成人论坛

Robert - did you train in tabloid journalism?

"this big, bloated and poisoned beast".

Closer to home why not write about XL and the nasty bankers who foreclosed on a sound company?

"When confidence in a bank erodes, it ebbs at first and then is gone in a great whoosh. Lehman will be lucky to end the day as an independent bank".

Quite often hastened by media speculation of this kind!

A year to the day since NR and we are no further forward!

My vote is for RP. Lehman appears to be exactly as he so colourfully describes. Northern Rock got itself into a pickle and all he did was to report it. 'Shoot' the bankers, not the messenger.

I would like to hear more on the battle between Gordon Brown's desire to buy the election and his one-eyed prudence. Keep it coming!

This comment was removed because the moderators found it broke the house rules. Explain.

They have to some how rescue it otherwise the whole ship will sink. At least the US government and Fed is doing something.

This is much better than how we handled Northern Rock.

forgive my financial naivety, but i have a question regarding the writing down of assets ( Lehman's $54bn of unwritten-down illiquid commercial and residential property assets) As they are written down i presume at some point they can be written up again or at some point written off. If the property market starts to rise again (i guess it must at some point) then the people buying lehman, or other distressed banks, will be able to write up the write downs and make a handsome profit. Or am i missing something?

To the Idiots still bemoaning the perceived (wrongly) part of Mr Peston in NR's downfall... stop trying to shoot the messenger!
NR was brought down by the incompetence of those running it: inparticular the spectacularly flawed business plan put inplace by those incharge seeking to grow NR by 20%+ year on year.

Lehman Bros. Again the probably final downfall of this particular bank has been in play and obvious to anyone caring to pay attention to that infomation in the public domain regarding this bank since March. It was one of several mentioned often as in a simularly precarious postion to Bear Sterns.

When Lehman announced that it's Korean suitors nolonger wish to play, the bank's doom was assured. After all why would anyone want to get involved with a bank that had already been so comprehensively rejected?

Well well well, it looks like a major investment bank is going down. Should it be propped up? No. Will bankers learn some lessons from its demise, hope so, but don't hold your breath.

Ah yes, that apparently bottomless resource, the US Treasury.

Only it is not.

As a mental exercise, pile up the US debt in dollars and the resulting stack will, I believe, now stretch a few miles out into space.

Not exactly a sustainable position, even for the USA.

I don't know why my comment (no.4) has been referred to the moderators. Perhaps it failed to exhibit sufficient glee at the misery of other people. Gloating is such an unpleasant human characteristic.

Time to stick the fork in the Lehman sausage, because it looks like its cooked to me.

The Fed are going to have to start printing money soon, as the bill to the US taxpayer on all of these bailouts is going to be unpayably large.

There are lots of other big boys in the US that are teetering on the brink.

Wachovia,
Citigroup,
Morgan Stanley,
Washington Mutual,
AIG,
Ford,
GM,
Chrysler.

And thats just the ones I know about, I bet there are lots of other possibles to go under as well.

I wonder when attention will turn to the UK with all of this? Whilst banking practices have been a bit better in the UK, it seems to me entirely possible that house prices could fall 50%, and then our own financial institutions will be in the spotlight.

The Chancellors recent remarks about this being the worst financial crisis for 60 years look to be pretty much spot on. If it werent for the economics given to us by Keynes, I would have no doubt that this is the worst financial crisis ever.

So the greatest effort to print money outside of Zimbabwe is about to begin to counter the rampant ongoing deflationary collapse is about to begin. My guess is that gold is going to perform far better in the next year than it has done in the last 3 months.

I'm not criticising RPs right to report the NR story and from his recent comments he seems to have accepted that it's better to balance some of his more glib opinions with a message that the institution in question is in no imminent danger of collapse. This will avoid causing mass panic as happened then.

I dont think you can seriously absolve him of all blame, though! If he has, hopefully, learned from NR, then that implies he had lessons to learn!

The 2000 jobs would still have gone due to the ecomomic climate and reduced volumes, even without his reporting though, and I don't agree with people who say that's RPs fault!

There was still a mischievous glint in his eye when he stuck it to Adam Applegarth a year ago though... Genuine glee!

