Tory guru: Financial system riskier now than it was before the collapse of Lehman Brothers
James Forsyth 12:32pm
There’s a good article in the New York Times today about how little has changed in the way Wall Street does business since the collapse of Lehman—employment in the sector is only down eight percent, Goldman employees will earn on average $700,000 this year and derivatives are still not being traded on an open exchange. Indeed, the new Tory guru Nassim Taleb, the author of The Black Swan, thinks that the system might be riskier now than it was when Lehmans collapsed:
This problem of moral hazard is considerable. But having bailed out the banks, I find it hard to see how governments can deal with it. A declaration that the banks would not be bailed out again would be a hostage to fortune.“Mr. Taleb warns that the system has grown riskier since last fall. The extensive government support that began after Lehman collapsed will lead investors to assume that governments will always prevent major banks from collapsing, he said.So investors will lend money to the financial industry on easy terms. In turn, financial institutions will use that cheap money to make risky loans and trades. The banks will keep the profits when their bets pay off, while taxpayers will swallow the losses when the bets go bad and threaten the system.”
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Rhoda Klapp
September 12th, 2009 1:00pm Report this commentIsn't that what we have regulators for? Tongue-in-cheek, whistling...
Seriously, if the govy lets it go again, after saying it knows all about what caused the last problem, then the fault all lies with them. The market will always do what it does, if you let it.
TrevorsDen
September 12th, 2009 1:50pm Report this commentHang the bastards from the nearest lamp-posts.
The same govt which is whinging about the pensions provided by the Phoenix 4 under their stewardship have happily given Goodwin his massive pension and seen Heston promised massive bonuses.
And for what? £10 million just to sack people and take cheap money and lend it dear? I could do that. No I couldn't I am not bare acd enoiugh.
Heston is just a barrow boy like all the rest of the toe-rags.
TomTom
September 12th, 2009 3:50pm Report this commentJust limit banks' Debt/Equity ratios and increase their Cash Reserves - setting a corset on their capital structure will require more funds to flow to Retained earnings and less to Cash Bonuses.
Reduce Leverage and expose the overcapacity in the banking system. Trading Profits based on mis-priced Risk have allowed banks to carry excess capacity
Bexleyite
September 12th, 2009 3:53pm Report this commentI'm not lending money to the banks on easy terms. They're forcing me to accept ridiculous rates of interest and charging borrowers a fortune for loans.
Lola
September 12th, 2009 6:47pm Report this comment'Oi, Brown! Sit in the corner and write out one thousand times:'
Reg-yew-lay-shun increases risk.
Stephen David
September 12th, 2009 10:43pm Report this commentCan you get rid of the NatWest Advertisement that keeps expanding to block out the blogs
Tim Calvert
September 13th, 2009 12:38am Report this commentI could not agree more Stephen David.
If the Speccie can't control the banks when they ruin its web pages, it should stop commenting on banks altogether.
anon
September 13th, 2009 10:36am Report this commentStephen, Tim
well said! if you can't even control the banks when they're paying YOU for access to the webpage then you really shouldn't be commenting on control, regulation etc etc at all. and it wouldn't be so bad if it wasn't such a smug, pc bleedin' advert in the first place. Banks - know your place! top right corner of webpage and no expansionsim!
THX1138
September 13th, 2009 7:49pm Report this commentGo Goldman -It brings a little sunshine into my world to think
that there are people in the world earning some serious wedge again.
Governments, regulators, newspapers columnists & general doom & gloom merchants like Taleb & Roubini can witter on all they like, while the clever sods in the City & Wall St will just keep getting richer and I'll be cheering them on.
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