Edward Harrison has been on top form recently, pushing out a bunch of very insightful articles about the tedious subject of bank regulation, capital adequacy, and other such delightful subjects. Two articles in particular are required reading for anyone who can stomach more discussion on a subject that many (particularly central banks and regulators), would prefer to be just swept under the carpet.
Did Bailouts Work or Is It All Just a Lie?
Hugh Hendry Recommends You Panic
Nice link to a clip of Hugh Hendry speaking his mind (and a lot of sense), also there was Gillian Tett of the Financial Times; she said:
“Many investors are saying that they can’t tell what the level of exposure and risk is in the European Banking system.”
Of course, she is absolutely right, although I’m not sure what’s news? Investors couldn’t tell what the risk and exposure was five years ago; if they could have they never would have made the loans or greedily gulped down all that highly rated toxic garbage, like a pack of BSE-infected demented pigs. What’s new is that in Europe, they have only just realized that. The crisis in USA in 2008 and the crisis now is that investors -- i.e. market participants -- were not (and are still not), provided with sufficient truthful information that allowed them to make sensible investment decisions. That’s why they “can’t tell what is the level of exposure and risk”.
Tett goes on to say (I paraphrase):
The problem right now is that by avoiding talking about it and sweeping the problems under the carpet, that will just make things fester.
But what’s the big deal? First the government in the USA and now the governments in Europe have committed to “stand behind the banks,” to pay-off their gambling debts and reward their stupidity. And everyone will live happily ever-after, for a while, by which point the politicians who made those decisions will be long gone.
So “don’t panic,” this problem is being swept under the carpet and will be “dealt-with” at a later date when the “market” is not so jittery.
I was rather amused by something else that Tett said, which was that in USA the regulators went in and “did a proper audit,” and that although that was “not perfect” it was a start.
WOW! That’s a…
