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Contents contributed and discussions participated by stefan ayache

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Kevin Mao

Key Facts - 10 views

started by Kevin Mao on 18 Apr 12 2 follow-ups, last by kevinan108 on 18 May 12
  • stefan ayache
    #3 stefan ayache on 18 May 12
     
    Lehman Brothers-Investment bank that went under, led to the meltdown that was the 2008 financial crisis
    Bank of America-American Bank involved in many high profile banking stories
    Financial Crisis- started towards the end of 2008 with the crash of Lehman Brothers, brought the financial system to its knees. This was due to problems in the credit markets, after many homeowners with subprime mortgages started defaulting on their mortgages and getting foreclosed upon, losing their homes
    Housing bubble- housing prices going above their value, ends with a sudden huge drop in housing prices
  • stefan ayache
    #4 stefan ayache on 18 May 12
     
    bear stearns- American investment bank which went under during the financial crisis
  • stefan ayache
    #7 stefan ayache on 18 May 12
     
    Euro crisis- European governments have been taking on more debt than they are able to repay, has led to massive financial instability in Europe and devaluation of the Euro
    Goldman Sachs- American Investment bank, still around after the crisis, are now quite profitable, have no souls
    Merrill Lynch- American Investment bank which shut down during the crisis
    JPMorgan- American bank, was the only bank to remain profitable during the crisis
stefan ayache

Banking industry faces calls for tougher regulation after massive loss at JPMorgan - Wi... - 0 views

www.winnipegfreepress.com/...-on-investments-151019915.html

banking

shared by stefan ayache on 17 May 12 - No Cached
  • JPMorgan Chase faced intense criticism Friday for claiming that a surprise $2 billion loss
  • the colossal misfire was cited as proof that big banks still do not understand the threats posed by their own speculation
  • It just shows they can't manage risk
  • ...31 more annotations...
  • if JPMorgan can't, no one can
  • JPMorgan is the largest bank in the United States and was the only major bank to remain profitable during the 2008 financial crisis
  • the $2 billion loss came from a hedging strategy that backfired, not an opportunistic bet with the bank's own money
  • the trades were instead a "major bet" on the direction of the economy
  • he did not know whether JPMorgan had broken any laws or regulatory rules
  • the bank was "totally open" to regulators
  • recharged a debate about how to ensure that banks are strong and competitive without allowing them to become so big and complex that they threaten the financial system
  • The JPMorgan loss did not cause anything close to the panic that followed the September 2008 failure of the Lehman Brothers
  • Within minutes after trading began on Wall Street, JPMorgan stock had lost almost 10 per cent
  • about $15 billion in market value
  • It closed down 9.3 per cent
  • Fitch Ratings also downgraded the bank's credit rating by one notch
  • The broader stock market was down only slightly for the day
  • they involved "synthetic credit positions," a type of the complex financial instruments known as derivatives
  • Enhanced oversight of derivatives was a pillar of the 2010 financial overhaul law
  • the implementation has been delayed repeatedly
  • the derivatives market remains too opaque for regulators to oversee
  • Corker, a leader of a failed effort last year to block a Federal Reserve rule that slashed bank profits from debit cards, called for a hearing "as expeditiously as possible"
  • imposible to legislate or regulate risk out of the financial system
  • A mistake was made. Money is going to be lost. It's not customer money. It's not government money. It's JPMorgan's money, the shareholders of JPMorgan
  • No one seemed to suggest Friday that JPMorgan had broken a law
  • changes promoted by the Obama administration were in many cases similar to what the financial industry had sought before the crisis
  • Regulators are still drafting hundreds of rules
  • One is the so-called Volcker rule, which will prohibit banks from trading for their own profit
  • Dimon conceded that the strategy was "egregious" and poorly monitored
  • the trades probably crossed that line because they were making money for JPMorgan
  • At some point it goes from being a hedge to being a moneymaker
  • the only big bank to escape relatively unscathed
  • Dimon said that Paul Volcker, the former Federal Reserve chairman for whom the rule is named "doesn't understand capital markets."
  • "Acting like everyone who's been successful is bad and that everyone who is rich is bad — I just don't get it," he said at a conference earlier this yea
  • sent an email to JPMorgan's 270,000 worldwide employees assuring them that the company was "very strong."
stefan ayache

Hedge Funds Are Shadow Banks in Need of Regulation, Bafin Says - Bloomberg - 1 views

www.bloomberg.com/...-of-regulation-bafin-says.html

shared by stefan ayache on 17 May 12 - No Cached
  • Hedge funds act as shadow banks and should be added to the list of organizations in need of regulation
  • Germany’s financial regulator Bafin.
  • Shadow-banking definitions by the Financial Stability Board
  • ...26 more annotations...
  • are too narrow
  • Bafin is working on its own proposals to regulate the sector
  • make dodging rules more tedious and expensive
  • So-called shadow banking that takes place outside the scope of regulators is being targeted by financial watchdogs on concern that it may be used to evade a global clampdown on excessive risk-taking
  • The FSB
  • established a list of shadow-banking activities that may warrant tougher oversight
  • will seek agreement on the rules by the end of 2012
  • Authorities should know why money is deposited offshore
  • need for additional rules for derivatives
  • credit-default swaps
  • who should be allowed to sell CDS
  • purchase of the instruments should be restricted
  • the CDS market still isn’t transparent
  • tripling how much core capital lenders must hold to at least 7 percent of assets
  • how much freedom national regulators should have to go beyond minimum EU capital rules
  • Finance ministers are set to discuss the rules again at a meeting in Brussels
  • German banks that lend to local economies dominated by medium-sized companies are seeking to loosen standards for risk weighting of these loans
  • The current crises were caused by subprime and government bonds
  • force banks to hold Tier 1 capital equivalent to 3 percent of their total assets
  • would prevent lenders from accumulating assets worth more than 33 times their reserves
  • The measure is needed to stop banks from evading other capital rules
  • considering how to expand the range of assets that qualify as highly liquid
  • concerns that the current list is too narrowly focused on government debt
  • survive a 30-day credit squeeze
  • set to take effect in 2015
  • We, for example, have a huge government bond market; others don’t
stefan ayache

