Lehman Brothers

[Dryce]

A few hundred years ago companies were given their own legal identity divorced from its owners. One view of this outcome is that it was an artifice so that directors could take risks that they were not prepared to take with their own money. Ask yourself why that would be eh?

How many times have you heard of examples where something is done for "the good of the company" - not for the humans in it but an artifical construct that cares not whether it lives or dies.

The directors do take risk and have a fiduciary responsibility with regard to the good of the company.

The invention of the company as a separaet entity is extremely powerful concept.

It works.

 

[grober]

The price of failure?

Here we go. News today that chief executive Andy Hornby will get a £2 million plus payout and some sort of sinecure on the merger of HBOS with LLOYDS/TSB. This is the guy who has been paid millions of pounds of bonuses in the short time he has presided over the demise of one of the oldest established banks in the UK. http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/09/18/cnhornby218.xml Evidently he worked for ASDA in their "George" clothing division before moving to HBOS. I mean flogging cut price clothing to punters and running a billion pound banking operation how difficult can it be ?-----well quite a bit more difficult actually!

Remember Howard Brown the irritating "singing cashier"? Using Halifax counter staff in adverts was Andy's brainchild evidently. I bet many of the HBOS counter staff are singing a different tune today!

 

[Mudster]

Make it illegal to sell shares you don't own?

Well interestingly the statement on the evening news said they aimed to make it illegal "to sell your shares at a high price then buy them back for a lower price"....

They'll be closing the stock market then will they?

 

[Corrado]

Here we go. News today that chief executive Andy Hornby will get a £2 million plus payout and some sort of sinecure on the merger of HBOS with LLOYDS/TSB. This is the guy who has been paid millions of pounds of bonuses in the short time he has presided over the demise of one of the oldest established banks in the UK. http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/09/18/cnhornby218.xml Evidently he worked for ASDA in their "George" clothing division before moving to HBOS. I mean flogging cut price clothing to punters and running a billion pound banking operation how difficult can it be-----well quite a bit more difficult actually!

Remember Howard Brown the irritating "singing cashier"? Using Halifax counter staff in adverts was Andy's brainchild evidently. I bet many of the HBOS counter staff are singing a different tune today!

I've no sympathy for him - not that he needs it in his secure new directorship.
Could it be that the collective greed of Halifax Building Society investors was just the start down this rocky road - after all, it was they who voted to demutualise for a few grubby shares (which I never bothered to sell )? .

 

[grober]

The price of failure?

sorry double post.

 

[Dragon]

Well interestingly the statement on the evening news said they aimed to make it illegal "to sell your shares at a high price then buy them back for a lower price"....

They'll be closing the stock market then will they?

It a legal entity, they just suspended it until Jan 09.

 

[Roger Jones]

In the immortal words of It Ain't 'Alf 'Ot Mum, I can't thing of a better verdict on the collapse of the system as "too much clever dicky". As for the misfortune of those front-office sharks who will lose their jobs, well, "oh dear, 'ow sad, never mind".

But collapse it is, and what a complete disgrace it is on all those regulatory bodies and their governmental masters who have failed in their duties on both sides of the Pond. It may be a shock but it seems to have surprised few except for them. When reports emerged of mortgages at 6x earnings and more, self-declared earnings, 100% value of property and more -- who didn't think that rather too many people were losing a grip? And who ever imagined that the future of the top shark-pen of all would be brought into question: Goldman Sachs. That's a sure sign of the enormity of this whole business.

 

[Dragon]

Short-selling sharks who profited from falling share prices face 'death sentence' aft

Oh ho ho, yes hang them high. :bannana: :bannana: :bannana:

http://www.dailymail.co.uk/news/art...prices-face-death-sentence-FSA-crackdown.html

 

[Mudster]

Short selling has bugger all to do with the mess they're in now.

Irresponsible lending leading to an unprecedented housing bubble is responsible...short selling is actually a cause not an effect.

They're effectively shooting the messenger when they should be hanging the morons that thought it was a good idea to lend 125% of the value of a house to a people on minimum wage with no prospect of wage inflation.

 

[Dryce]

They're effectively shooting the messenger when they should be hanging the morons that thought it was a good idea to lend 125% of the value of a house to a people on minimum wage with no prospect of wage inflation.

The 125% of the value of a house bit probably isn't a fundamental though does show how risk was being inappropriately assessed.

The short selling is just opportunism as the events unfold.

There are two factors at the heart of this. First off the property lending. Secondly balance sheet valuations.

The property lending has ended up in a lot of institutions being exposed. First off the value of property based debt has been downgraded. Then the knock on in confidence due to the widespread exposure has caused other types of security to be downgraded.

A major problem is that if you have a security of some sort on your balance sheet at a given value and somebody else is forced to sell the same type of security in a fire sale *you* have to revalue the security on your balance sheet. So a downward spiral is setup in this sort of crisis where major institutions have to write down more and more and as weak ones fall the stronger ones end up writing down yet more and get weaker so some of them start to fall.

So as confidence falls the values fall.

Now in the good times the reverse happens - but less dramatically.

The property bubble was blatant. But when you have competitors and shareholders it's hard to restrain the valuations on your balance sheet when everybody else isn't doing the same.

 

[richard]

It a legal entity, they just suspended it until Jan 09.

