Read three great posts over a cup of coffee this afternoon - first, on the Hubris of The Bankers:
If Wall Street were truly serious about convincing Main Street that we're all in this together, its top executives would have stepped before the cameras yesterday and promised not to cut lines of credits to long-standing business customers who have never missed a payment.
They would have committed themselves not to foreclose on any homeowner who is willing and able to refinance into a new, government-guaranteed, fixed-rate mortgage set at 85 percent of the current value of the property.
They would have offered to suspend dividend payments until capital levels had been restored to pre-crisis levels.
They would have given us their solemn promise not to advise clients to hold on to their own investments while quietly dumping whatever they can from their own portfolios and shorting every security in sight.
With the Treasury now desperate for help in managing its new rescue efforts, they would have volunteered, at no cost to taxpayers, the services of some of those investment bankers and financial wizards who now don't have much else to do.
And the maharajas of finance could have set a wonderful example if they had all gotten together and agreed to work for a dollar a year until the crisis has passed.
(From
The Washington Post via
Paul Kedrosky).
Following that,
an FT piece explaining how Hubris is rapidly followed by Hysteria in matters Financial.
Bank panics invariably reveal the poor quality of lending that accompanied the preceding boom. Walter Bagehot, the greatest of 19th-century writers on finance, was aghast at the stupidity of the directors of the discount house Overend Gurney, whose failure in 1866 was the cause of the last run on a British bank before the ignominious demise of Northern Rock. “They ruined a firm almost inconceivably good by business so inexplicably bad that it could hardly be much worse if they had of set purpose tried to make it bad,” wrote Bagehot.
The behavioural characteristics of the panic are the obverse of those of the boom. Excessive confidence is replaced by extreme fearfulness and a nervous distrust takes the place of blind trust. During the panic, the buying frenzy of the boom gives way to panicky disposals.
The Hubris to Hysteria was ever thus, and in every crash is the view that the Centre and the Sides Cannot Hold, and it is The End of Things. So likewise is the solution always the same:
......even in 1825 the authorities belatedly succeeded in quelling the panic in that incident by borrowing money from France and distributing a stash of old banknotes found in the vaults of the Old Lady. In the 20th century, the end of the panic tended to coincide with decisive government intervention: Roosevelt’s bank holiday of March 1933, the launching of the Bank of England’s “lifeboat” in December 1974 and the nationalisation of Japan’s Long-Term Credit Bank in October 1998, which was accompanied by a $500bn capital injection into the stricken banking system.
But fleecing the punter to put Humpty Dumpty back together again is not in general a way for bankers to earn love and admiration, and in this email age the Broadside Ballads are electronic - here are some choices from an email going round:
What do you call 12 investment bankers at the bottom of the ocean? A good start.
What's the difference between Investment Bankers and London Pigeons? The Pigeons are still capable of making deposits on new BMW's
I had a cheque returned earlier. "Insufficient Funds" Mine or the banks?
For Geography students Only: What's the capital of Iceland? Answer: About Three Pounds Fifty...
And poor old Japan - no sooner out of one crunch, and their economy is struggling again, it seems......
Following the problems in the sub-prime lending market in America and the run on Northern Rock in the UK, uncertainty has now hit Japan. In the last 7 days Origami Bank has folded, Sumo Bank has gone belly up and Bonsai Bank announced plans to cut some of its branches. Yesterday, it was announced that Karaoke Bank is up for sale and will likely go for a song while today shares in Kamikaze Bank were suspended after they nose-dived. While Samurai Bank are soldiering on following sharp cutbacks, Ninja Bank are reported to have taken a hit, but they remain in the black. Furthermore, 500 staff at Karate Bank got the chop and analysts report that there is something fishy going on at Sushi Bank where it is feared that staff may get a raw deal.
Speaking of fish, there seems to be quite a strong feeling that the bankers have not yet copped that they are in bad odour.....
