October 21, 2009
A must read:
The Snowball of Derivatives: The Specter of a Second Black Swan
Filed under Uncategorized
“But where does this leave risk management – which is what we all are involved and believe in? The markets were seen as sound 18-24 months ago – now they are crashing around us. Risk management is no longer the new kid on the block, it is a mature process – at least credit and market risk are. Saying “Oops, sorry, but we did not think of liquidity risk” does not carry much weight.
Bear Stearns, Fannie Mae and Merrill Lynch all had large and impressive risk teams. What happened? Was their advice ignored, or were their models ineffective? If the former, executives should be facing jail, not mega-payoffs. If the latter, if our models only work in static markets, we should be coming up with answers now. Why pay for a major departmental function if it cannot do what it is supposed to?”
Basel II in the news – but Lehman’s takes the headlines
15 September 2008
The above: what happened with the Basel ii Mandates being left to the banks! Roubini is correct:
“The most naïve and really incredible development of international public policy over the last ten years or so has been the Basel II guidelines for regulatory reform. It is hard to understand how on earth regulators could embark on a trip to outsource credit and market risk management to the supervised banks themselves.
More Basel ii mandates in store for January 01.2010, this time worldwide.
excellent link, Mr. Galt!