From what I've heard, he probably deserved it anyway! Just goes to show the old adage is true; Be nice to people on the way up, because you'll meet them on the way down too!

It was a year ago now, so who cares anyway! I'll look out the second Friday of next September to see which big UK company folds (after XL today).

To all who keep blaming Pesto for these crises'.......HE'S JUST REPORTING IT AS IT IS!!!!
If you hadn't noticed.....Lehman's share price has fallen through the floor this week!!!.....GET REAL!

This comment was removed because the moderators found it broke the house rules. Explain.

13, Lehman's share has dropped massively over the last 18 months not just this week.

This week is the undertaker coming to measure. Next week will be the nails in the lid

Prediction:

This Sunday (14 Sep 2008) evening
"Lehman Brothers sold to Citi or BOA"


You can read all about it on Monday morning.

I seem to remember a time when banks were relatively secure, fairly unadventurous organisations who exercised a degree of prudence - and imposed it on their customers.

Still find it hard to understand how so many apparently intelligent - and certainly massively paid - financial companies bought such worthless paper.

If they just followed the herd, it hardly makes them "individual". If the paper was sold under false pretences, it's fraud. Didn't somebody within these companies wonder whether what they bought was worth a cup of spit?

Doesn't say much about the original oversight of mortgage sales within the US. And sure doesn't say much in favour of the wealthy idiots world-wide who created damage to multiple economies.

Brown keeps saying that every country is affected by this. Affected? Yes.

But how many countries did NOT get dragged down as the result of poor decisions by their banks?

Don't see much sign of Saudis, Dubai, China being hampered because they bought rotten paper.

It was Robert Peston's alarmist reporting that started the bank run which destroyed Northern Rock.

The proof of this is that Barclays had approached the BOE before Northern Rock but as they did not have to contend with no alarmist reporting no bank run and they are still going strong.

All businesses get into trouble from time to time but do not make the main story on the ten o clock news. Northern Rock would have survived if it had not been for three people, Robert Peston, Mervyn King and Vince Cable.

The "It's the media what did it!" party should explain how the share price in both Northern Rock and Lehman Bros fell BEFORE the stories were printed.

Presumably for them when they see massive, out of alignment, share price falls this is not really due to the fact that the company is really and truly in trouble ?? ....

No way, that's just the market ... being .... er..... well... pointlessly nasty to the company??

No worries! ----or at least La-La-La! I can't hear them!!

The boy in the story of the Emperor's new clothes obviously grew up to be a journalist---- But I suppose these days instead of simply getting away with pointing out the obvious, that the Emporer HAS no clothes--- he would be arrested and charged with nicking the non-existent garments.

At least there is sound advice on their home page:

> We make a solid case for going
> underweight on growth and overweight
> on deep value.

They might add that it's far better to close the stable door before the horse has bolted.

#19

Northern Rocks share price dropped from 拢12.40 to 拢7.40 between February and the start of September 2007, as you rightly say, as the market began to get jittery about it鈥檚 wholesale funding and priced accordingly. Following RPs grandstanding on TV, it fell 31pc IN A DAY. I don鈥檛 think its too unreasonable to assume a connection.

Also, the unfortunate funding model is quite rightly the responsibility of the NR management. It鈥檚 the crippling bank run and queues outside branches which people leave at Robert Pestons door.

21 It is the DUTY of a journalist to print the facts. Northern Rock was a busted flush. Every journalist that new it should have published it.

It is a cornerstone of democracy that we have a press that goes to press.

Northern Rock is in the state it's in because it was run incompetently, the sam as Lehman's is now and any other giant that goes under in the coming months.

If they didn't realise the risks in what they were doing, what the hell were they doing in the banking industry.

#22

I agree about the freedom of the press and their responsibility to report the facts, but I think if RP had tempered some of the hyperbole in his NR reporting with references such as those he has used this week when referreing to other companies;

"But, for the avoidance of doubt, this firm is not bust nor seems in imminent danger of collapse."

...then a bad situation would not have been made worse. The run on the bank was unnecessary and entirely caused by the media's interpretation ofwhat should have been a simple statement of fact.

No one can argue that the need to ask for the emergency funding was caused by incompetent NR management, however!

Anyway, as I said earlier, it's been a year, so...

