What to do with bankers who cling bitterly to their guns, religion and money? The NYT's Floyd Norris says, "jawbone them". Worked on asses, I recall, or do I have that wrong? IB'r, CEA, all you other financial wizards out there. Any suggestions?
1 comment:
Anonymous
said...
The biggest problem is that no one knows when the writeoffs will end. RBS is now 60%-owned by the British government. The Swiss government just bailed out UBS to the tune of $60 billion.
No one knows if there is "more to come".
A big problem is that bankers were getting paid in short-term 12-month time (annual bonuses) while the products they were creating and selling (CDS's, CDO's, MBS's) had long-tail, long-term liability (like, they weren't worth anything). Banks were borrowing and paying out short, and lending out and taking risk long.
Now they have pulled in their horns and won't borrow (much less pay out) any more. It's because their long-tail risk ("long-tail" means the right hand thin part of the bell curve tail) is still some number - maybe it's $1, maybe it's $100 billion.
Lehman should not have been allowed to fail. It has frozen assets of individuals, mutual funds, hedge funds, etc. etc. One hedge fund has a 3% stake in UBS that he cannot access. Now, do you think ANY bank is going to lent to ANYONE and risk having its assets frozen until a bankruptcy court sorts through it? Bwah ha ha ha!
here is the issue:
Risk to bank of not lending: $0 Risk to bank of lending: Who knows?
So, you are the head of the bank - what do you do?
You sit tight and wait until things settle out and the Dow Jones isn't fluctuating 1,000 points a day. I'm thinking 3-6 months you will see no lending despite the amount of jawboning. But when it finally does "settle out" and the banks do start to lend again, I guarantee you the Fed/SEC/Treasury will claim that it was their jawboning that "finally" made it happen.
I am, after twenty years, a non-practicing lawyer and glad of it. I am the author of The New Millionaire's Handbook (Andrews/Mcmeal 2000, Greenwich Mean Time (2006) and several equally funny (he said) unpublished novels and screenplays. For the past six years or so I've been selling real estate in Greenwich, Ct and, while that wasn't exactly the career I envisioned when I was a starry-eyed law school graduate, it seems to pay the bills far better than lawyering ever did, with no stress. Good deal.
Mostly, you'll find information about Greenwich real estate in this blog but I do have other interests and, because I think what our politicians do can severely affect the economy and real estate values, I often jump the shark. If you don't want to see that ugly sight, please skip to a real estate entry.
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Contractors and such. Folks I've used and been impressed by.
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1 comment:
The biggest problem is that no one knows when the writeoffs will end. RBS is now 60%-owned by the British government. The Swiss government just bailed out UBS to the tune of $60 billion.
No one knows if there is "more to come".
A big problem is that bankers were getting paid in short-term 12-month time (annual bonuses) while the products they were creating and selling (CDS's, CDO's, MBS's) had long-tail, long-term liability (like, they weren't worth anything). Banks were borrowing and paying out short, and lending out and taking risk long.
Now they have pulled in their horns and won't borrow (much less pay out) any more. It's because their long-tail risk ("long-tail" means the right hand thin part of the bell curve tail) is still some number - maybe it's $1, maybe it's $100 billion.
Lehman should not have been allowed to fail. It has frozen assets of individuals, mutual funds, hedge funds, etc. etc. One hedge fund has a 3% stake in UBS that he cannot access. Now, do you think ANY bank is going to lent to ANYONE and risk having its assets frozen until a bankruptcy court sorts through it? Bwah ha ha ha!
here is the issue:
Risk to bank of not lending: $0
Risk to bank of lending: Who knows?
So, you are the head of the bank - what do you do?
You sit tight and wait until things settle out and the Dow Jones isn't fluctuating 1,000 points a day. I'm thinking 3-6 months you will see no lending despite the amount of jawboning. But when it finally does "settle out" and the banks do start to lend again, I guarantee you the Fed/SEC/Treasury will claim that it was their jawboning that "finally" made it happen.
CEA
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