What was really behind last year's market crash?


#1

guardian.co.uk/business/2009 … il-extract


#2

Typical Journalism… !!!Long and blown out…

Root Cause.
Banks and politicians who have hidden agendas and conflicts of interest

CORRUPTION that makes Enron look like a fairytale…


#3

People always look for complicated explanations when simple explanations do just fine in many cases…

My view, interest rates were held too low for far too long in the aftermath of 911- this is the main cause, everything else is subsidiary.

The Guardian never raises a whisper against Brown’s bloated public sector of course.


#4

The cold fact is this: when bankers didn’t know where their next decade’s mortgage payments were going to come from (if not their current employer) they didn’t take massive risks.

We have ample evidence of bankers listening with care to Nicholas Nasim Taleb’s warnings, then cheerfully going on to take those same risks, knowing that their bonuses were guaranteed.

Force salaries down to the point where the decision-makers are no longer set for life, and you’ll see no more crises.

In fact, every bank needs to have someone whose only job is to sign off on risky stuff, and whose salary is permanently basic middle class by law, with no bonuses or above-inflation raises permitted.

His only job is to apply simple risk metrics and reject everything that is too complicated for him to understand. The types of thing that he is allowed to accept should be a short list, with everything that departs from it automatically rejected.

No more crises again. Ever.


#5

It might be a simplistic plan, rock3r, but I like it!


#6

Yeah, nice plan. Now all you have to do is sell it to the ruling elites :laughing:

Greed and irresponsible lending - that was it in a nutshell. And why wouldn’t you do again, when you know that you’ll get off scot-free and that the losses will be socialised? That the globalised elite rich will end up richer, and that nation states will pick up the tab.


#7

My solution was that banks could only issue recourse loans up to a maximum credit limit per individual/family unit. This would be based on tax paid. If you don’t pay tax, you clearly have no income and so you don’t get credit.


#8

I think you’re halfway there. You need someone (ideally more than one someone) whose sole job it is to monitor risk AND whose remuneration is not in any way linked to the performance of the instruments, business models, etc. he’s analysing. You actually should pay this guy well, just not in terms of short-term incentives like shares or profit-linked bonuses.


#9

But competition will dictate the wage, perks and benefits of this risk officer as banks would seek to employ the best.