Red Lenin - if only! The 成人论坛 actually thinks it knows what is best for us and does not publish all the news if it thinks it might cause unrest or, more importantly, be politically incorrect. It distorts society by non-reporting because it thinks it knows what is in our best interests. Secondly, it is frightened to break news first. Giiligan's little 6.07am offering didn't help. This is why it is best not to rely on it for news. The nanny arrogance is breathtaking - but it's all done for our - ie the common masses - own good!

Am I naive in thinking that the time has come to allow at least one major financial institution to be allowed to sink without trace? The message from Fannie, Freddie, NR and Beare Stearns seems to be 'don't worry if it all goes belly up - the state will bail you out'.

The stakeholders in these companies had a choice. They chose to accept the risk in return for an anticipated return. The tax payer has no choice. Every time a bail out is funded, it is money diverted from the proper business of running the country.

If Lehmanns is swallowed up by a bank big enough to take the strain, all well and good. If not, let it go under. Perhaps the rest will learn from the example.

Lehman brothers should put their CDO's and dodgy AAA' S under their pillows and on the pottys under their bed ,by morning the tooth fairies working for the fed will have replaced them with treasuries and other liquid assets

If Dawkins ever writes about the" toothfairy delusion" the westearn banking system will colapse

Is this thread about Lehman Bros or Bob "we're all going to die" Peston's part in it's downfall?

Much as i admire Mr Peston's characteristic sunny and optimistic disposition, I think it's a little unfair to ascribe the downfall of two major financial institutions to his scribblings.

That said, the media are largely responsible for the general malaise - witness the case of the hurricane reporting a couple of weeks ago when the news channels spent 24 hours repeatedly showing a clip of a road sign flapping in the wind - it looked no worse than a wet weekend in Warwickshire, but the oil price still went up by 10 dollars per barrel! On the subject of which, it seems like only yesterday that the "experts" were predicting oil at 200 dollars and, infected by the pessimism, i went out and cancelled the new Bentley and purchased a Citroen C1 - now Brent crude is down by a third and I'm driving around in an economical tin can..Doh!!

Also, why does the 成人论坛 still insist on retaining a clip on this website of an unfortunate individual who cashed in his 拢700 million property portfolio two years ago and is now busily talking the market down? This clip has been on the site for at least six months - hardly balanced reporting chaps, but guaranteed to make the rest of us feel decidedly under the weather!

RP's opinions and sensationalist reporting is not the problem, it people gullibility!

It's the fact that the majority of people believe everything 成人论坛 news broadcast is absolute fact and 100% correct.

#25--cheers from the 'Amen Corner' here.

The US has endured a number of boom-and-bust cycles, each one brought about by collective stupidity and imprudence. A market, if generally left to itself, tends to eat the stupid and imprudent for breakfast one day.

Today is Lehman's turn to be served up.

The Treasury needs to keep out of the way, and let this one fall, and the next, and the next.

After a lifetime of dealing with arrogant and self-serving 'financial services' types, I have noooo sympathy.

(More grits and biscuits, please, and pass the sorghum and butter.)

27 - The experts said oil would rise to around USD150 this summer (which it did). They then added it would fall to around about 100-110 by years end (which is looking right) then would rise to around 200 dollars by spring 2010.

So far they are looking pretty accurate.

Lets hope they got the last bit wrong, eh?

You say that 'our Barclays will pick up the best of the people' - Won't be picking up any at the top steering that particular ship then.

#27

I'm still predicting USD 200 oil.

It's just been delayed by the credit crunch. However, once everything gets back to normal (whatever that is) and demand growth is re-established then the oil price will scream back up to over USD120 bbl.

This is just a lull in the proceedings... Sorry..

Now that Lehmans is about to all but completely disappear let's hope that this will be the catalyst for normal lending practices to resume in the banking industry.

After many of the big banks, on both sides of the pond, were forced to declare huge losses the banks were still reluctant to lend to each other in case one of them failed. Many lenders strongly believed that one large bank was concealing the full extent of the value of toxic waste on it's books because the write down costs would show that bank was probably beyond redemption. As the poker game, in the financial markets, unfolded and other banks declared their hand it became increasingly evident that Lehmans might be the last really big one to come clean. If that is the case then perhaps we are now seeing the end of the beginning of the financial markets road to recovery.

