He says his bank, like all European banks, are being told by the wacko regulators they have to put more money in reserve TO COVER LOSSES DUE TO BAD LOANS they've made. (This means they need to put a pot of money off to the side to cover the stupid high risk/high profit potential loans they've made that didn't pan out, money that now won't be available to loan out to customers.)
So it's the banking regulator's fault business loans will now be harder to get?
Ummm....try this Mr. Greedy Banker: Only make loans to quality, credit worthy customers. Then you wouldn't have all those horrible losses. Greece is/was NOT a quality, credit worthy customer. Nor was Ireland, or Italy, or Portugal. (Of course then you wouldn't have your whopping big bonus either. Ohhhh....now I get it!)
As for my own investment strategy, I'm playing it safe. I've put everything I have into Gallagher's Sledge-O-Matic, becoming the exclusive North American distributor for his fantastic "slicing / dicing / cuts Julianne fries but you gotta hit that sum bitch juuuuust right" miracle kitchen device.
Cha-ching!
S
Speaking of risky loans... wonder if China will cut off the U.S.
ReplyDeleteScott, I think you've got it just a little wrong. They only get those whopping big bonuses when their extremely risky investments pay off. When they make bad loans they only get mediocre bonuses and everyone connected to the financial world (everyone) loses.
ReplyDeleteSo: If the big shot banker gambles and is right, he gets a huge bonus. If he gambles and loses he gets a little bonus and the world goes into a massive recession. Either way, his incentive is to take huge risks. If the bank fails another bank hires him because "You have to be really smart to put the world into a recession." In the old days, the big shot banker owned the bank and if his risks went sour he lost everything. That is why the image of the old bankers was one of conservative stogy safe and non-risk taking.
Mr. Potter was an old prick, George Bailey loaned money to everyone. It was a great movie, but real bankers need to fall somewhere in between. Either way, it would be nice if banks went back to investing in people, and not complicated mathematical equations.
But by the use of smoke-and-mirrors, many of those bad loans could be made to look good for a while, giving the bankers time to cash their big checks. The same thing happened here. Just look at how long Fannie, Freddie, Countrywide and the rest paid out huge monies to their executives, knowing full well their "success" was really just a house of cards. By the time everything became clear, their money was safely squirelled away, and they were living the good life in the Hamptons. At least that's the way hindsight is now explaining it.
DeleteHmmm...good point.
DeleteYour post reminds me of the time I told Mrs. C. I had good news for her and bad news. The good news was that I was taking her to a Gallagher performance. The bad news was I had front row tickets.
ReplyDeleteI seldom commenr, but wanted to let you know I enjoy your posts. Most of the time. Good stuff.
ReplyDeleteSteve in Germany
Should have typed comment.
ReplyDelete