- #71
apeiron
Gold Member
- 2,138
- 2
WhoWee said:Why don't you support your comments?
Surely you of all people are not objecting to people expressing an opinion?
WhoWee said:Why don't you support your comments?
apeiron said:Surely you of all people are not objecting to people expressing an opinion?
WhoWee said:Sorry - I didn't notice any "IMO" labels.
Is this an opinion - the word "fact" confused me? my bold
"The fact that the victims include some hick European banks (as well as many other financial institutions in many other countries) just shows how incompetent they were, and how opaque/unregulated the derivative scams were."
apeiron said:What, are you disputing this as a fact - the victims included hick European banks? You are instead claiming that they were competent and street-wise banks? Help me understand where your confusion lies. And you're welcome to support your claim if you like.
Your points are taken. But to keep this on topic wrt what "levelling the playing field" might entail, I'm just assuming that tighter regulation of the financial industry would be an important component of that. Do you agree or disagree with that assumption?WhoWee said:No, it's not that simple. Much of the financial crisis was (and is) rooted in Europe. We've discussed the amount of money that was routed to European institutions in other threads.
As for the housing market. When people were signing for no-doc and $0 down loans - as much as the bank would lend - with the hopes of buying a house they couldn't afford with the expectation of appreciation - was the bank the "good guy" if they said "no" - or was the bank the "bad guy" trying to keep the poor person down?
As for the bundling and resale of mortgages - we didn't learn anything from the S&L crisis a decade earlier (and neither did Congress) - IMO.
WhoWee said:If this is a "fact" then please support - if it isn't, please label as opinion.
After the crash of its shares, the German financial watchdog BaFin and the Ministry of Finance opened an investigation into allegations of reporting and accounting misconduct. Although no charges were brought against the bank, four of the five executives of IKB stepped down between 1 August and 1 November 2007
IKB was mentioned by the U.S. Securities and Exchange Commission (SEC) in court fillings when it sued Goldman Sachs and one of Goldman's CDO traders on April 16, 2010.[14] The SEC alleges that IKB was on the wrong side of the CDO instruments Goldman was creating and that Goldman defrauded both IKB and ABN-Amro in failing to disclose that the CDOs that IKB was purchasing were not assembled by a third party, but instead through the guidance of a hedge fund that was counterparty in the CDS transaction. This hedge fund, Paulson & Co., stood to earn great benefit in the event of default.[15] The suit by the SEC alleges that IKB lost US150,000,000 which Paulson gained.
Apeiron, I don't honestly think that WhoWee is in any way a troll (although it might seem so wrt to certain nitpicking wrt his requests of substantiantion regarding certain contentions). He has certain opinions, a certain world view, as all of us do. Of course, as you should know from my posts, I respect your command of logic, and your knowledge of many factual issues. So, from a layman's limited education and perspective (mine), I'm interested in reading what you and WhoWee have to say on issues relevant to this thread topic (as well as many others).apeiron said:Your demand for support can only be trolling here. Were you seriously suggesting this is a fact in doubt?
But to feed the troll ...
http://en.wikipedia.org/wiki/IKB_Deutsche_Industriebank
ThomasT said:My basic question is, assuming that people in positions of power (including the very rich, even if not 'public' officials) are 'unfairly gaming' things, then what can be done about it?
apeiron said:Your demand for support can only be trolling here. Were you seriously suggesting this is a fact in doubt?
But to feed the troll ...
http://en.wikipedia.org/wiki/IKB_Deutsche_Industriebank
WhoWee said:Again, this game is tiresome.
apeiron said:So are you telling us now that posts cannot be a mix of opinion and fact? Really?
WhoWee said:I said no such thing - merely asking you to clarify fact or opinion. Claims labeled "fact" require support - opinions should be labeled opinion.
apeiron said:Yes, and I supported a fact. So what are you [STRIKE]trolling[/STRIKE] complaining about now?
Goldman Sachs knows that not
every asset manager would be willing
to work with Paulson, according to
the complaint. In January 2007,
Goldman approaches ACA
Management, a unit of a bond insurer.
ACA agrees to be the manager in a
deal, and to help select the securities
for the deal with Paulson.
Goldman never tells ACA or other
investors that Paulson is shorting the
securities, and ACA believes that
Paulson in fact wanted to own some
of the riskiest parts of the securities.