Folk just want things to get back to normal. That of course is the problem. By back to normality do they mean an economy based on banking services where millions of people's jobs depend on money being lent out at interest? Those people and others like them that are unproductive ultimately depend on others work. Ah, you say, but those doing productive work can do it a lot easier, better, by using banking services and investing in the future. Quite so. But it all has to be paid back. Meanwhile the bankers are not content with just lending out money. They lend the same money out multiple times. A bank with 1:1 reserve ratio could still go bust during a run if it could not call in its loans quickly enough + it in turn could not borrow from other banks, including its central bank. Once the ratio gets increased then the likelihood of a run increases.
This is where moral hazard should come in. It should be an absolute no no for a bank to get into trouble.
As an analogy consider a driver who pulls out to overtake a line of traffic. If he cannot get back in then he suffers the consequence. Safe overtaking is therefore the norm.
He did not have to overtake. More to the point however is that other banks can be affected by a bank going down. Worst of all however is that normal folk, like blog readers, begin to realise that the whole of the banking system and in turn the whole of society is built on sand.
Not pleasant. That is why Gordon must be having sleepless nights. He is part of an economy based on keeping most folk ignorant and allowing others a free ride.
No easy solution for us.
But it will be easy for him. The blue party will soon be in power.

Holy Cow!!!

It's all going 'Pete Tong' now.

This is the beginning of the end unless post #16 webdeepak's prediction is correct......which I strongly suspect it will.

At some point though...surely a bank at some must be allowed to go the wall.....unless they really do control the entire western political establishment and hence they will be bailed out at any cost.

This is gonna be one hell of a rollercoaster.

I think most people preferred banks when they were boring.

Why blame the media if banking has ceased to be boring? Surely that is the fault of the bankers. The media will always point out things that are not boring so if bankers don't want to be talked about then they should go back to being boring.

The experience of yet another big bank going under is quite frankly terrifying. When will it end? I have heard of three good businesses being pulled down in the last two days and none were banks but the banks pulled the plug in each and every case despite payment dates being met.

The dogs are now out in the streets busy eating each other.

Unemployment is going up, demand is collapsing, the government hasn't a clue, businesses are going bust, people will go bust next and the banks have no money. When will it end?

But just remember this has been the longest period of sustained growth in two hundred years; all driven by endogenous growth theory. Bah!

If I'm finally allowed to post (are you still looking up schadenfreude?)

Those taking delight in others' misery should reflect and consider that all of us (except maybe hermits) are part of the same capitalist system which involves the lending of money by banks who don't have it to others, some of whom won't be able to repay it.

Yes, it's all 'built on sand' (no. 34) and involves perpetuating the belief that some institutions are absolutely safe.

If too many of these do fold (and it's a classic domino) we could be left foraging for food in a matter of weeks.

The only way to restore order is to allow some small institutions to fail, and bail out the rest. When it's all over, those who should have been involved in regulating banks, especially, should be made to realise that they were partly to blame for failing to do so.

If Gordon Brown is 'having sleepless nights'
because he's in charge of an underregulated capitalistic society it will indeed be a near-perfect irony that the electorate's response will be to elect the Conservatives.

Anyone got a well-stocked nuclear bunker going cheap?

#37 I'm right out of nuclear bunkers but I can sell you a budgiegar.

I thought I would check out the Lehman Brothers website from the link provided by Robert Peston.

The site starts with this description of themselves: "Lehman Brothers, an innovator in global finance, serves the financial needs of corporations, governments and municipalities, institutional clients, and high net worth individuals worldwide. We maintain leadership positions in equity and fixed income sales, trading and research, investment banking and investment".

Err.. not any more! I just love their description of themselves "as an innovator in global finance"! A more apt description would be master of their own downfall.

Let them go bust.

sadly 25, you are naive. You have no idea of the consequences of allowing such a failure in the cds market. Capitalism as we know it was a moment away from death in March 2008 when the Fed held a gun to BS and JPMorgan behind closed doors and forced them in to a deal, a mile away from the free market. As I have said before, the bailout of Bear was a bailout of JPMorgan, and the interwoven armageddon of the cds market remains unchecked.......

