Ma sillers staying unner ra bed ...

[ParaHandy]

thinking oot ra box, youse unnerstaund, its nae a soorprise the FSA cannae recruit staff who know a thing or two aboot collateralised debt when even the banks huvnae a clue hoo much thur worth?

Ahm minded orra great railway fraud (yorks railway cpy) in ... erm ... 1845 when the directors stuffed the balance sheet with capitalised development costs. The average mug, like ma'sel, wudnae hae a clue whit thon wur oan aboot but it sounds awfy like whit Enron were up to & Gordon Brown is doing, with PPF, 150 yrs later.

Onyway, efter 200 years orra regulation we're nae any further forward; ither than yon shoyte FSA wull employ anither 100 gadgees who hivnae a clue

[jim.r]

Hmm.. Para , what parteecular box were you thinking out of .. was it one of France's finest?

[ParaHandy]

Hmm.. Para , what parteecular box were you thinking out of .. was it one of France's finest?

jings .. she's a real peach is Mrs S (ither than being an eytie). That the one you mean? Mr S is a standard us yins aspire tae.

[Telo]

staff who know a thing or two aboot collateralised debt when even the banks huvnae a clue hoo much thur worth?

Disagree. These guys knew exactly what they were doing, which was playing fast and loose with other people's money, and paying themselves huge salaries and bonuses for doing so. They've been caught out.

I liked the US characterisation of the Bear Stearns bailout by the Fed: "Socialism for the Rich!" Funny how the wealth of taxpayers can be socialised for the wealthy, yet they go mental at the very suggestion of socialised medicine for the mass of US citizens.

Looking at UK pension regulation,of which a lot is unnecessary imho, If as much effort had been spent regulating the banks, particularly the investment banks, we might not have been in this position. Mind you, UK bank regulation wouldn't have stopped the activities in the US. Ironically, Eliot Spitzer, who had at least tackled some of the abuses, was done in while all this was going on. Strange timing imho, but probably co-incidental. In his case, cock-up rather than conspiracy perhaps?

[ljs]

Hmm.. Para , what parteecular box were you thinking out of .. was it one of France's finest?

jings .. she's a real peach is Mrs S (ither than being an eytie). That the one you mean? Mr S is a standard us yins aspire tae.

Ya dirty old man. I think you've got a point though.

[claymore]

I was watching yon Chuckkie Enbra last night as he wiz stood next tae her - Ah've a feeling he was thinking impure thochts

[Superstrath]

Shard: These guys knew exactly what they were doing, which was playing fast and loose with other people's money, and paying themselves huge salaries and bonuses for doing so. They've been caught out.

Yes, but the bonuses have been paid, and they're not giving them back, caught or not. Jon Moulton's excellent C4 Despatches prog How The Banks Bet Your Money explained all that. His best line was that,"The banking industry is unique in that it privatises it's profits, but socialises it's losses."
So unless you are one of the "Clever men in suits," then you are going to bear the losses one way or another.
Even worse, for me, as a consequence of all this, in the short term, is that the euro is now worth nearly 80 pence, instead of it's relatively steady 68 over the past few years. That means a 15% drop in my earnings, and a price-hike for my customers, if they'd wear it, which they won't.
How much is the euro-lottery this week? I'd best get a ticket.

[ParaHandy]

Disagree. These guys knew exactly what they were doing, which was playing fast and loose with other people's money, and paying themselves huge salaries and bonuses for doing so. They've been caught out.

That's all true. My point is that it has been going on for centuries - despite the best efforts of governments. Humankind is inately unable to resist the temptation.

You mention Spitzer; the UK has never been good at prosecuting white collar crime. Just one example, the Nat-West 3 who could not be prosecuted in the UK because the principal witness, a US citizen, had plea-bargained a reduced sentence in a US court for shopping the three of them and others who were jailed as well. In a UK court, he'd not have immunity even if they could have got him to appear. As New York attorney, Spitzer successfully went after all the banks who'd arranged Enron's dodgy debt at a cost, to the banks, of several $bn.

Looking at UK pension regulation, if as much effort had been spent regulating the banks we might not have been in this position.

UK pension regulation is far from the exemplar you believe. When Maxwell jumped, we got the 95 Pension Act, the 97 MFR Regulations and a Regulator. Never again were we to be swindled by a corrupt and dishonest man. It didn't happen quite as intended. Maxwell's plundering was eventually paid back; the last time, I think, that informal approaches by the Bank of England governor, backed by the threat of prosecution for knowingly receiving stolen goods, operated and was successful. The Regulation was less successful. The Acts forced a prescriptive investment policy on pension funds; assets had to match liabilities otherwise the Scheme could be penalised by failing the solvency (MFR) test. A DWP official told me, in all seriousness, that every Trustee of a failing pension scheme should be prosecuted under the 1910 Trust Acts for investing in equities, to match liabilities and conformance with MFR, before a bear market and not investing "as a prudent man". Anne Abraham, the Parliament Ombudsman, eventually proved mal-administration not by a corrupt company official but by government. Gordon Brown was at best incompetent and, at worse, criminally culpable after he repeatedly fixed the arithmetic of MFR such that schemes were more likely to achieve an MFR score of 100% which indicated a solvent scheme to its members.

