Tuesday, October 28

Paulson's Capital Cram: Oops, banks not using it for lending...

Looks like the administration has woken up to the fact that just because you give banks more money, doesn't mean they'll lend. AP has an article where the White House is admonishing (admonishing!) banks to lend now that they've taken the money. Why isn't anyone talking about the fact that banks don't have anyone to lend to? What part of: "tightening credit standards" are people not understanding?

Tuesday, October 14

Bloomberg Article on Paulson's Banking Capital Cram Misses the Point

This article on Bloomberg article argues that Paulson's capital cram may not work because the treasury doesn't have the capability to force banks to lend. Why am I the only person here who thinks this is missing the much larger and much more important point: The banks need sound businesses they can lend to! Most of the problem of the financial crisis has to do with the fact that lending standards were too loose; which is another way of saying they were lending to people that shouldn't have gotten credit in the first place. So adding more credit to the system fixes this problem how exactly?

Thursday, October 9

Excellent overview of how the risk models failed us from former LTCM counsel.

This is the best explanation of why the risk modeling on Wall Street is inadequate for the job and is a great way to understand why this crisis is escalating. I am still waiting for a cogent article that outlines that even if the regulators and internal risk management teams had adequate models, they probably still would've been thwarted from managing the risk because of typical corporate politics. Everyone who has worked at a large corporate knows that the revenue producing side of the business wields the greatest power when it comes to arguments about managing risk at the margins. It's clear that internal risk management teams were ineffectual in trying to stop the credit structuring teams when they were pulling in abnormal amounts of revenue.

Monday, October 6

Lehman Approves Millions in Bonuses Days Before Bankruptcy

It's actions like this which will motivate the public to demand rationality in executive compensation. NYTimes has an article stating that Lehman Brothers approved almost $10 Billion in compensation for its employees in the year before bankruptcy.
$10 Billion.
This is pathetic and it's time to start putting people into jail.