Fears grow of repeat of 2008 financial crash

[Wallenburg]

Banks manage risk that is literally the entire point of banking to manage risk.

... They don't seem to be very good at it.

I'd like to see you do better. They are generally very good at what they do, and they have a strong incentive to be good at it. If they aren't, they lose their jobs.

[New Chalcedon]

This is nothing like the 2008 financial crash... Like, at all.

The biggest catalyst was the crash of the housing market, which collapsed the many Collateralized Debt Obligations on the market.

CDOs are basically junk bonds, except they're gigantic groups of junk bonds all smushed together. Basically guaranteed for some portion of them to default.

They depend solely on cash flow.

Watching the tickers means nothing unless we understand what's causing the downturn.

Nothing was fixed after the 2008 crash. Banks continue to be de-regulated despite risk-taking behavior and predatory lending are still common practice.

Banks manage risk that is literally the entire point of banking to manage risk.

Yes, but it seems that today's banks manage risks badly. Which doesn't especially surprise me - with the perverse incentives in modern corporate practice, bank officers from the CEO down to the branch managers have every reason to maximise short-term gains, often at the expense of the bank's medium-term stability and safety.

[The Rich Port]

... They don't seem to be very good at it.

I'd like to see you do better. They are generally very good at what they do, and they have a strong incentive to be good at it. If they aren't, they lose their jobs.

A big part of why people dislike Obama was specifically for his inaction against the banks involved in the sup-prime mortgage crisis.

Also, they didn't loose their jobs because 9 million other people did, as a direct result of their actions.

If this is what being "good" at the job is, I don't want to know what being "bad" at it is.

[Wallenburg]

I'd like to see you do better. They are generally very good at what they do, and they have a strong incentive to be good at it. If they aren't, they lose their jobs.

A big part of why people dislike Obama was specifically for his inaction against the banks involved in the sup-prime mortgage crisis.

Also, they didn't loose their jobs because 9 million other people did, as a direct result of their actions.

If this is what being "good" at the job is, I don't want to know what being "bad" at it is.

When I say that they are good at their jobs, I do not intend to suggest that what they do to be successful is good.

[Geilinor]

I'd like to see you do better. They are generally very good at what they do, and they have a strong incentive to be good at it. If they aren't, they lose their jobs.

A big part of why people dislike Obama was specifically for his inaction against the banks involved in the sup-prime mortgage crisis.

Also, they didn't loose their jobs because 9 million other people did, as a direct result of their actions.

If this is what being "good" at the job is, I don't want to know what being "bad" at it is.

Many people in charge of making irresponsible decisions did lose their jobs. In some cases, they were "bad" at their jobs. That doesn't mean banks are necessary a problem.

[New Chalcedon]

... They don't seem to be very good at it.

I'd like to see you do better. They are generally very good at what they do, and they have a strong incentive to be good at it. If they aren't, they lose their jobs.

Except that by then, the individual CEOs have pocketed their massive bonuses and moved on. Now, if banks only paid out bonuses in the form of shares that couldn't be traded for at least 5 years after they were awarded, it'd be a different stories - the medium-term incentives would shift toward CEOs insuring the bank remained solvent and valuable.

[Wallenburg]

I'd like to see you do better. They are generally very good at what they do, and they have a strong incentive to be good at it. If they aren't, they lose their jobs.

Except that by then, the individual CEOs have pocketed their massive bonuses and moved on. Now, if banks only paid out bonuses in the form of shares that couldn't be traded for at least 5 years after they were awarded, it'd be a different stories - the medium-term incentives would shift toward CEOs insuring the bank remained solvent and valuable.

CEOs tend not to be the ones making the investments, though. They help guide the main strategy. The lower level employees do the real risk-taking.

[The Rich Port]

A big part of why people dislike Obama was specifically for his inaction against the banks involved in the sup-prime mortgage crisis.

Also, they didn't loose their jobs because 9 million other people did, as a direct result of their actions.

If this is what being "good" at the job is, I don't want to know what being "bad" at it is.

