Deleted member 651465
D
What caused the banking crash? Impact on regulation
- Thread starter sports_brah
- Start date
- Joined
- 4 Jan 2013
- Posts
- 3,783
u mad bro?
Haha, I've been to 3 assessment centres recently. Feel like cattle at this stage!
Thankfully I've got no real interest in going into risk management, I'd rather be at the section where people are managing MY risk.
Surely being someone with an 'indepth' knowledge of the financial crisis you should know this?
I've got plenty of books on it, and I'm pretty confident in my ability to write a great deal on it. It never hurts to hear others opinions, as it can sometimes dovetail really nicely with an existing viewpoint.
Just to add to the discussion. If someone wants a good introduction, I would recommend reading:
Understanding regulation, theory, strategy and practice (second edition). (Baldwin, Cave and Lodge).
Very comprehensive and gives a good basis. Message me in trust if you'd like a copy.
- Joined
- 4 Jan 2013
- Posts
- 3,783
No cure for being human!
This did the rounds on various websites:
Helga is the proprietor of a bar.
She realizes that virtually all of her customers are unemployed alcoholics
and, as such, can no longer afford to patronize her bar.
To solve this problem, she comes up with a new marketing plan that allows
her customers to drink now, but pay later.
Helga keeps track of the drinks consumed on a ledger (thereby granting the
customers’ loans).
Word gets around about Helga’s “drink now, pay later” marketing strategy
and, as a result, increasing numbers of customers flood into Helga’s bar.
Soon she has the largest sales volume for any bar in town.
By providing her customers freedom from immediate payment demands, Helga
gets no resistance when, at regular intervals, she substantially increases
her prices for wine and beer, the most consumed beverages. Consequently, Helga’s gross sales volume increases massively.
A young and dynamic vice-president at the local bank recognizes that these
customer debts constitute valuable future assets and increases Helga’s
borrowing limit.
He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral!!!
At the bank’s corporate headquarters, expert traders figure a way to make
huge commissions, and transform these customer loans into DRINKBONDS.These “securities” then are bundled and traded on international securities markets.
Naive investors don’t really understand that the securities being sold to
them as “AA” “Secured Bonds” really are debts of unemployed alcoholics.
Nevertheless, the bond prices continuously climb!!!, and the securities soon
become the hottest-selling items for some of the nation’s leading brokerage
houses.
One day, even though the bond prices still are climbing, a risk manager at
the original local bank decides that the time has come to demand payment on
the debts incurred by the drinkers at Helga’s bar.
He so informs Helga.
Helga then demands payment from her alcoholic patrons, but being unemployed
alcoholics they cannot pay back their drinking debts.
Since Helga cannot fulfil her loan obligations she is forced into
bankruptcy.
The bar closes and Helga’s 11 employees lose their jobs.
Overnight, DRINKBOND prices drop by 90%. The collapsed bond asset value
destroys the bank’s liquidity and prevents it from issuing new loans, thus
freezing credit and economic activity in the community.
The suppliers of Helga’s bar had granted her generous payment extensions and
had invested their firms’ pension funds in the BOND securities. They find
they are now faced with having to write off her bad debt and with losing
over 90% of the presumed value of the bonds.
Her wine supplier also claims bankruptcy,
closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.
Fortunately though, the bank, the brokerage houses and their
respective executives are saved
and bailed out by a multibillion dollar no-strings attached cash infusion from the government.
The funds required for this bailout are obtained by new taxes levied on
employed, middle-class, non-drinkers who have never been in Helga’s bar.
Helga is the proprietor of a bar.
She realizes that virtually all of her customers are unemployed alcoholics
and, as such, can no longer afford to patronize her bar.
To solve this problem, she comes up with a new marketing plan that allows
her customers to drink now, but pay later.
Helga keeps track of the drinks consumed on a ledger (thereby granting the
customers’ loans).
Word gets around about Helga’s “drink now, pay later” marketing strategy
and, as a result, increasing numbers of customers flood into Helga’s bar.
Soon she has the largest sales volume for any bar in town.
By providing her customers freedom from immediate payment demands, Helga
gets no resistance when, at regular intervals, she substantially increases
her prices for wine and beer, the most consumed beverages. Consequently, Helga’s gross sales volume increases massively.
A young and dynamic vice-president at the local bank recognizes that these
customer debts constitute valuable future assets and increases Helga’s
borrowing limit.
He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral!!!
At the bank’s corporate headquarters, expert traders figure a way to make
huge commissions, and transform these customer loans into DRINKBONDS.These “securities” then are bundled and traded on international securities markets.
Naive investors don’t really understand that the securities being sold to
them as “AA” “Secured Bonds” really are debts of unemployed alcoholics.
Nevertheless, the bond prices continuously climb!!!, and the securities soon
become the hottest-selling items for some of the nation’s leading brokerage
houses.
One day, even though the bond prices still are climbing, a risk manager at
the original local bank decides that the time has come to demand payment on
the debts incurred by the drinkers at Helga’s bar.
He so informs Helga.
Helga then demands payment from her alcoholic patrons, but being unemployed
alcoholics they cannot pay back their drinking debts.
Since Helga cannot fulfil her loan obligations she is forced into
bankruptcy.
The bar closes and Helga’s 11 employees lose their jobs.
Overnight, DRINKBOND prices drop by 90%. The collapsed bond asset value
destroys the bank’s liquidity and prevents it from issuing new loans, thus
freezing credit and economic activity in the community.
The suppliers of Helga’s bar had granted her generous payment extensions and
had invested their firms’ pension funds in the BOND securities. They find
they are now faced with having to write off her bad debt and with losing
over 90% of the presumed value of the bonds.
Her wine supplier also claims bankruptcy,
closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.
Fortunately though, the bank, the brokerage houses and their
respective executives are saved
and bailed out by a multibillion dollar no-strings attached cash infusion from the government.
The funds required for this bailout are obtained by new taxes levied on
employed, middle-class, non-drinkers who have never been in Helga’s bar.
Soldato
- Joined
- 8 Mar 2007
- Posts
- 10,938
That's like me selling you a house and re-wiring all the electrics before I leave, then saying it must be your fault it burnt down because you were living there at the time of the fire.
Nope.
As a result of the so called "crisis", banks have now been given the power to take your money from your account.
They tested it out on Cyprus first, no one complained or rioted, and so then they signed it into law everywhere else.
They don't need bailouts any more, they can just take your money with their new "bail-in". Google it.
