Tag Archives: Financial

Clearing The Bull Part 1 – Ending 30 Years Of Banking Failures

Banker and author Jonathan Ledwidge addresses the City Book Fair in London, on what the banking industry must first do if they are to bring and an end 30 years of repeated failures.

Watch Part 1 on youtube using this link http://youtu.be/evrheDydfto

and

Watch Part 2 – Why Banks Are Still In Trouble on youtube with this link http://youtu.be/cnsCbMuWYQc

Watch Part 3 – Why Banks Need A Human Transformation on youtube with this link http://youtu.be/L99b0ZZsUbc

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Clearing The Bull: JP Morgan And Derivatives Derangement Syndrome (DDS)

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.

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Bank Shareholders Fight Back

The past few weeks have witnessed several instances where shareholders have rejected executive compensation packages proposed by bank boards. Is this the dawn of a new era in corporate governance?

Many years ago when I was Business Manager to the Global Head of Treasury at ABN AMRO, the unit submitted its bonus request for that year to the director responsible for the investment banking unit. When he saw the size of the request his acerbic response was; “so what about the shareholders”.

It would appear that shareholders around the world are now beginning to ask the same question. From one bank to the next shareholders are venting their displeasure at the size of executive compensation plans—forcing management to revise their payouts.

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The Disastrous History of Financial and Market Dogma

Like alchemists on an eternal quest for a method for turning base metals into gold, the financial markets have proved susceptible to one dogma after another—with disastrous consequences.

One of the primary causes of the massive growth in the subprime market was the idea that if you took a well-diversified portfolio of sub-investment grade loans you could convert them into AAA securities. Some market professionals were even of the opinion that the level of risk reduction that could be achieved through diversification could effectively, with the aid of a few credit derivatives, immunize banks from any significant losses whatsoever.

While acknowledging that was the prevailing view, Alan Greenspan the former Fed Chairman had another perspective. In a column in the Financial Times of March 26, 2009 Greenspan stated:

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