« Unemployment: what to do? | Main | Ownership & house money »

March 19, 2009



Also clearly absence is any return to the concept of a bank director having to be a "fit and proper person", both in terms of personal integrity and knowledge and experience. While integrity can sometimes be hard to judge objectively, there should at least be a requirement for demonstrated skill and experience. If the football authorities can demand that team managers have passed their coaching badges surely a requirement for senior bank executives and directors to have professional qualifications in banking or finance is not too much to ask. Running a grocery store is not an adequate qualification for becoming CEO of a major bank.


Imagine the next boom, in which banks restrain lending. Young people will complain of being unable to get on the housing ladder.

Yeah, because, in the last boom, they had NO problem.

5: idle productive capacity. Increased uncertainty means higher risk premia.

Luis Enrique


you've read the report (so I don't have to!) ... does it say anything about preventing banks from loading their balance sheets with each other's securitized loans, or from taking out default insurance and behaving as if this meant they were risk free?

the inspiration for these two questions comes from these two (imho) must-read articles



Leigh Caldwell

RobertD: He does hint at some kind of requirements for bank staff to be more skilled and better trained. But actually I don't think the problem here is the irrationality of bank employees. They have been all too rational, creating and exploiting big agency problems.

The real problem - which he identifies but doesn't propose to solve - is irrationality of the non-professionals in finance, investors and borrowers. I think we need some proposals for a regulator of rationality:



Luis - higher capital requirements would, indirectly, limit banks' holding each others' loans. I don't think Turner does address the CDS problem, though.
That said, I've long been puzzled by these. They seem to me to just exchange default risk with counterparty risk. It's only because the counterparty (AIG) gets bailed out that this makes sense.

The comments to this entry are closed.

blogs I like

Blog powered by Typepad