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April 09, 2008

Comments

Mark

Am I right, I am not sure...?

Banks have treated the increase in paper value of these assets as a means to draw ever larger salaries and bonuses - A banker says, "I bought an asset which appreciated in value by 30 million last year, therefore I deserve a salary and bonus of 5 million. It matters not a jot that the appreciation was a figment of my imagination".

And now the value of these assets is shown to be lower, the banker is already out the window with his swag bag over his shoulder.

I am just not sure to which victim the swag belonged. Although it is clear shareholders carry the can - much like an insurer at a burglary.

Bob B

Chris - I would appreciate your reflections on this proposal:

"[George] Osborne is therefore attracted to a proposal put forward last year by a former member of the Bank of England’s monetary policy committee, Charles Goodhart, whose effect would be to impose restrictions on how much banks can lend during years of strong economic growth and would ease those restrictions when the economic cycle turns down."
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/04/osborne_and_the_next_crunch.html

Almost anything Goodhart suggests about banking reforms commands serious attention and several other people, including Vince Cable, are mooting prospective radical reforms of the financial system without being any too specific about details:
http://commentisfree.guardian.co.uk/vincent_cable/2008/04/calling_time_on_the_system.html

Occasionally, in the context of dealing with Japan's deflation, news has emerged from there about suggestions that the central bank there might engage in market support operations for equity, which raises all sorts of fascinating questions about who or what is to select what equity to support?

Bob B

For interest, here is the text of George Osborne's speech at Harvard yesterday:
http://www.conservatives.com/tile.do?def=news.story.page&obj_id=143499

Dipper

Mark is spot on.

The current crisis raises some very serious issues about how shareholders control the bankers. Isn't government control just an excuse for shareholders not to exercise their responsibilities?

jameshigham

For one thing, it's much less than equity investors have lost.

Yes but that's hardly and argument, Chris.

kinglear

The banks like to blow a few billions every few years. It gives them the excuse to up their charges, screw their shareholders, and generally make us all miserable

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