending?

Because bankers have control of the money supply. Bank credit makes up something like 95% of all 'money' out there.

Banks are supposed to use this power to allocate capital to productive enterprises. Instead, they've been playing the numbers game to dodge regulation and skim as much money out of the system for themselves as possible as well as making some pretty crazy bets.

When the bets don't pay off, the public has to bail them out because they are 'too big to fail'. We've seen trillions of dollars pumped into the system globally and after more than two years the banks are still dysfunctional and not lending to business ... with another liquidity crisis looming.

IMO the benefits that the banking system offers our economy are getting close to being outweighed by the costs it is imposing on us. Frankly, the current setup of the banking system leaves it looking like one gigantic parasite leeching the blood of the productive to give itself huge rewards whilst knowing that if it dies, it takes the host with it.
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Old 16.07.2010, 15:15
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

Could this be the start of something big!!!

Zurich Financial Services said today "it would take a $330m hit on bad property loans in the UK and Ireland in the second quarter of this year, more than the $231m hit it took for mortgage impairments in the whole of 2009, after its banking operations saw further deterioration in property markets"

Wonder if the other banks will come clean about exposure/losses in UK (& other) property or is it all being swept under the carpet.
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Old 16.07.2010, 20:11
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Could this be the start of something big!!!

Zurich Financial Services said today "it would take a $330m hit on bad property loans in the UK and Ireland in the second quarter of this year, more than the $231m hit it took for mortgage impairments in the whole of 2009, after its banking operations saw further deterioration in property markets"

Wonder if the other banks will come clean about exposure/losses in UK (& other) property or is it all being swept under the carpet.
As I have said, I don't think the banks have revelaed the true state of bad debts or they have exchanged the debts (which will not be paid) with their governments (well the UK and USA have) and therefore the government will get the knock which will mean the government will have to print more money and the currency will devalue.
I have spent a conciderable amount of time reading the markets over the last three years and listening to all the analysist/"experts" on CNBC and my view is that I do not see things getting better for many years.
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Old 17.07.2010, 07:27
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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There are two parts to banking aren't there?

1) Give X% to savers/depositors and lend this money to individuals and business at X+extra%. Difference - Bad Debts - Administration => Profit.

Quite predictable profits.

2) Take depsit funds from savers; create all kinds of financial instruments, Loan Notes; Forward Buy; Options; Derrivatives; CDOs etc etc. that most people don't understand (including as it seems the actual players in the market).
Re (2) - this isn't how it works. Investment banks don't have significant deposit taking businesses and don't use saver's funds to finance their trading operations. They have Treasury departments which borrow money to fund their trading book. Cash and securities they custody for private clients are ring fenced.

It's also worth pointing out (again) that the recent financial crisis wasn't caused by investment baks trading derivatives, forwards, options etc. but by retail banks making plain vanilla housing loans to people who couldn't afford them and people who couldn't afford them happily taking the cash. Investment banks got caught up because they repackaged and bought this junk, using too much leverage. [/QUOTE]

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It is markets speculating or trying to manipulate the market price to make a paper trading profit with some financial instrument and this is what I believe is the problem
There's no law against speculation. Market manipulation is illegal.

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.....I actually wonder what (perhaps I am just clueless) what actually goes on in the City of London and New York with all these investment bankers because to me it appears as if they are a bunch of people in effect gambling with each other with monies coming from people that believe that they are investors when in effect sponsors.
If by investors, you mean shareholders, then yes. But any shareholder of a bank that makes money trading securities should make it his business to understand how those profits are being made. Trading and speculating is what investment banks do. They've never made any secret about it. And for years, shareholders were happy to take take their cut of the profits and benefit from the increase in share prices that these trading activities created.


