tag:blogger.com,1999:blog-6798074091942701235.post4246880204643720022..comments2024-03-27T11:08:31.557-04:00Comments on Can Turtles Fly?: SEC charges Goldman Sachs with fraudSivaram Vhttp://www.blogger.com/profile/06361276466660862882noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-6798074091942701235.post-25265476594797954152010-04-23T11:02:02.000-04:002010-04-23T11:02:02.000-04:00Sorry about the late response...
I was kind of jo...Sorry about the late response...<br /><br />I was kind of joking when I said European bankers are worse. Both were incompetent and overpaid for what they did. There is also a lot of cross-ownership so it's hard to ascribe blame to one or the other (European banks were hurt by American subsidiaries and vice versa.) It also depends on who you blame when employees may be in one region but senior management, who are the ultimate risk officers, are from another region.<br /><br /><br />Lehman and Bear Stearns blew up but that is to be expected given how they were bond shops (anyone dealing in mortgage bonds was toasts.) I'm not excusing their behaviour but it isn't a surprise to me. They made a fortune on selling toxic assets and, well, they were poisoned by the toxicity after dealing in them too much.<br /><br />It's still not clear to me that Merrill Lynch, Goldman Sachs, and Morgan Stanley were as dumb as they seem. Some of these companies have posted huge losses but they earned a fortune selling this stuff in the last decade. It wouldn't surprise me if the losses aren't that bad when you offset it with the profits earned over the last decade. If you look at stock prices of some of these banks, they are not as bad the situation indicates.<br /><br />I agree with you that Citigroup was run by incompetents or the greedy (in it for themselves and not their employer.)<br /><br />I don't really know if AIGFG was mostly Americans. I could be wrong but my impression was that it was Europeans.<br /><br />As for European bankers, we have two giants that nearly collapsed: UBS and ING. There was also RBS, HBOS, and a few others.<br /><br /><br />Overall, American institutions will probably end up with bigger aggregate losses. But I suspect their situation may not be as bad if you count the profits they made selling this stuff. The problem for the Europeans is that they were mostly the buyers. For me, the biggest surprise is not the collapse of, say, Citigroup; but rather, the collapse of a conservative institution like UBS.Sivaram Velauthapillainoreply@blogger.comtag:blogger.com,1999:blog-6798074091942701235.post-55159602685362773652010-04-18T15:10:33.000-04:002010-04-18T15:10:33.000-04:00Hmm, I really have to take issue with the idea tha...Hmm, I really have to take issue with the idea that USian bankers are smarter then their Euro counterparts. Not because it might be insulting to Europeans (hell, we do have plenty of idiots this side of the pond and they are very heavily employed in banking and politics) but because it simply doesn´t match the record.<br /><br /><br /><br />Consider, how many Eurobanks blew up over subprime CDO/RMBS? very few in fact and all very small (IKB has about $80B in assets, a piker by Eurobank standards) Eurobanks off course didn´t need much US help in blowing themselves up the oldfashioned way:<br /><br /><br /> Icelandic banks killed themselves relying excessively on expensive wholesale funds and noncore deposits<br /> The UK, Ireland and Spain all had massive property bubbles of their own and plenty dodgy loans to go with that<br /> Fortis killed itself overpaying for ABN Amro and borrowing heavily to do it<br /><br />So yes, our bankers are idiots, but CDO exposure wasn´t their big stupidity<br /><br /> Compare this to the US. In the US:<br /><br />Citi blew up on subprime CDO exposure (and was given massive amounts of government aid to make up the difference)<br />AIG blew up on subprime CDO exposure (and the London based AIG FP was mostly USian staffed)<br />Merrill Lynch blew up on subprime CDO exposure (and was merged into BofA effectively sinking that one as well but for massive government assistance<br />Lehman blew up on subprime CDO exposure<br />Bear Sterns blew up on subprime CDO exposure (and was given to JP Morgan with the Fed eating the loss on the worst CDO trash)<br />and that´s just the really big ones...<br /><br />Wall Street should have understood these things if anyone did but Wall Street would have completely destroyed itself if the Feds hadn´t stepped in.<br /><br />Only Goldman comes out looking rather clever and ironically they may just have been too clever by half. If this SEC lawsuit has legs it could sink Goldman and then <em>all</em> the great investment banks will have been killed off by CDO´s.Contrariandutchnoreply@blogger.com