Warren Buffet has called the Federal Reserve, the US central bank, “The Greatest Hedge Fund In History”. That is because the Fed as it is commonly known has persisted in printing money and buying $85 billion in bonds each month in order to artificially support the US and by extension the global financial markets.
This is quite possibly the recipe for another financial disaster. Continue reading
Posted in Banking, Business, History
Tagged asset prices, bonds, Credit, Federal Reserve, Financial Crisis, financial markets, hedge fund, housing, inflation, Paradigm, Quantitative Easing, stocks, Subprime, Warren Buffet
The headline writers are at it again as just about every publication that can spell the word derivatives is bemoaning JP Morgan’s $2 billion credit derivatives loss. Meanwhile, on planet Earth, the EU continues to sink under hundreds of billions of dollars of debt.
JP Morgan’s $2 billion credit derivatives loss is, in reality and the greater scheme of things, a non-story. It’s a 1% loss on a $200 billion investment portfolio. It is a 0.1% impairment of a $2 trillion balance sheet. This is minor when compared to the hundreds of billions of dollars in junk and distressed Eurozone sovereign debt.
Posted in Banking, Business, Politics
Tagged Banks, Credit, Crisis, Debt, Derivatives, Economics, Eurozone, Financial, Government, JP Morgan, mervyn king, politics, Sovereign, Subprime
We can never legislate or regulate our way to sustainable banking—the industry needs to adopt a new strategic business model
Déjà vu All Over Again
“They came on in the same old way and we sent then back in the same old way”.
They were the words the Duke of Wellington used to describe the repeated and futile attempts by Napoleon’s Grand Armée to break through the British defenses at Waterloo.
They can equally be used to describe the current prescriptions for the subprime crisis.
We remain mired in the unenviable position where those who know about banking are firmly wedded to the same old solutions, while those who don’t know about banking i.e. some in the mass media and certain politicians, resort to populist rhetoric. Sadly, the debate on the subprime crisis has generated more heat than light.
It is time for something different. However, before we move forward with a new prescription we need to better define the problem.
Posted in Banking
Tagged Audit, Bank of England, banking, Clearing The Bull, Credit, Dick Fuld, Federal Reserve, Finance, Financial Crisis, Fred Goodwin, FSA, Investment Banking, Junk Bonds, LDC Debt, Legislation, Regulations, Risk, Risk Management, SEC, SOX, Subprime
Western society is now facing economic challenges that, until recently, were almost inconceivable. Budget deficits, austerity measures and overall economic decline, in both relative and absolute terms, all appear to be the order of the day.
As a consequence, the liberal democracy which the west has held aloft like a prized-possession for so long, is also now under threat. Greece and Italy are being run by appointed technocratic governments, the EU suffers from political gridlock and the US political system is in rigor mortis.
Most people will either think or want to believe that all this has been triggered by the banks and the subprime crisis which they brought about. However, this is not entirely true. As a matter of fact that would be putting the cart before the horse.
History tells us a slightly different story—and that is that almost every major banking or financial crisis of the past 40 years has been accompanied by great economic and political issues and events that in many instances have had a global impact. The subprime crisis was no different.
This is just one example of what Clearing The Bull is all about. The book looks beyond the conventional rhetoric and belief systems to not only better understand the nature of financial crises, but also why banks need to do a much better job at managing both their internal and external environment.
Available for pre-order!
Posted in Banking
Tagged Banks, Business, Central Banks, Clearing The Bull, Controls, Credit, Deregulation, Derivatives, Economics, Federal Reserve, Finance, Financial Crisis, Governance, Government, Hedge Funds, Human, Human Assets, Investment Banking, Leadership, Management, Regulators, Risk, Securitization, Subprime, Subprime Mortgages, TBTF, Too Big To Fail, Transformation, Values