Goldman puts together a deal
known as a “synthetic collateralised
debt obligation” designed to help IKB
and Paulson get the exposure they
want. IKB takes US$150 million of the
risk from sub-prime mortgage bonds
in April 2007. ABN Amro takes some
US$909 million of exposure as well,
and buys protection on its exposure
from ACA Management affiliate ACA
WhoWee said:I don't consider IKB a "hick European bank" or incompetent (this is an opinion).
Has anything come of the SEC's looking at Goldman Sachs? Is part of the problem with the financial industry that, even though some of its dealings might not be quite 'kosher' and might even be harmful to America, those questionable dealings aren't, technically, illegal?rootX said:Just out of my own interest I found a story related to IKB.
http://www.soldonapn.co.nz/wp-content/uploads/2009/11/NZHA19APR10B016.pdf
ThomasT said:I see that apeiron and WhoWee are online now, so I'll ask:
@ WhoWee,
Do you generally agree with apeiron's statements in post #79?
@ apeiron,
Yes, regulating for transparency would seem to contribute to levelling the playing field. Is it realistic to suppose that legislation to that effect will be passed? Can sufficient transparency and the prevention of financial catastrophes be achieved without legislation?
@ WhoWee and apeiron,
Take a time out from your current argument. I think that both of you are pretty knowledgeable. Moreso than me anyway. So, I'm just interested in hearing your opinions (as well as those of other knowledgeable commenters). And if you present your opinions with documented 'facts', then that's even better.
The rules require that opinion be stated as such and claims of fact must be backed up. I haven't given you any infractions yet for those posts in this thread, but those are the rules.apeiron said:So are you telling us now that posts cannot be a mix of opinion and fact? Really?
Evo said:The rules require that opinion be stated as such and claims of fact must be backed up. I haven't given you any infractions yet for those posts in this thread, but those are the rules.
The fact that the victims include some hick European banks (as well as many other financial institutions in many other countries) just shows how incompetent they were, and how opaque/unregulated the derivative scams were.
“WHO’S on the other side, who’s the idiot?” is the question posed by one of the characters in “The Big Short”, Michael Lewis’s new book on those few investors who bet against the subprime-mortgage market. “Düsseldorf. Stupid Germans,” is the answer they keep getting. “They take rating agencies seriously. They play by the rules.”
For Düsseldorf, read IKB Deutsche Industriebank, a bank that plays the role of hapless victim in the SEC’s complaint against Goldman Sachs and a strong contender for the title of leading chump in the financial crisis...
...IKB was far from being the only German bank to burn its fingers doing so...Most German Landesbanken suffered from poor governance. “All these toxic assets seem to have accumulated in those places where oversight was poorest, and the risk-return ratio was ignored,” says Jörg Rocholl of the European School of Management and Technology in Berlin. Yet even by these dismal standards, IKB stands out.
A specific example of an unsophisticated SI is the German bank IKB, known best for its role in the SEC's complaint against Goldman
rootX said:Just out of my own interest I found a story related to IKB.
http://www.soldonapn.co.nz/wp-content/uploads/2009/11/NZHA19APR10B016.pdf
apeiron said:Yeah, so I was asked to support...
I cited a very famous specific case, subject of ongoing court action. So how is this not good enough?
If whowhee wants to side with Goldman Sachs and claim that IKB was a "sophisticated investor", then sure, let him/her make the case. One that is more than his/her opinion.
But in the meantime...
From the Economist - http://www.economist.com/node/15955490
Or from Corporate Governance Failures The Role of Institutional Investors in the Global Financial Crisis - http://books.google.co.nz/books?id=...ikb small unsophisticated german bank&f=false
WhoWee said:I think IKB is sophisticated enough to be in the derivatives business - but not on par with aggressive Wall Street traders (IMO) acting in less than good faith.
WhoWee said:In other words, IKB were not just sophisticated financial professionals. They were—or claimed to be—sophisticated and experienced when it came to exactly the kind of junky CDOs, dubbed Abacus, they bought from Goldman Sachs.
It is possible, or even probable, that IKB was overstating its level of sophistication...