Many people in charge of making irresponsible decisions did lose their jobs. In some cases, they were "bad" at their jobs. That doesn't mean banks are necessary a problem.

I didn't say the BANKS were the problem.

I said that the people in charge of the banks and the continued lack of regulations is the problem.

Except that by then, the individual CEOs have pocketed their massive bonuses and moved on. Now, if banks only paid out bonuses in the form of shares that couldn't be traded for at least 5 years after they were awarded, it'd be a different stories - the medium-term incentives would shift toward CEOs insuring the bank remained solvent and valuable.

CEOs tend not to be the ones making the investments, though. They help guide the main strategy. The lower level employees do the real risk-taking.

... The main strategy sucks.

[New Chalcedon]

Except that by then, the individual CEOs have pocketed their massive bonuses and moved on. Now, if banks only paid out bonuses in the form of shares that couldn't be traded for at least 5 years after they were awarded, it'd be a different stories - the medium-term incentives would shift toward CEOs insuring the bank remained solvent and valuable.

CEOs tend not to be the ones making the investments, though. They help guide the main strategy. The lower level employees do the real risk-taking.

Yes, per the guidelines laid down by the CEOs. And they, too, have incentives to maximise short-term gains - they get paid bonuses based on EOFY figures, too. And their bonuses are cash, just like the CEO's (albeit smaller). So: Once again, perverse incentives.

Claiming that the CEOs aren't responsible kind of begs to be asked, "Well, why are they paid so much if they're not responsible?"

[Stormwrath]

If there will be some kind of repeat of 2008, I think it will be inevitable and will happen differently. I don't know how it will play out, other than the banks and the stock markets feeling the brunt of things first, but if it does play out it might deal the Asian economies a greater deal of pain than the US and Europe.

[The Rich Port]

CEOs tend not to be the ones making the investments, though. They help guide the main strategy. The lower level employees do the real risk-taking.

Yes, per the guidelines laid down by the CEOs. And they, too, have incentives to maximise short-term gains - they get paid bonuses based on EOFY figures, too. And their bonuses are cash, just like the CEO's (albeit smaller). So: Once again, perverse incentives.

Claiming that the CEOs aren't responsible kind of begs to be asked, "Well, why are they paid so much if they're not responsible?"

The ENRON Nuremberg Defense: "I cannot possibly know everything going on in my company... Even though everything is supposed to pass through me for approval."

Dunno why it worked for these bums but not for ENRON.

EVERYBODY went to fucking jail after the ENRON scandal.

[Wallenburg]

CEOs tend not to be the ones making the investments, though. They help guide the main strategy. The lower level employees do the real risk-taking.

Yes, per the guidelines laid down by the CEOs. And they, too, have incentives to maximise short-term gains - they get paid bonuses based on EOFY figures, too. And their bonuses are cash, just like the CEO's (albeit smaller). So: Once again, perverse incentives.

Claiming that the CEOs aren't responsible kind of begs to be asked, "Well, why are they paid so much if they're not responsible?"

We weren't talking responsibility. We were talking action. Don't strawman me.

[Nationes Pii Redivivi]

Probably, maybe not imminently, but Capitalism is a series of inevitable Crashes and Rises, though one should always be skeptical of naysayers, like the Austrians, that predict that a Crash is at hand unless everyone convert to the Praxeological faith, and lo, after seventy-five failed doomsday, they finally get a crash to vindicate themselves.

[Brickistan]

... They don't seem to be very good at it.

I'd like to see you do better. They are generally very good at what they do, and they have a strong incentive to be good at it. If they aren't, they lose their jobs.

Yeah...

Right...

They're so good that the entire US banking sector nearly collapsed in 2008, dragging the rest of the western world with them, and requiring massive bailouts to prevent a total collapse of western economy.

Banks were never intended to take risks. They're supposed to be a safehouse for our money, a place where we can deposit and withdraw money without having to wonder if they'll still be here tomorrow. That's why the Glass–Steagall Act was put in place. And sure enough... Once that was removed, it didn't take the banks many years to put themselves in such a risky situation that they got "too big to fail" and damn near brought western civilization to its knees.

