105 thoughts on “Monday Message Board

  1. freelander, whilst i agree with your assessment that andrews analysis of the GFC is cr*p you really do have put forward some reasoning or evidence,
    andrew clearly thinks my opinions about central banking are completely rubbish but he does have the good manners to rebut them with counter arguments and information,
    and whilst he can appear smug and self-righteous there really is the possibility of an actual conversation

    on another topic i think it has been good that the climate change dynamic has been upset by the stooges, morons and sociopaths who just dont care,
    it had become an almost religious dogma, and people that doubted it or questioned it really were being treated poorly which i think was wrong,
    personally i trust the scientists and from the evidence i have seen presented am as sure as i can be that we are causing catastrophic climate change and needed to act a long time ago,
    but a pause for thought on the whole picture, and a recalibration towards more transparency and less dogmatic triumphalism in tone is a good thing

  2. john, i think you might find richard murphy’s comments spiel interesting

  3. obama
    I know both those guys; they are very savvy businessmen (on the $17 million bonus for Jamie Dimon of JP Morgan Chase and the $9 million bonus for Lloyd Blankfein of Goldman Sachs)
    Simon Johnson
    Not only were their banks saved by government action in 2008-09 but the overly generous nature of this bailout means that the playing field is now massively tilted in favor of these banks. (I put this to Gerry Corrigan of Goldman and Barry Zubrow of JP Morgan when we appeared before the Senate Banking Committee last week; there was no effective rejoinder.

    but dont worry, even though they put him in there, obama is going to reign these guys in …
    ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha

  4. Andrew I’m not sure where you are coming from with the comparison to the Saving and Loan crisis. Admittedly I wasn’t working in the financial markets at the time but a quick perusal of the data on the St Louis Fed sight suggests the crisis did not have a huge impact on bank money creation activities.

    The slump in the M1 multiplier during the GFC is eerily similar to the collapse in the early 1930’s while the increase in credit spreads that occurred at its height was a fair indicator that a full scale financial collapse was a real possibility. we can only imagine what the impact would have been had Merrill gone over on the same weekend,

    Three of the big five investment banks falling over, Wachovia forced into the arms of Wells Fargo, Citigroup and Bank of America put on life support. It was (and still is) biggest financial crisis since the 30’s by a country mile.

  5. sdfc,
    When you look at the actual losses, not the big headline figures of size of institutions, the numbers are actually fairly similar. The difference here is that it was a few of the big boys that got hurt – like (as you point out) Wachovia and so on not, as in the S&L crisis, the smaller retail banks.
    The point with the big ones is that none of them were actually in a negative equity situation. They were suffering not because they had low or negative net worth, but due to a lack of confidence in them and the resulting withdrawal of deposits and ceasing of business – a liquidity crisis, as showing up in the figures you were quoting.
    The question then becomes how to reduce the chances of this happening again. Did bailing them out actually reduce the chances or increase them? Personally, I think the bailout made it more likely that it will happen again.
    People will remember that big, risky institutions get bailed out. Small ones do not. Given the choice, therefore, where are you going to put your money? Risky institutions pay more interest (or dividends). Safe ones pay less (in general). Big ones get bailed out – small ones do not.
    The big, risky institutions therefore come out ahead to a rational investor because they can expect to get bailed out and they get high returns.
    Sure – not bailing them out would have hurt a fair bit in the short term. In the long term, though, I think that not bailing them out would have created a much safer, more stable financial system, as there would have been an incentive to favour the smaller, safer institutions (smaller as you can then easily distribute your risk amongst several banks) over the large and risky ones.
    To me, all the bailout did is to make the next crisis more likely, not less. Regulatory changes are not likely to affect this as, in the main, the bankers are smarter than regulators and will dance around the regulations, just as they did the old ones. To me at least, more regulations will just make it worse. I have little confidence that the new ones are going to improve matters at all. The current ones are already really onerous. More onerous ones will not fix that.

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