Ok, so whats going to happen in Jan 09 ? Given that the underlying bad stuff where we all suspect the banks have a whole load of bad debt (in the form of worthless [edit: mortgage related] investments) on their books that will still be there (or sold off for virtually nothing)?

The fact that the interbank lending rate keeps staying so high leads me to beleive that the banks are looking at their own balance sheets and thinking "eek, no way we are lending our cash to another bank, their balance sheets are probably as poor as ours"
- (ok, so they probably arent saying "eek" or "poor")

R

 

[Mr E]

Short selling has bugger all to do with the mess they're in now.

Irresponsible lending leading to an unprecedented housing bubble is responsible...short selling is actually a cause not an effect.

They're effectively shooting the messenger when they should be hanging the morons that thought it was a good idea to lend 125% of the value of a house to a people on minimum wage with no prospect of wage inflation.

There is a view that removing the uptick rule last year in the US has introduced unnecessary market volatility. There has also been concern that the large short positions of traders on certain stocks has, because of the transparency in the industry, become a self-fulfilling prophecy.

Although the fundamental problem has been the inability to value assets because the risk cannot be ascertained, it's acerbated by those looking to make a killing through shorting. It adds another pressure to an-already tottering market and so suspension seems to be a reasonable approach to take.

There are so many culpable parties behind the current situation that it's difficult to know where to start. Personally I think it lays at the doors of two parties - the rating companies who gave these "toxic" assets investment-grade ratings (at a fee I might add) with no liability themselves, and those who replaced supervision with regulation in the finance system.

At least with "junk" people knew what they were getting - but this time around the banks were looking for investment-grade holdings with junk levels of return. And who was there saying "this all smells a bit iffy to me"? No-one, because the paperwork was correct and the rules had been obeyed - even though they were selling rotting fish wrapped up in a pretty box - and the supervision with it's twitchy nose had been replaced by a book of rules.

 

[Dragon]

Ok, so whats going to happen in Jan 09 ? Given that the underlying bad stuff where we all suspect the banks have a whole load of bad debt (in the form of worthless [edit: mortgage related] investments) on their books that will still be there (or sold off for virtually nothing)?

The fact that the interbank lending rate keeps staying so high leads me to beleive that the banks are looking at their own balance sheets and thinking "eek, no way we are lending our cash to another bank, their balance sheets are probably as poor as ours"
- (ok, so they probably arent saying "eek" or "poor")

R

..

 

[Dragon]

Bill Gate, the richest man after credit crunch.

Lucky man even after he gave so much away.

http://www.telegraph.co.uk/news/wor...-crisis-hits-members-of-Forbes-rich-list.html

 

[Dragon]

Face of a gambler, named and shamed

http://www.dailymail.co.uk/news/art...ys-robbers-pinstripes-facing-huge-losses.html

I met some at IOD, asking for IT effort.

 

[timskemp]

In business one man's gain is always another man's loss. That's business.

The brokers and dealers work on commissions - for as long as there is trading they make money.

 

[mattc]

In business one man's gain is always another man's loss. That's business.

The brokers and dealers work on commissions - for as long as there is trading they make money.

Rubbish! Make something. Mine something. Provide a service that someone is prepared to buy and everyone wins.

of course if companies did not feel the need to raise finance from "the market" there would be precious few shares to trade. Who would lose then? Companies feel the need to expand though and that leaves them exposed to the market when it falls out of love with them.

If we really want such a dog eat dog world don't be surprised went economic terrorists start killing business men at the head of companies and high profile traders who they perceive to be the arcitects of much of the disparaities in the world. Far-feached you say? Look how the world has changed in just a few hundred years. Extrapolate it forward and if you feel politicains arenot listening and business does not care why uphold the social contract with the state? There are enough disturbed people out there to just need a nudge in the wrong direction.

Of course it wont be fair but then everyone seems to be saying thats the world, get used to it.

 

[timskemp]

Rubbish! Make something. Mine something. Provide a service that someone is prepared to buy and everyone wins.

Really?

Manufacturing relies on supply and demand, when demand drops it's not the businessmen that lose jobs, it's the workers. (BTW when people complain about nuclear power and risk, remind them of the thousands killed by mining accidents and related diseases...)

Mining relies on miners, when the mine collapses or there's an underground explosion who loses their life the miner or the businessmen?

I provide a service as a one-man IT consultant, often my consultancy is into labour saving software - who loses then? I know I gain.

 

[Mudster]

If we really want such a dog eat dog world don't be surprised went economic terrorists start killing business men at the head of companies and high profile traders who they perceive to be the arcitects of much of the disparaities in the world. Far-feached you say? Look how the world has changed in just a few hundred years. Extrapolate it forward and if you feel politicains arenot listening and business does not care why uphold the social contract with the state? There are enough disturbed people out there to just need a nudge in the wrong direction.

Of course it wont be fair but then everyone seems to be saying thats the world, get used to it.

That very thing happened in Russia during the 90's as Capitalism took over from decades of communism, of the 50 founders of the Moscow form of "the chamber of Commerce" 48 were murdered. Mostly banking, telecoms and high tech related indutries.

You seem to have almost idealistic utopian ideals, which, in a perfect world, would work.

Like communism, it should work, the problem is we are actually human and we "want" or dream. Being human means Communism and to a lesser extent Socialism can never work, capitalism is the next best thing...sure, that's flawed too, but it's the best we've got until someone comes along with a better idea...At least we're free to exercise our minds and make our own decisions (to an extent).