Banking News
There are 2 interesting tidbits of banking tidings inwards today's (9/10/2013) papers.
The Wall Street Journal has a long page 1 article, "Life on Wall Street Gets Less Risky" describing what it's similar at Morgan Stanley nether the novel regulatory regime. Two bits caught my eye
No, nosotros set 50 cops inwards your car. And how long tin this perhaps become on before the cops get-go bespeak where you're going as well as why? How long tin 50 regulators sit down inwards the banking company blessing every decision, before "you know, y'all haven't made whatsoever dark-green let on energy loans inwards a long time" starts coming up? But contrariwise, how long before those 50 regulators come upward to the persuasion that Morgan Stanley's survival as well as prosperity is their job? 50 full-time authorities employees calling the shots on every bargain at a supposedly someone banking company is a skillful film to proceed inwards hear of what "regulation" means.
It also agency bureacracy as well as a provide to the cozy banking the world of the 1950s.
But in that location is skillful tidings inwards this too.
You know, similar LTCM.
Oh wait, maybe this isn't as well as hence great. "Systemic" never had whatsoever limits. How long until regulators attain upward one's hear the novel hedge funds are "systemic?" The "intermediated finance" persuasion gaining to a greater extent than as well as to a greater extent than popularity at the Fed says that leveraged intermediaries willing to purchase are they lynchpin of the fiscal system. "Fire sales" volition pause out simply every bit much if they fail...
Well, maybe I worry likewise much.
The other heartwarming big picture: Banks get got figured out that maybe the Modigilani-Miller theorem industrial plant afterwards all. You tin operate alongside lower risk, lower beta, lower provide on equity. That's what's going on, basically, at Morgan Stanley. And made fifty-fifty clearer inwards the Financial Times:
The Wall Street Journal has a long page 1 article, "Life on Wall Street Gets Less Risky" describing what it's similar at Morgan Stanley nether the novel regulatory regime. Two bits caught my eye
Your No. 1 customer is the government," John J. Mack, Morgan Stanley's chairman as well as main executive from 2005 to 2009, told electrical flow CEO James Gorman inwards a recent telephone call. Mr. Gorman, who was visiting Washington that day, agreedThis is a useful anecdote to remind people what "regulation" means. I larn asked all the time, "doesn't the fiscal crisis hateful nosotros demand to a greater extent than regulation?" They seem to recall "regulation" is something y'all pour inwards similar gas inwards the tank. Or maybe they envision "regulation" every bit a unproblematic ready of impartial rules. You know, in that location is a 50 mph speed limit, which everyone routinely violates, a huge crash, as well as hence nosotros enact a xxx mph speed boundary as well as set a lot of cops on the road.
....regulators prowl the business office flooring looking for state mines, as well as Mr. Gorman phones Washington before making major decisions...
About 50 full-time authorities regulators are straight off stationed at Morgan Stanley. There were none before 2008, when it was regulated every bit a brokerage theater instead of a bank.
No, nosotros set 50 cops inwards your car. And how long tin this perhaps become on before the cops get-go bespeak where you're going as well as why? How long tin 50 regulators sit down inwards the banking company blessing every decision, before "you know, y'all haven't made whatsoever dark-green let on energy loans inwards a long time" starts coming up? But contrariwise, how long before those 50 regulators come upward to the persuasion that Morgan Stanley's survival as well as prosperity is their job? 50 full-time authorities employees calling the shots on every bargain at a supposedly someone banking company is a skillful film to proceed inwards hear of what "regulation" means.
It also agency bureacracy as well as a provide to the cozy banking the world of the 1950s.
There straight off are 3,000 dissimilar limits that bound such things every bit how much upper-case missive of the alphabet traders tin set at risk, upward from xxx before the crisis....
Wall Street civilization has long valued grueling hours, lunches at desks as well as belatedly nights inwards the office. In 2011 as well as 2012, Morgan Stanley's fourth-floor upper-case missive of the alphabet markets partitioning overlooking Times Square, where several hundred bankers assist adapt stock as well as bond deals, started emptying out before inwards the day, according to 2 sometime employees who worked in that location at the time.....The three-martini lunch, 2-pm tee fourth dimension as well as "mad men" suits can't endure far behind.
But in that location is skillful tidings inwards this too.
..go-go trading businesses i time hailed every bit its time to come are gone or curtailed. In their place, the storied investment banking company has embraced the retail-brokerage business—peddling stocks as well as doling out fiscal advice to ordinary investorsThis is great! The Volcker rule, which seemed awfully difficult to define as well as implement every bit regulatoin, seems to endure happening inwards spirit. Trading is moving out of big government-subsidized, likewise big to fail, commercial banks. Free marketers, cheer. This constituent is non dying. It is moving to hedge funds, where it belongs. And which everyone knows tin fail.
For the high-rolling traders who used to brand to a greater extent than than $10 i M one thousand a year, Mr. Gorman has had a unproblematic message: Take fewer risks or get got their deed to a hedge fund, where failure doesn't threaten the fiscal organization every bit much.... Traders as well as others get got left for hedge funds as well as private-equity firms.
...Michael Reed, who worked at the PDT desk for xvi years before leaving inwards 2010, laments the spend upward of the firm's trading culture. "Personally, I respect it sad," he says. "They used to endure a peer of Goldman Sachs. Now, they're simply about other retail brokerage."
You know, similar LTCM.
Oh wait, maybe this isn't as well as hence great. "Systemic" never had whatsoever limits. How long until regulators attain upward one's hear the novel hedge funds are "systemic?" The "intermediated finance" persuasion gaining to a greater extent than as well as to a greater extent than popularity at the Fed says that leveraged intermediaries willing to purchase are they lynchpin of the fiscal system. "Fire sales" volition pause out simply every bit much if they fail...
Well, maybe I worry likewise much.
The other heartwarming big picture: Banks get got figured out that maybe the Modigilani-Miller theorem industrial plant afterwards all. You tin operate alongside lower risk, lower beta, lower provide on equity. That's what's going on, basically, at Morgan Stanley. And made fifty-fifty clearer inwards the Financial Times:
Credit Suisse’s main executive has set out a vision for a banking manufacture alongside lower but to a greater extent than sustainable returns as well as has vowed to never i time again brand losses.
Brady Dougan... said Credit Suisse’s aim of an average xv per cent after-tax provide on equity was a much to a greater extent than dependable hope over the long term than the sector’s pre-crisis xx to xxx per cent targets.
Lower risk, lower beta, less gamble of failure, lower provide on equity. So much for the claim banks had to plow over shareholders an absolute ROE independent of beta as well as volatility.
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