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Abdiwahab Ibrahim

Pension fund - Wikipedia, the free encyclopedia - 0 views

en.wikipedia.org/...Pension_fund

financial crisis institutional investors pension funds mutual

shared by Abdiwahab Ibrahim on 14 Jan 11 - Cached
  • Abdiwahab Ibrahim on 14 Jan 11
     
    This is old, but yup.
Jeremy Ip

Ratings agencies involvement in the sub-prime mortgage crisis | The Casual Truth - 1 views

www.thecasualtruth.com/266

Rating Agencies

shared by Jeremy Ip on 12 Jan 11 - No Cached
  • The reality is they were at the core of the problem. They made the investments appear a lot better and safer than they really were – and the whole system relied on their ratings.
  • Over the past decade, a lot of people in America couldn’t really afford the money they borrowed for their house. These were called sub-prime mortgages.
  • These sub-prime mortgage contracts were grouped together with some safer mortgage contracts and other investments and sold on as one overall asset.
  • ...9 more annotations...
  • These bundles of rubbish were known as Collateralised Debt Obligations (CDOs) and were sold on to the big investment banks that needed assets to balance out their liabilities.
  • However, before any buyer bought these CDOs, they checked their rating to see how risky they were. Most buyers (investors) would not buy something with a CC rating for instance. In fact, many savings funds like pensions had a rule of only investing in A or above rated investments.
  • Therefore, the banks needed the rating agencies to effectively lie and give them a higher rating.
  • So to sell these CDOs to investors, the rating had to qualify. The problem was many of the CDOs didn’t deserve a high rating because they were based on people who couldn’t realistically pay back their mortgage.
  • The rating agencies were more than willing to do this because if they didn’t, the bank would simply go to their competitor down the road who would gladly take the business. And with average rating fees of over US$300,000 and margins of 50 percent, it was no wonder.
  • The agencies also became advisers rather than independent judges. They would tell the banks how to restructure the dodgy asset so that they could give it a higher rating. And these changes were mostly technicalities rather than anything of sound substance.
  • There was a supposed safety net in the system which meant that each investment had to be rated by two different agencies. However, this just resulted in two false ratings effectively making the safety net useless
  • When investors complained that their supposedly safe investments were actually rubbish, the rating agencies pointed to a clause saying that they cannot be held liable for any incorrect ratings – basically “sorry, but sometimes we get it wrong”.
  • Yes the banks were at fault in pressuring the agencies to lie, but the agencies were clearly willing partners for their own financial gain.
Abdiwahab Ibrahim

Intoxicated Institutional Investors: How The Financial Crisis Infected The Real Economy... - 1 views

business.in.com/...1

financial crisis financial crisis what caused blame institutional investors mutual funds pension

shared by Abdiwahab Ibrahim on 14 Jan 11 - No Cached
  • Abdiwahab Ibrahim on 14 Jan 11
     
    Blaming Institutional Investors.
Sophia Wang

Definitions - 98 views

Alpha and Beta accutally have interesting meanings in business. Alpha 1. A measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares it...

financial crisis definitions

started by Ms Cuttle on 12 Dec 10 36 follow-ups, last by Sophia Wang on 14 Jan 11
Rachel Choi

AIG Settlement: Insurance Giant Agrees To Pay Investors $725 Million - 0 views

www.huffingtonpost.com/...lement-investors_n_649910.html

shared by Rachel Choi on 11 Jan 11 - No Cached
  • Ohio Attorney General Richard Cordray said Friday the latest figure will combine with previous AIG settlements reached with secondary defendants to pay about $1 billion to shareholders, including pensions representing firefighters, police, teachers, librarians and others.
  • The lawsuit alleged anti-competitive market division, accounting violations, and stock price manipulation by AIG between October 1999 and April 2005.
  • The suit alleged that AIG:
  • ...4 more annotations...
  • Committed accounting fraud that culminated in a $3.9 billion restatement in May 2005 that included an array of transactions through which the company artificially boosted its reported claims reserves. Those transactions included allegations relating to a $500 million no-risk fraudulent reinsurance transaction with General Reinsurance Corp. in relation to which one AIG executive and four General Reinsurance executives were found guilty of securities fraud.
  • Divided the market for certain types of insurance by paying tens of millions of dollars in undisclosed contingent commissions to insurance brokers and through bid-rigging.
  • Engaged in stock price manipulation that Cordray called "straightforward," in which AIG executives ordered traders to inflate the company's stock price.
  • In addition to the $725 million announced Friday, the case against AIG also includes several earlier settlements: $72 million with General Reinsurance; $97.5 million with PricewaterhouseCoopers LLP, and $115 million with former AIG chairman and CEO Maurice "Hank" Greenberg and other AIG executives and related corporate entities.
  • Rachel Choi on 11 Jan 11
     
    The compensation AIG has to pay off... (Provides a list of the suit alleged against AIG)
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