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I wonder how long it will take for the general public to realise that these financial instruments being sold never work.
If we look back since the 60's when this all started with Unit Trusts then Endowments; Pension Plans, Investment Plans etc etc. Nobody seems to have made a profit.
Nobody? Sure they have. Tons of investors have made money. It all depends on when you get in and when you get out.
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Old 18.07.2010, 12:56
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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It's also worth pointing out (again) that the recent financial crisis wasn't caused by investment baks trading derivatives, forwards, options etc. but by retail banks making plain vanilla housing loans to people who couldn't afford them and people who couldn't afford them happily taking the cash. Investment banks got caught up because they repackaged and bought this junk, using too much leverage.
Yeah right

Who do you think came up with the idea for the 'New Financial Instruments' and created and traded the MBSs and CDOs which enabled mortgages to be handed out to all and sundry with no real link between creditor and debtor (as retail banks used to have)?

The crisis had everything to do with the antics of the investment banks. Your attempts to revise history a mere couple of years after it happened (and is indeed still unfolding) and portray the investment banks as victims of conventional retail banks leave me speechless.
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Old 19.07.2010, 09:27
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Yeah right

Who do you think came up with the idea for the 'New Financial Instruments' and created and traded the MBSs and CDOs which enabled mortgages to be handed out to all and sundry with no real link between creditor and debtor (as retail banks used to have)?

The crisis had everything to do with the antics of the investment banks. Your attempts to revise history a mere couple of years after it happened (and is indeed still unfolding) and portray the investment banks as victims of conventional retail banks leave me speechless.
Commercial banks, I banks, Rating agencies - they were all complicit, they all allowed greed to overrule their good sense, and they are all guilty.

But the real criminals are the politicians who knowingly allowed all this to happen - in return for bribes from the above guilty parties.

On the specific point you make, Gav ... yes, the I Banks came up with the clever ideas. But that's a bit like blaming the people who came up with Lotto. If you use up your rent and food money to buy Lotto tickets and are starving at the end of the month, I think it is pretty clear who is to blame...

The commercial banks are all run by grown ups who were under no pressure to buy into any clever ideas the I banks came up with.

It was simple greed that drove all these actors. That, and the comforting knowledge that if and when 5hit really hit the fan, their political patrons will bail them out with public money.
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Old 19.07.2010, 20:08
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Yeah right

Who do you think came up with the idea for the 'New Financial Instruments' and created and traded the MBSs and CDOs which enabled mortgages to be handed out to all and sundry with no real link between creditor and debtor (as retail banks used to have)?

The crisis had everything to do with the antics of the investment banks. Your attempts to revise history a mere couple of years after it happened (and is indeed still unfolding) and portray the investment banks as victims of conventional retail banks leave me speechless.
Spot on. The RMBS ('financial innovation' ) were the major cause of the crisis - the IBs even set up & owned all the mortgage originators and built a vertical supply chain!

They're still using their politicians to steal everyone else's money; they're now doing it with the spread between IRs and loan rates;

"What the average citizen doesn’t explicitly understand is that a significant part of the government’s plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread" - Bill Gross, co-CIO, Pimco.
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Old 20.07.2010, 11:23
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Spot on. The RMBS ('financial innovation' ) were the major cause of the crisis - the IBs even set up & owned all the mortgage originators and built a vertical supply chain!

They're still using their politicians to steal everyone else's money; they're now doing it with the spread between IRs and loan rates;

"What the average citizen doesn’t explicitly understand is that a significant part of the government’s plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread" - Bill Gross, co-CIO, Pimco.
& from today's newspaper "Hungary cannot easily devalue to claw its way out of its debt-trap because 63pc of loans from mortgages, households, and companies are in foreign currencies, much of it in the ever-soaring Swiss franc"

63% !! What were the financial institutions offering these loans ever thinking? Bound to "end in tears",
buying your home by borrowing foreign currency is very dangerous - of course the interest rates were low, but why?
Because strong currencies do not need high rates to sustain their value. Weaker currencies do have higher rates but also the risk of steady devaluation.
So today you borrow 100,000 CHF for your mortgage which is equivalent to say 200K of your local currency then next year you have to find 250K of your local currency to pay off your 100,000 CHF. & how much local currency the year after!!
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