12-year-old Ontario girl slams modern banking system, becomes YouTube hit - thestar.com - 1 views

www.thestar.com/...ng-system-becomes-youtube-star

shared by stefan ayache on 17 May 12 - No Cached
  • Canada’s banking system has been the subject of international praise from economists grappling with global turmoil, but one 12-year-old girl begs to differ
  • earning a reputation as a financial pundit after her tirade against her homeland’s borrowing practices
  • already a veteran of the financial lecture circuit
  • ...11 more annotations...
  • reasons why so many of the world’s countries are facing staggering debt
  • aim at Canada’s modern day financial system and champions a greater role for the country’s central bank
  • The banks and the government have colluded to financially enslave the people of Canada
  • a brief history of the Canadian banking system, referencing obscure historical figures
  • governments began borrowing from private banks instead at considerably higher interest rates than those available through the central bank
  • The result, Grant argues, is a rapidly increasing national debt
  • If the Canadian Government needs money, they can borrow it directly from the Bank of Canada
  • arguing borrowing from the Bank of Canada would shore up depleted government resources and usher in an era of prosperity for Canada
  • Such a change in monetary policy, combined with crucial changes in tax policy, would make available tens of billions of dollars that are urgently needed to rebuild our public infrastructure, protect our environment, and strengthen Medicare and other social programs so vital in meeting human needs
  • Critics of Crowell’s arguments contend inflation rates would soar if the central bank was able to lend money below commercial interest rates
  • Others, however, were skeptical that Grant’s words were truly her own
stefan ayache

Mortgages: More than half of Canadians to carry household debt into retirement | Mortga... - 1 views

business.financialpost.com/...to-retire-with-mortgage-survey

shared by stefan ayache on 17 May 12 - No Cached
  • The one thing Canadians won’t be retiring anytime soon is their mortgage debt
  • Bank of Montreal says 51% of Canadian homeowners plan to carry their mortgage into their retirement
  • times have changed and he believes Canadians can handle the burden
  • ...12 more annotations...
  • People are more sophisticated in their approach to personal finance today than the previous generation
  • People are living longer, working longer and making real estate plans longer or further into their lives
  • Another trend, one which was not considered by the industry before, is people moving into more expensive, upscale homes after retirement
  • Another part of the trend could very well be strategic. With rates on a five-year closed mortgage at about 3.5%, paying down that debt might not seem as high a priority for many homeowners
  • The extremely low level of interest rates is acting both as an inducement for people to take on more debt than they would have in the past and on the flipside not encouraging them to save as in the past
  • People could end up working longer and it might also mean there will be that much less equity in the home you’ll be leaving to heirs
  • could also reflect the longer amortizations the mortgage industry saw
  • Traditionally, mortgages were amortized over 25 years, but that number ballooned to 40
  • the issue is how it’s affecting retirement with half of Canadian homeowners saying their debt load was hindering their ability to plan and save
  • Canadians need about 70% of their pre-retirement income to maintain the same lifestyle
  • By 60 to 69, 25% of those people still have a mortgage
  • real estate prices continue at all-time highs
stefan ayache

JPMorgan Chase's 'Jamie the Great': tap dancing with derivatives | Opinion | The Seattl... - 2 views

seattletimes.nwsource.com/...2018219913_dowd17.html

shared by stefan ayache on 17 May 12 - No Cached
  • Jamie Dimon calls it "a doozy." And it was
  • $2 billion credit derivatives trading bungle that could mushroom to a $4 billion loss
  • tougher regulations may be needed
  • ...17 more annotations...
  • his talk about not lumping in "good banks" with "bad banks" has fallen off his pedestal
  • everyone is capable of disastrous stupidity
  • Dimon doesn't buy the argument that bosses of big, complex companies can never make mistakes
  • Three top executives of British firms were sacked in revolts of shareholders, who also rose up against giving new executives millions in "golden hellos."
  • With CEO pay going stratospheric as workers' pay grew stagnant, anger was bound to erupt
  • there wasn't much ire at the JPMorgan Chase annual shareholders meeting
  • Dimon's admission on "Meet the Press" that his team was "sloppy" and "stupid" and used "bad judgment" in incurring the loss
  • led to the rolling of three heads at the bank, an FBI investigation, and a congressional ramp-up for more chiding hearings
  • While the trade was "poorly vetted and poorly executed," he said it wouldn't make a dent in the "fortress balance sheet."
  • hould our company really be spending shareholder funds on, some $7 million last year alone, on lobbying efforts to thwart the Dodd-Frank legislation and the work of regulators to write the rules stemming from that legislation?"
  • hareholders, "weary of mistakes" and pledges to reform
  • the group endorsed Dimon's pay package of $23 million and let him keep his dual titles of chairman and CEO
  • he's known as the favorite banker of the president, who called Dimon "one of the smartest bankers we got"
  • checking account at JPMorgan worth $500,000 to $1 million
  • New York City's chief audit officer is urging Dimon to "claw back" salary and bonuses paid to the top executives who dragged the bank into the excessive risk
  • loathe to "act like a judge and jury" with Ina Drew, the head of the investment office who resigned on Monday, given that she lost $2 billion on that deal while she was making $9 billion on others
  • You have to earn respect every day. It's never how great we are. It's always the good, the bad and the ugly
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