I think IKB is sophisticated enough to be in the derivatives business - but not on par with aggressive Wall Street traders (IMO) acting in less than good faith.
apeiron said:Well which was it? That they were? Or that they claimed to be (and instead proved to be hicks taken by the big city slickers)?
Did you properly read the blog(!) article you are citing here?
Down page it concludes...
Darn tootin' right as history proved!
Of course, IKB was in there trying to be a player with Rhineland. But by what stretch of the imagination were they competent?
As you confess...
...so yes, we agree that IKB was clearly not as sophisticated as GS and Deutsche Bank. But we have different opinions on whether they had enough of a clue to be writing the deals they wrote. Or whether the Rhineland team cared enough about the outcome for their employer.
And IKB was a story shared by many (IMO). Staid traditional bank gets whizzy new CEO who sets up an off-balance sheet entity to "aggressively pursue" great new business opportunity. And comes unstuck because the US was allowing the unscrupulous to package toxic waste as AAA.
ThomasT said:@ apeiron,
Yes, regulating for transparency would seem to contribute to levelling the playing field. Is it realistic to suppose that legislation to that effect will be passed? Can sufficient transparency and the prevention of financial catastrophes be achieved without legislation?
WhoWee said:It doesn't seem fitting (in the context of your analysis of IKB) to hold Deutsche Bank up as the model of sophistication...
Might it be possible the trading department at IKB acted in their own best interest - rather than the bank's?
John Creighto said:With regards to transparency there are already quite a few rules with regards to disclosure of various derivative risks. Of course I presume disclosure could mean burying them deeply in some obscure report.
The 1988 acquisition of Atlantic for pounds 400m proved the undoing for the stock market success story, as a black hole was discovered in the company's accounts. B&C had to write off pounds 550m and in 1990 collapsed with pounds 1bn of debt.
The report says Atlantic never made a profit from its inception in 1975 and employed practices that went beyond the bounds of acceptable accounting policies. 'If the report is correct, it is clear that B&C was sold a pup,' Mr Gunn said.
http://www.independent.co.uk/news/b...w-and-accountants-spicer--pegler-1415499.html
apeiron said:You are harping on now for pages about one word - "hick". The original point was my objecting to your characterisation of the financial sector as "highly regulated". I argued that the credit crunch was caused by the explosive rise of an opaque, off-balance sheet, market for structured financial products and the consequent emergence of predatory behaviour.
Regulation is needed to create transparency and level playing fields in markets so that even ordinary folk can safely invest. But the derivatives casino created an environment in which even "sophisticated" banks, with newly created trading desks, became easy marks. As IKB showed.
You don't actually seem to disagree with anything substantive about what I've just said. You have agreed about the casino aspect, the predatory aspect, the regulation aspect.
You are now repeating points I originally made as if these were novel thoughts...
So you can see why your comments seem like trolling rather than a serious intent to engage with the meat of my arguments.
If you actually have some substantive disagreement with my views about the demonstrated perils of unregulated, geared trading, then start a proper thread about it. But so far, it has been nitpicking to little effect because you don't fundamentally disagree it turns out. All IMO
WhoWee said:As for the idea that anyone actively trading in derivative markets is unsophisticated - I just don't subscribe.
Julian Le Fanu, a policy adviser to the UK’s National Association of Pensions Funds (NAPF), says while the report might tackle the lack of boundaries to protect investors in the US investment market, the UK’s Financial Services Authority already places a requirement on any investment provider to ensure an investor is capable of understanding the risks of the product it invests in, as has the recent introduction of the EC’s Markets in Financial Instruments Directive (MiFID).
“We have been through a round of investor reclassification, particularly through MiFID, with new boundaries in client classifications, so financial institutions’ classifications have been reviewed to ensure they are in line with the requirements of the MiFID,” said Le Fanu,
http://www.ipe.com/magazine/are-pension-funds-sophisticated-enough_29196.php
apeiron said:Okey dokey. And the other view to which many subscribe is that the definition of "sophisticated" is one of the key issues to be considered post-crunch.
And this other view has been acted upon (which rather undermines your claims here)...for example...
WhoWee said:I get it - but there's a big difference between investors and traders.
apeiron said:But "sophisticated investor" is the actual issue here isn't it? It is the term recognised in financial regulation. And the term being used in defense by GS, Deutsche, et al. Why are you trying to misdirect to "trader" when that was not what was under discussion?