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congenialJonMc

Listed below are comments made by congenialJonMc between Tuesday, 23rd September 2008 and Tuesday, 7th October 2008.

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Banks' most pressing problem 12:46pm on 07 Oct 2008 Lets assume that the large banks in the UK are effectively insolvent - the size of these institutions, starting with HSBC, is so huge that combined the big banks dwarf the GDP of the UK. There is no way the UK can recapitalise these banks and axccquire their dodgy assets. People in the UK and the US talk about the Japan experience in the nineties but it is worth remembering the enormous savings, reserves and overseas holdings of Japan at that time and the bail out of the banking sector has left the economy effectively meaningless for two decades. The US and the UK are in no way in a similar situation.
Banks' most pressing problem 10:34am on 07 Oct 2008 I wonder if the bankers in the boardrooms can see the irony of their begging for capital as a result of their reckless lending and foolish use of leverage to buy questionable assets as their employees reposess houses and persue people through county courts for ill-advised borrowing and poor debt management.
Central banks to the rescue 6:29pm on 26 Sep 2008 Its amusing that so many people are cavalier about this situation, the truth is that many of the lost jobs in the city were at the apex of the food chain and the repurcussions of so many people being laid off will be severe - go and walk down Cheapside and see how many mobile phone stores, expensive coffee shops and overpriced sandwich bars there are. These establishments exist because the average secretary or clerk in a city institution earns 3 to 4 times as much as in regular jobs. Expand the thinking and see how many of the creative types in the westend depend on business from the banking sector to maintain their similar life styles. Of course this means little to the average worker in Wales or the Midlands but consider the tax revenues generated by London. Very few of us can imagine what it is like to exist in a world where the banking sector ceases to operate normally. I am only 38 but was working in Indonesia in 1997 when their system collapsed completely during the asian crisis - I wonder how people in this country will react to similar circumstances. When I was a child I remember the Winter of Discontent, the power blackouts, the constant strikes but it seems as real to me now as a world with only 3 television channels.
Central banks to the rescue 12:54pm on 26 Sep 2008 If the bail-out happens, it will only increase the moral hazard. The international banking system has shown that it is extremely blinkered when it comes to making the same mistakes over and over again. The collapse and rescue of LTCM, (smartest people in the room), which was overseen by Greenspan had little impact on the ambitions of traders and hedge fund managers. In fact Merriwether was up and running a very similar but smaller fund shortly after being shown the door and was, incredibly, trumpeting his track record! the Russian default was similarly followed by the Argentinian debt default, noticably banks had increased their risk management operations hugely between these two events, unfortunately the smart people in risk only seem able to interpret what their bloomberg or risk management systems tell them rather than recognizing when the yield to maturity of a soverign bond is over 140% there is a good chance of default - I suppose phd's in mathmatics or physics doesn't teach you how to recognize real events. And what of increased regulation like Sarbannes Oxley, introduced to prevent another Enron? Well a SIV run by a bank is just the same as Enron's ludicrously named off balance sheet vehicles.
Central banks to the rescue 11:06am on 26 Sep 2008 The $700bn plan, even if it is passed through congress, is probably too little to late.Paulson and Bernanke clearly feel they can do a JP Porgan and "stop the rot" but I think the situation has deteriorated far too much. The UK and the US had decided that a service economy, lead by financial innovation was the way to go and we are witnessing what happens when the finance sector fails to operate. This crisis is primarily a credit crisis, not an equity crisis as in the past. Nationalisation of the banks won't work as Northern Rock has shown, after selling off the best mortgages, they offered customers renewing their mortgages an increase of around 60% - good effort! We should all be prepared for a good bout of depression era living, unless the great and the good can engineer a nice winable war, look out Iran, Venezuela and North Korea!
The next accident 1:01pm on 23 Sep 2008 Post 51.
I worked in the embryonic CDS market and can assure you it was never envisaged that credit default swaps would be used in the way they have been since 2002. They were never supposed to be a leveraged substitute for corporate bonds.

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