John Lanchester · The Art of Financial Disaster · LRB 15 December 2011
No essay in English has a better title than De Quincey’s ‘On Murder Considered as One of the Fine Arts’. I wonder whether, if he were alive today, he might be tempted to go back to the well and write a follow-up, ‘On Financial Disaster Considered as One of the Fine Arts’? The basic material might be less immediately captivating, but there’s a lot to choose from. As Warren Buffett has pointed out more than once, ‘It’s only when the tide goes out that you learn who’s been swimming naked.’ Financial and economic downturns always cause a rash of scandals and exposure. In the UK, our most recent outrage has featured Northern Rock, the bank whose collapse in the autumn of 2007 was the first harbinger of the credit crunch and subsequent Great Recession. To sum up: the Virgin deal guarantees big losses for the taxpayer, uses exotic financial techniques analogous to those which caused the Rock to collapse in the first place, and leaves us with a bank which is measurably less safe.
Wall Street Aristocracy Got $1.2 Trillion From Fed
Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits. By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. Fed Chairman Ben S. “These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. (View the Bloomberg interactive graphic to chart the Fed’s financial bailout.) Foreign Borrowers It wasn’t just American finance. Peak Balance The balance was more than 25 times the Fed’s pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon. Odds of Recession Liquidity Requirements ‘Stark Illustration’ 21,000 Transactions
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Supermarket banking
At the recent Occupy debate on "Socially Useful Banking", Andy Haldane argued strongly for culture change in banking, and particularly in retail banking - the sort of banking that ordinary people rely on for their payments, their short-term savings and their loans. And he claimed that structural separation of retail banking from what are viewed as "higher-risk" activities such as investment banking and trading would end cross-contamination of culture and enable retail banking to return to its roots in relationship management and judgement based on local knowledge. He said that the ring-fencing of retail banking as proposed in the Vickers report on reform of banking may not be enough and full separation would be considered if necessary. ".....financial and human resources were diverted away from retail banking services and non-bank activities towards investment banking. I don't agree. I have reason for saying this. But I would issue a word of caution here.
The Great American Bubble Machine | Politics News
The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates. Invasion of the Home Snatchers By now, most of us know the major players. But then, any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. The Feds vs. They achieve this using the same playbook over and over again. BUBBLE #1 The Great Depression Goldman wasn't always a too-big-to-fail Wall Street behemoth, the ruthless face of kill-or-be-killed capitalism on steroids —just almost always. Where to go?
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Working Capital Series: Drivers | A Private Equity Blog
Acknowledging the importance of working capital analysis (in private equity valuation) is only the first minor step. Understanding the drivers of working capital and how they influence value is the second and most important step. By understanding each driver, you’ll gain an appreciation for how movements in working capital can create untold value, but also unprecedented destruction. We run into problems when a particular movement can indicate both an improvement and a critical problem. So we have to look deeper. The primary drivers of working capital are as follows (see the diagram for more detailed conceptual drivers of working capital): Debtors (accounts receivable) – this refers to accrued revenue/sales placed on credit and awaiting to be settled by cash. The typical strategy with working capital drivers is to decrease debtors terms, decrease inventory requirements and increase creditors terms in order to manipulate the working capital profile of the business.
CHARTS: Here's What The Wall Street Protesters Are So Angry About...
The "Occupy Wall Street" protests are gaining momentum, having spread from a small park in New York to marches to other cities across the country. So far, the protests seem fueled by a collective sense that things in our economy are not fair or right. But the protesters have not done a good job of focusing their complaints—and thus have been skewered as malcontents who don't know what they stand for or want. (An early list of "grievances" included some legitimate beefs, but was otherwise just a vague attack on "corporations." Given that these are the same corporations that employ more than 100 million Americans and make the products we all use every day, this broadside did not resonate with most Americans). So, what are the protesters so upset about, really? Do they have legitimate gripes? To answer the latter question first, yes, they have very legitimate gripes.