Re 34 and 36

There is some merit in what you both have to say about the misbehaviour of the people running the banks and how these insitutions need to be better regulated and with with stronger punitive action taken against those that fail.

Since the great depression of the 1920's there have been numerous banking failures and several finacial market crashes. All of them were caused by greedy bankers mismanageing the banks affairs in order to make megabucks, for themselves, before being found out.

There isn't a bank in the world which is safe.

They ALL use the same lending model. They lend out everything except for a small reserve... ~3% in the UK, ~2% in the Euro zone and about 10% in the USA.

No bank has enough money to pay more than that percentage of it's customers back. So if there is a run on ANY bank, you need to be at the front of the queue.

Those reserve ratios also mean that banks in the USA are far less likely to have problems than UK or EU banks. Ours have even larger mountains of debt on top.

I was just wondering if RP could check his desk diary and tell us when the recovery is allowed to start please?

It's obvious to us all that the situation is pretty bad, but there are still some basic facts that get overlooked for the sense of sensationalism.

The power the media has is staggering. They decide who we'll vote for, they decide who'll manage the national teams and now they've figured out that they can make a recession into a depression.

So I ask again.. Robert, when can I stop worrying about my job security for 10 minutes please?

Some time ago I ran across an amusing quote by a banker,
who was asked if lenders should refrain from
foreclosing on homeowners who default.

His response was, "Capitalism without bankruptcy
is like religion without hell."

Now, I haven't followed how this banker is doing
in his career, but shouldn't the same broth be
used to cook a goose as well as a gander?

At the very least, golden parachutes seem
inappropriate at times like these - if a CEO
can fly when he is kicked out of the nest, then
that, at least, proves that he displayed some
measure of foresight.

And, if you should feel threatened by events,
fear not, is still up.

All of the guys picking on RP just don't see that the conspiracy goes much deeper.

On this website, click your way through to "Business" and what URL will you see?

.../2/hi/business/default.stm

business/default... hmmm. A mission statement?

Argentine President Cristina Fernandez de Kirchner told Lehman Brothers Holdings Inc. to worry about its own finances, three weeks after the firm said the South American country could default within two years.

鈥淭oday the news in the papers, in all the papers, is the collapse of another bank far away in the United States 鈥� that bank that predicted the collapse of Argentina,鈥� Fernandez, 55, said during a speech last night. 鈥淭hey should spend more time looking at their own accounts rather than looking at other countries.鈥�

Credit default swaps ... the loaded gun in this international financial game of pass the parcel. Should the parcel make an unexpected stop ...an unrescued busted bank, the game stops and a cascade effect begins as those cds are called on. Result....BOOM!

I've mentioned in posts here more than once this year that multi trillion dollar in cds was a bomb waiting for a trigger. I suspect it will be a smaller, unnoticed US bank going belly up that begins the cascade.

m茅rde is too polite a word.

It's become increasingly obvious why our chancellor gave that very strange interview a couple of weeks ago......the bad debt is now starting to unwind in a big way right across the globe.

The question everyone seems to be nervous about asking is just what effect all these Government baleouts are going to have on the taxation of us poor mortals both here and abroad ?

I suspect that Mr Darling has some projected figures which are too awful for the Labour Party to believe....and certainly too big for us to digest.

fingerbob69 #49

I suspect you may be right.

There is by all accounts a huge mismatch between those that want to sell credit default swops and those that want to buy. And since the whole structure is based on confidence, which is melting away, how long before it all collapses?

It does make me wonder when people talk of the trillions of dollars tied up in these CDS's and things. It seems like there are two parallel financial universes out there.

The real universe where people get paid for doing a useful job and then spend their money on various consumer products and services; and another, much larger universe where banks and billionaires and sovereign wealth funds just pass money from one to another (meanwhile creating even more money out of thin air as they do so).

These two universe seem to be almost completely independent of each other despite using the same nominal currencies (except that the latter acts
like a black hole, continually sucking money out of the former).

And I wonder, providing we can insulate the savings or ordinary folks, would it really matter if the latter universe just imploded? All these trillions of dollars in CDSs aren't actually keeping the economy afloat by paying for burgers and plumbers and so on, they just sit in this parallel dimension increasing the theoretical wealth of their owners without any effect on the real economy at all.

