Comments on: More Off-Balance Sheet Risks: Conduits

By: Snarky

Snarky — Wed, 28 Nov 2007 04:23:31 +0000

The counterparty risk can be in the billons.

By: peter from oz

peter from oz — Tue, 27 Nov 2007 19:11:02 +0000

estragon
cascading failure of counterparty risk modelling is the coup de grace
unfortunately my clients and friends think a coup de grace is a christmas cocktail and my highly indoctrinated well educated overpaid juniors reject cascading etc angrily as it devastatingly extinguishes the lustre of their education and their raison d’etre
don’t expect any publicity or warning any time soon
hmmm just like a tsunami i’m told
rgds pcm

By: peter from oz

peter from oz — Tue, 27 Nov 2007 19:02:17 +0000

estragon
agree its not a scoop
conduits as common as muck for years along with cdos and sivs etc etc
but until the great unwashed become educated thru the mass media/popular magazines such as fortune or dare I say it business week the big end of wall street can maintain the rort e.g lehman did the most damage to the little man and the “sophisticated” corporations here in oz with their “eminence” and “yield greed” being the only marketing tools
no point depending on cnbc because the illiterate can’t educate
as discussed with barry don’t knock a free wsj at least uncle rupert broadens the scope for some investor literacy with access to some quality reporting
rgds pcm

By: Estragon

Estragon — Tue, 27 Nov 2007 17:17:59 +0000

Unless you’ve been living under a rock on Mars for the last 10 years, you probably already know that banks have been earning more fee income and less interest margin income. That’s what investors wanted, and bank managements responded to varying degrees. In other words, that banks structure lending off their balance sheets and generate fee income isn’t new news.

Eavis is trying to morph this widely known fact into a scoop, and to paint it as some sort of deep dark conspiracy.

The fact is that NOBODY knows the extent to which these structures will end up on banks’ balance sheets, and NOBODY knows what, if any, hold-to-term losses will ultimately be. If banks started abitrarily adjusting reserves for every contingent liability out there, they’d be legitimately accused of cookie-jar accounting and possibly options fraud. Eavis would likely be at the front of the lynch mob, and rightly so.

There are lots of other issues in the credit mess, and I’m a bit disappointed that Eavis is going into hysterics over red herrings. I guess it’s an easier sell in MSM than say, the potential for cascading failure of counterparty risk modelling.

By: rp

rp — Tue, 27 Nov 2007 17:13:10 +0000

Interestingly enough, it appears that at least one back (HSBC) just moved $45 billion of SIV’s back on to their balance sheet, acknowledging that they bear ultimate responsibility for the attempt to shift the risk off the balance sheet. I wonder who will be next?

By: Francois Theberge

Francois Theberge — Tue, 27 Nov 2007 15:49:34 +0000

Gotta love that one:

“The FAILURE by banks to properly inform shareholders of their potential losses is perhaps the biggest scandal so far of the credit crunch that began this summer.”

Are you kidding me?

I see no failure in here. Since banks were not obliged by law to do it, they didn’t. Why run the risk of discomfort, blame, pain and suffering when it is oh so much easier to hide the bad stuff?

If one wants to talk to me about failure, why not turn the attention to Washington DC? They’re the ones in charge of mandating and regulating financial institutions.

At the risk of sounding like a broken record, I’ll say it again: Our politicians will start working for us the day we, the people, pay them. (public financing of electoral campaigns)

When Dave Davies interviewed Senator Kennedy on Fresh Air, he asked him: “What is the thing that has changed the most in the 43 years you have been in the Senate?” Answer: “The influence of money”

http://www.npr.org/templates/story/story.php?storyId=5353270

(starting at 20:55min)

Said influence has been enough to brainwash DC on the virtues of “industry can self-police their behavior”

Got several bridges to sell you: bulk discounts are accepted.

By: Francois Theberge

Francois Theberge — Tue, 27 Nov 2007 15:19:50 +0000

In all the clusterf*ck that is the so-called “subprime” mess, one little data point that really get under my skin is the fact that investors bought these CDO’s, RMBS, and all the alphabet soup of securitized stuff, trusting the rating posted by agencies like Moody’s, Fitch and companies. Said ratings were provided by the sellers who paid for it.

…

What would you think of a home buyer that would trust on faith, an inspection report paid for by the seller??

…

And now, we, the taxpayers, will most likely be called upon (whether we like it or not) to bail out (some if not all) buyers and sellers alike?

F*ck me plenty!

By: peter from oz

peter from oz — Tue, 27 Nov 2007 13:32:49 +0000

following up my previous comment on the “rescue” the clock is ticking to 31/12 and big ticket vulture investors will take no risk high priced positions in medium term quality assets using dollars they are reaping from an inflated oil price (and/or to buy some time for the big end of wall street perhaps a desperate administration is calling in some some strategic mid east chits)
meanwhile back at the ranch the ostriches celebrate this show of “confidence in the market” because they are so comfortable with their head in the sand this close to christmas
rgds pcm

By: Marcus Aurelius

Marcus Aurelius — Tue, 27 Nov 2007 12:54:30 +0000

How much more junk can they hide in the closet? When they finally open the door, you’d better stand back.