Abrahams successful prosecution of the government, which she paid for with her job I think, was only the tip of a much more malevolent iceberg. Risk aversion became the watchword of the EU. This was a natural position for the EU. For example, pensions in the EU, where they are not funded pay-as-you-go by government (the vast majority), are funded by investment in fixed-interest; their Trust Deeds prohibit them from investing in, riskier, equities. But the aversion to risk went much further; the ISAB (the bean-counters regulators) determined that balance sheet liabilities should be calculated using present value discounted against corporate bond +AA yields. An insurance cpy might have discounted its future premium income against the equity yield which is where the income was invested - no longer, they had to be discounted against the much lower bond yield. Clearly, getting debt off a balance sheet made good financial sense if that liability had to be discounted at much lower yields than were hithertofore commonplace. For the banks, this was a terrific wheeze because the debt could be sold and allow further debt and so on and on ... the principles of Obliquity (unintended consequences)

Hence we got CDOs and its toxic ilk. These SPV's removed debt. But, their sheer complexity is the seed of our undoing. If relatively straightforward securitised debt is beyond the comprehension of Yvette Cooper, governments will have extreme difficulties with such complex instruments as CDOs. But, they regulated for this to happen. They meddled with what I fear will be disastrous consequences.

If there is an effective way of governments to regulate effectively, then we have not found it; we probably never will. Some 4 years ago, a government minister, Patricia Hewitt, opined that the UK with its auditor's report of ".. a true and fair statement .." is a sufficient deterrent to keep UK plc's accounts in order. Governments dig the holes and then regulate to keep people from falling in. Don't dig the holes but who am I ...

[Telo]

UK pension regulation is far from the exemplar you believe. When Maxwell jumped, we got the 95 Pension Act, the 97 MFR Regulations and a Regulator. Never again were we to be swindled by a corrupt and dishonest man. It didn't happen quite as intended. Maxwell's plundering was eventually paid back; the last time, I think, that informal approaches by the Bank of England governor, backed by the threat of prosecution for knowingly receiving stolen goods, operated and was successful. The Regulation was less successful. The Acts forced a prescriptive investment policy on pension funds; assets had to match liabilities otherwise the Scheme could be penalised by failing the solvency (MFR) test. A DWP official told me, in all seriousness, that every Trustee of a failing pension scheme should be prosecuted under the 1910 Trust Acts for investing in equities, to match liabilities and conformance with MFR, before a bear market and not investing "as a prudent man". Anne Abraham, the Parliament Ombudsman, eventually proved mal-administration not by a corrupt company official but by government. Gordon Brown was at best incompetent and, at worse, criminally culpable after he repeatedly fixed the arithmetic of MFR such that schemes were more likely to achieve an MFR score of 100% which indicated a solvent scheme to its members.

Abrahams successful prosecution of the government, which she paid for with her job I think, was only the tip of a much more malevolent iceberg. Risk aversion became the watchword of the EU. This was a natural position for the EU. For example, pensions in the EU, where they are not funded pay-as-you-go by government (the vast majority), are funded by investment in fixed-interest; their Trust Deeds prohibit them from investing in, riskier, equities. But the aversion to risk went much further; the ISAB (the bean-counters regulators) determined that balance sheet liabilities should be calculated using present value discounted against corporate bond +AA yields. An insurance cpy might have discounted its future premium income against the equity yield which is where the income was invested - no longer, they had to be discounted against the much lower bond yield. Clearly, getting debt off a balance sheet made good financial sense if that liability had to be discounted at much lower yields than were hithertofore commonplace. For the banks, this was a terrific wheeze because the debt could be sold and allow further debt and so on and on ... the principles of Obliquity (unintended consequences)

Hence we got CDOs and its toxic ilk. These SPV's removed debt. But, their sheer complexity is the seed of our undoing. If relatively straightforward securitised debt is beyond the comprehension of Yvette Cooper, governments will have extreme difficulties with such complex instruments as CDOs. But, they regulated for this to happen. They meddled with what I fear will be disastrous consequences.

If there is an effective way of governments to regulate effectively, then we have not found it; we probably never will. Some 4 years ago, a government minister, Patricia Hewitt, opined that the UK with its auditor's report of ".. a true and fair statement .." is a sufficient deterrent to keep UK plc's accounts in order. Governments dig the holes and then regulate to keep people from falling in. Don't dig the holes but who am I ...

Jings, murder polis, ye've fair killed that thread.

[Olivepage]

"Don't dig the holes but who am I ..."

Someone who knows a SPV from a CDO.

Which puts you one up on me - at least