There is something that I do not understand about bank failures and 'rescues'. My concern is that in the process of failing liquidity evaporates. Now, in a 'rescue' more liquidity is poured in to rescue the bank. So the bank lost liquidity in its failure and to rescue it even more liquidity is absorbed. Thus in terms of global liquidity the act of rescuing a bank (in these circumstances) causes even more global liquidity to vanish - a liquidity divisor?

So how can a rescue of a bank actually help increase global liquidity? (I concede it can if by propping it up, its remaining liquid funds are kept from further evaporating.)

Thus bank failures and subsequent rescues pose an interesting question about the global liquidity benefits in current circumstances.

Fannie and Freddie are a case in point to keep them afloat may, or may not, be a good thing in terms of recovering from the liquidity crisis. The only genuinely positive benefit is to stem a panic. But in the end a rescue is just as bad (or more so) for liquidity as no rescue.

(Of course the main beneficiaries are the staff and directors whose actions caused the problem in the first place and the poor old taxpayer has to take on their losses whilst they keep their profits - this stinks!)

We are really in uncharted deep do-do without a paddle.

If a CDS-counterparty bank goes bust there are probably three options:

1. All contracts involving that bank become void. Great news for anyone who took a long position, especially those who dealt in an up-front contract (the credit involved is deemed to be so risky that you don't just get paid a semi-annual insurance premium to take its risk, you get a lump sum at the start as well). But then everyone will rush to replace their contract somewhere else, so you're left with the same volume of CDS outstanding, and a few investment funds who were on the wrong side of the contracts might fail and have to liquidate.

2. The failed institution's side of the contract is legally transferred to the eventual buyer of the institution, assuming it doesn't go straight to Chapter 7 (liquidation, as opposed to re-organisation under Chapter 11). Not sure how this would work out, and unless the buyer was another bank, I don't think this would be practical. If the buyer was another bank, it would be a painful process for that bank to decide how the taking-on of these contracts would affect its own position (which would largely be hedged).

3. The institution goes bust, files for Chapter 7, and the claims of any CDS counterparties in the event of credit events are somehow added to the list of claims for repayment of debts. This would be a nightmare to administrate, not least because most contracts last for 5 years, and 10 years is not uncommon either.

Number one looks most likely to me (would love to hear other thoughts), and would probably accelerate the death of the CDS market.

random thought - the contracts aren't trillions of dollars of *value*, they're trillions of dollars of *nominal*. In other words, the contracts relate to trillions of dollars of bonds, but their value is a fraction of this. The nominal amount only comes into play if a company the subject of a CDS contract goes bust - then the CDS protection holder receives the nominal value from the CDS protection seller in exchange for the defaulted bond (or you can cash-settle at the discretion of both parties). As an example - I could buy USD100million protection in a well-rated company like Exxon Mobil and maybe pay 0.25% per year, or 250,000 dollars, for the insurance against them going bust. And if they don't go bust, that's the only money that changes hands.
Caveat - not entirely true - my broker would require me to post collateral against my position and that would be marked to market every day, so if Exxon become more creditworthy (say to 0.15% for protection), the value of my contract (paying 0.25% for insurance) would decrease, so I'd need to put more money against it to keep my broker happy. But these sums should also be trivial compared to the nominal 100 million bucks of debt covered.

Wouldn't it be easier for the US government to simply nationalise all American investment banks? Ultimately it will all be transformed into government debt anyway.

Good post #52 (John from Hendon),

I see the same situation, they all talk about maintaining liquidity, however its being drawn from under your feet.

On purpose I may add.

~51

'(meanwhile creating even more money out of thin air as they do so). '

Its that creation from thin air, the actual dabbling with the 'means of exchange' that has caused our present problems...............

I love the 成人论坛.

The business editor says Lehman will be lucky to end the day an independent bank.

As usual, the 成人论坛 has it backwards, Lehman will be unlucky to end the day an independent bank.

Dear Mr Peston,

We, the undersigned, are reliably informed (by a number of contributors to your blog) that you have the ability to make successful, financially sound, well-run businesses go bankrupt simply by questioning their viability. As we understand it, to date you have failed to make any personal profit from this talent, and indeed have made surprisingly little use of it. We would like to propose a mutually beneficial arrangement in which we finance a modest business trip for you to Seattle, Washington where we would like you to perform your magic trick on the two largest companies that you find there. On completion, I think you will find our gratitude runs to at least 8 digits in any currency of your choosing.