[Wallenburg]

I'd like to see you do better. They are generally very good at what they do, and they have a strong incentive to be good at it. If they aren't, they lose their jobs.

Yeah...

Right...

They're so good that the entire US banking sector nearly collapsed in 2008, dragging the rest of the western world with them, and requiring massive bailouts to prevent a total collapse of western economy.

I see you conveniently ignored the word "generally".

Banks were never intended to take risks. They're supposed to be a safehouse for our money, a place where we can deposit and withdraw money without having to wonder if they'll still be here tomorrow.

Bullshit.

And if that's too difficult to understand, It's a Wonderful Life puts it simply.

That's why the Glass–Steagall Act was put in place. And sure enough... Once that was removed, it didn't take the banks many years to put themselves in such a risky situation that they got "too big to fail"

You say that as if I would disagree with that, or as if I oppose such restrictions.

and damn near brought western civilization to its knees.

Oh, please. Wars, famines, and plagues have constantly threatened the power of Western civilization, and yet it has still emerged dominant. A handful of selfish investors won't destroy an entire way of life.

[New Chalcedon]

Yes, per the guidelines laid down by the CEOs. And they, too, have incentives to maximise short-term gains - they get paid bonuses based on EOFY figures, too. And their bonuses are cash, just like the CEO's (albeit smaller). So: Once again, perverse incentives.

Claiming that the CEOs aren't responsible kind of begs to be asked, "Well, why are they paid so much if they're not responsible?"

We weren't talking responsibility. We were talking action. Don't strawman me.

Are CEOs responsible for the policies by which a corporation operates? Yes or no?

If "Yes", then why did you state otherwise?
If "No", then why are CEOs paid so highly and given such institutional power? More to the point, who is responsible for bad corporate policies if not the CEO?

The fact is, CEOs are ultimately responsible for the policies they set for their subordinates - including their policies on risk management. If a bank has formal policies that make it operate in a high-risk or unsustainable fashion (i.e., pyramid-financing, insolvent trading, high proportions of loans doomed to default etc. etc.), then it's the CEO's screwup. If a bank has sensible formal policies but an organizational culture of excessive risk-taking, fraud and bribery (as was demonstrably the case prior to the 2008 collapse, and is still today), then it's the CEO's screwup on that front instead.

Yeah...

Right...

They're so good that the entire US banking sector nearly collapsed in 2008, dragging the rest of the western world with them, and requiring massive bailouts to prevent a total collapse of western economy.

I see you conveniently ignored the word "generally".

Banks, generally, are not good risk-takers, which is why they were tightly-regulated from the Great Depression through the 1980s. End result - no bank failures, no collapses of the financial sector, but still plenty of profits. But in the name of more profits, they lobbied hard to get oversight loosened and got what they wanted. Since then the financial sector has been the source of an economic crunch roughly once a decade. 1987 (S&L crisis), 2000 (dot-com burst leading to a short recession), 2008 (Wall St. meltdown)...

The evidence is in: banks cannot be trusted to operate without significant restrictions on what risks they may take and when, as well as regulatory enforcement of those restrictions.

[Frank Zipper]

How much of an economic impact is the current bad weather on the US eastern seaboard, and in China, likely to have?

[Wallenburg]

Are CEOs responsible for the policies by which a corporation operates? Yes or no?

Yes.

If "Yes", then why did you state otherwise?

I didn't.

Banks, generally, are not good risk-takers, which is why they were tightly-regulated from the Great Depression through the 1980s. End result - no bank failures, no collapses of the financial sector, but still plenty of profits.

Mmm-hmm, no bank, large or small, failed anywhere in the United States for over 40 years. I call bullshit.

The evidence is in: banks cannot be trusted to operate without significant restrictions on what risks they may take and when, as well as regulatory enforcement of those restrictions.

