After Lehman, A World That Cannot Fail – A New Crisis ?
It’s the anniversary of Lehman again and we have the media littered with nicely written articles mostly lambasting the crisis and also the Hank Paulson film to be aired next week on Netflix, Hank : Five Years From The Brink by Bloomberg.
Some nice reading material for the weekend.
- Asia Most At Risk Since Lehman Collapse : says ex trader http://www.scmp.com/business/banking-finance/article/1309385/asia-financial-risk-most-lehman-says-ex-trader-lawrence
- Five Years After Lehman, It ‘s Business As Usual For Wallstreet http://www.forbes.com/sites/jakezamansky/2013/09/12/five-years-after-lehman-its-business-as-usual-on-wall-street/?utm_campaign=forbestwittersf&utm_source=twitter&utm_medium=social
- James Gabraith, Neil Barofsky, and John Coffee Discuss Lessons from Lehman Meltdown http://www.nakedcapitalism.com/2013/09/james-gabraith-neil-barofsky-and-john-coffee-discuss-lessons-from-lehman-meltdown.html
- The Biggest Fall : Lehman Brothers Five Years On http://rt.com/business/lehman-brothers-5-year-817/
- Why Banks Fail http://www.zerohedge.com/news/2013-09-13/why-banks-failed
- Top Ten Lessons from the Lehman Collapse
There are still questions in all our minds. Why Lehman ? They saved Bear Sterns a few months before. Conspiracy theories on how Goldman engineered the fall etc. After all, Paulson was instrumental in the Bear Sterns deal. This is what he says about it.
“If market participants presume that a government is always going to step in to save a failing institution, then those market participants will not subject that institution to the kinds of rigorous analysis and scrutiny that is needed. I had argued that the shareholders of Bear Stearns shouldn’t get more than $2 a share, and that argument was less about moral hazard than what was right.
If the United States of America through the Fed was making a loan to prevent a bank from failing, why should shareholders get more money? Ben Bernanke and Tim Geithner argued that the greater good was preventing the failure. So I agreed to the terms. ”
And what does Paulson think of another crisis ?
““What’s the likelihood of another financial crisis?” And I begin by saying it’s a certainty. As long as we have markets, as long as we have banks, no matter what the regulatory system is, there will be flawed government policies. Those policies will create bubbles. They will manifest themselves in a financial system no matter how it’s structured and how it’s regulated.”
I see a crisis. A big one unfolding right before our eyes in a world that has no room for failure.
- Central Bank Crisis
PYOW – Print Your Own Way out of a crisis. QE has proven to work in improving headline economic numbers that are all important in buoying asset prices especially real estate, which majority have a stake in. BOE and ECB hot on the heels of the FED and achieving major success.
What of the central banks with less credibility ? Bail Ins ?
- Hostage Crisis/Bail Ins
Cyprus ! Bail in all. Make it everyone’s problem. On hindsight, a Lehman bail in might have saved alot of trouble.
Eike Bastita – former richest man in Brazil
“OGX Petroleo and Gas Participacoes SA announced it would be asking bondholders for more cash to prevent the firm from seeking bankruptcy protection.”
Earlier this year, we had the chinese solar companies popping – China Green, LDK Solar. All resolved via bail ins and government intervention. Dubai Group restructured $10 billion in debt nicely and there is a gridlock on Argentina.
Companies are getting bigger. Even economic rice stalls in Singapore are now operated as chains. Bond markets have exploded with record breaking issuances out of every corner of the world – we have $ 82 trillion out there with Verizon raising $49 billion in the blink of an eye.
In Singapore, exotic names coming in to pick at the market which some amateur investors assume is guaranteed by the central bank, a rather alarming misconception.
- The Rise of Occupy Wallstreet and Populist Movements
Politicians have never been more approachable and agreeable these days with Obama taking the lead and choosing to listen to popularity ratings before each decision of his. And woe betide the population if the decision is wrong, it was afterall by popular vote. No more tough talking ministers
The top 1% of the population is richer than ever and taking the lion’s share of total earned income and they will continue to be the targets of governments, or least appear to be the targets of.
Populism is at work everywhere even in Singapore where citizens just need to cry foul and now foreign workers are shut out. The new COE rules to keep luxury cars off the streets here.
I have to repeat Hank Paulson, “As long as we have markets, as long as we have banks, no matter what the regulatory system is, there will be flawed government policies. Those policies will create bubbles. They will manifest themselves in a financial system no matter how it’s structured and how it’s regulated.”
It is a world that cannot fail at all costs. Is that not a crisis in itself ?