Your faithfully,

The Boards of Airbus Industries and IBM.

I think we are approaching the stage where we are just one major Wall Street collapse away from a Depression spiral. If Lehman Brothers is an independent entity on Monday (it cannot be), then expect a Crash to occur. If the Crash occurs then cash/funding will dry-up overnight and if that happens we'll be looking at mass unemployment in weeks, if not days.

I'd imagine that this could lead to a run on a bank(s) as people get cash out to eat and lose faith in the system completely, and then panic buying. This, again I would imagine, would lead to banks freezing withdrawals. Having some spare cash around the house might be an idea.

I thought things might happen slower as the Fed is doing the right things to stop a Crash, quickly, but it can't stop a slow one. But, if, IF, the fed doesn't for some reason force a sale then the scenario is very bad.

I don't think we can even blame Robert Peston for this.

#59 hants_gw, I'm lovin' it!

I find it a bit spooky that banks, like most of the rest of us, have spent too much time spending and not enough time saving (only their staff bonuses, rather than 40" flat screen TVs, etc...) Sadly, even sensible people who do save can still get busted if they make 'poor' investment choices.

What does this tell us about the state of western society today? That the 1960's have a lot more to answer for than first thought? (I heard a great item recently on the Worldservice about the dangers of introducing concepts such as 'fun' into a banking environment!)

Maybe performance related pay is bad thing? Perhaps ban the internet and the free press, lest ordinary people want to react on information to their advantage...

I dislike government intervention in private company pay and rewards. But isn't it time that shareholders were given more teeth to control the over-generous pay and bonuses of all companies - but especially financial institutions?

Pay a guy (or gal) big bucks for cutting a deal to deliver goods or services? Makes sense, as some genuine value flows.

Pay for a snap-shot gain in the parallel universe of finance? Not so easy to justify. Too much "value" in that universe is flim-flam, now you see it, now you don't.

I'd slap a "freeze" on bonuses in financial services. Make them conditional on "value" being sustained over three years. Pay 25pc of bonus immediately, 25pc if value persists at the end of 2nd year, the rest if value persists at end of year 3.

Better still - deliver the bonuses in the form of funds based on the instruments traded, with a time limit on when they can be encashed... That would make the buggers think a little more about what they put investors' money into.

Scrap multi-million parachute payouts for those kicked out for bad performance.

ChiefWhiteHalfoat #54

Your description of the CDS market is that of an insurance product giving protection to the holders of debts for the payment of a premium based on the perceived level of risk. If it is no more than that, then surely the collpase of the CDS market cannot threaten financial stability as all it would do is remove insurance cover and the holders of bonds will have to bear the risk themselves.

I understand that the number of players willing to sell insurance has declined and rates are increasing to high rates, which may make the cost too expensive to be cost effective, and all this without a collapse of the whole system! The market appears to be in free fall anyway.

Let Lehman collapse.

HELP!

I would like to take out credit default swaps on my teeth[ soon to be off balance sheet ]so that in the event of the toothfairy not turning up ,the marked to book value can be maintained despite the potential drop in marked to market value .

I was considering aproaching the federal reserve as my mortgage payments are due at the end of the month and my concern is that nonpayment could lead to the colapse of the banking system or worse still ,confidence in tooth fairy economics itself


I have nowhere else to turn except ebay where a recent set of false teeth that chattered to the sound of the laughing policemen fetched a misserable 7 dollars including dead AAAbatteries

Please help

Why is Lehmans in trouble when it is not amongst the banks which have had the biggest sub-prime losses? Please explain.

Shouldn't ML and DB be in trouble too? They are in the top ten for losses.

Seems to me we hear a lot about banks not being willing to lend. I would have thought it more honest to say thay are unable to lens not unwilling.

Acceptance of that position would perhaps cause the public to fully realise the seriousness of the position and why therefore property values have much further to fall.

Whilst banks may have been more prudent in their lending the borrower must also accept some self responsibilty.

Governments should perhaps react to bubbles in any market by moving quickly to impose some form of tax change to keep the bubble in check.