You say this as if I support Jeb! or Clinton or some other Wall Street panderer. I think you have been misinterpreting my posts.

[New Chalcedon]

Are CEOs responsible for the policies by which a corporation operates? Yes or no?

Yes.

If "Yes", then why did you state otherwise?

I didn't.

True, you didn't directly state as much, when you tried to shuffle responsibility down the chain to the "lower level employees". You simply...tried to shuffle responsibility down the chain.

Banks, generally, are not good risk-takers, which is why they were tightly-regulated from the Great Depression through the 1980s. End result - no bank failures, no collapses of the financial sector, but still plenty of profits.

Mmm-hmm, no bank, large or small, failed anywhere in the United States for over 40 years. I call bullshit.

True enough - I misspoke. A trickle of bank failures happened throughout that time period; however, none threatened the security or efficacy of the banking system as a whole, and the number of bank failures was such a small proportion of the total number of banks that it demonstrated low-risk behaviour. For that 40 years (well, 50 actually), banks were tightly regulated. It's more than coincidence that banking deregulation was followed shortly thereafter by the Savings and Loan crisis. Banking deregulation started in March 1980, with the passage of the Depository Institutions Deregulation and Monetary Control Act of 1980, and the S&L crisis is generally acknowledged to have started in March 1985 with the failure of the Home State Savings Bank of Ohio.

It took just five years of banking deregulation to touch off a crisis which destablilized the whole economy. Five. Years. That's not what I'd describe as "good risk-taking" behaviour on the part of banks. Nor, for that matter, is it what I'd call evidence of ethical behaviour on the part of the hundreds of CEOs and boardmembers who ended up in jail for fraud, bribery and influence-peddling. The evidence is in: banks cannot be trusted to manage themselves without a tight regulatory framework, effectively enforced.

[The Rich Port]

How much of an economic impact is the current bad weather on the US eastern seaboard, and in China, likely to have?

Not very much, most likely.

A couple million dollars in damages is a drop in the bucket... And even then they can just ignore all the people in aid. Worked for Bush.

[Trotskylvania]

Yes, per the guidelines laid down by the CEOs. And they, too, have incentives to maximise short-term gains - they get paid bonuses based on EOFY figures, too. And their bonuses are cash, just like the CEO's (albeit smaller). So: Once again, perverse incentives.

Claiming that the CEOs aren't responsible kind of begs to be asked, "Well, why are they paid so much if they're not responsible?"

The ENRON Nuremberg Defense: "I cannot possibly know everything going on in my company... Even though everything is supposed to pass through me for approval."

Dunno why it worked for these bums but not for ENRON.

EVERYBODY went to fucking jail after the ENRON scandal.

The Enron scandal was limited a single company.

The 2007-8 financial crisis indicts an entire class and the capitalist socioeconomic system. You can't punish anyone without undermining the whole institution. Obama, the good dyed-in-the-wool Bolshevik he is, has no desire to undermine capitalism

[Frank Zipper]

How much of an economic impact is the current bad weather on the US eastern seaboard, and in China, likely to have?

Not very much, most likely.

A couple million dollars in damages is a drop in the bucket... And even then they can just ignore all the people in aid. Worked for Bush.

I was thinking it would have more economic impact than damages. Are people able to get to work? Though it is likely that in the UK I am just seeing the images that make it seem most dramatic.

[The Rich Port]

The ENRON Nuremberg Defense: "I cannot possibly know everything going on in my company... Even though everything is supposed to pass through me for approval."

Dunno why it worked for these bums but not for ENRON.

EVERYBODY went to fucking jail after the ENRON scandal.

The Enron scandal was limited a single company.

The 2007-8 financial crisis indicts an entire class and the capitalist socioeconomic system. You can't punish anyone without undermining the whole institution. Obama, the good dyed-in-the-wool Bolshevik he is, has no desire to undermine capitalism

Meh. If the current atmosphere in Wall Street revolves around crime and lies, is it really worth preserving?

It doesn't matter if he's a "Bolshevik" as long as he isn't an oligarchist.