Since 1999 the chief risk officers of the Wall Street banks that blew themselves up in 2008 because of reckless and irresponsible risk practices have been meeting in secret and calling themselves the Counterparty Risk Management Policy Group (CRMPG). Their plan was to periodically release erudite-sounding reports to regulators suggesting that Wall Street could police itself under a set of “Guiding Principles” in order to perpetuate its off balance sheet debt bombs, unregulated OTC derivatives and a self-regulation regime.
The group was led by former New York Fed President E. Gerald Corrigan who then moved on to a lucrative career at Goldman Sachs.
Representatives from banks like Lehman Brothers, Citigroup, Bear Stearns and Merrill Lynch sat on key committees of the Group and helped to formulate the “Guiding Principles” for Wall Street. Lehman Brothers filed bankruptcy on September 15, 2008 – just five weeks after a report from the group on managing risk was released. One day before the Lehman collapse, Merrill Lynch had collapsed into the arms of Bank of America. In March of that year, Bear Stearns had already collapsed into the arms of JPMorgan Chase with a generous financial assist from the Fed. In the same year, Citigroup became insolvent and received the largest taxpayer bailout in U.S. history.
Notwithstanding the hubris of these risk managers lecturing others on how to contain risk while their own institutions are in the process of an epic collapse because of negligently managed risk, the Federal Reserve actually deferred to this group at the peak of the crisis in 2008....Wall Street On Parade
Meet the Secret Wall Street Group Whose Fingerprints Are All Over the 2008 Crash
Pam Martens and Russ Martens
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ReplyDeleteCheckmate:
ReplyDelete“IV-21a. The Policy Group recommends that where the use of leverage ratios is compulsory, supervisors monitor such leverage ratios using the Basel II, Pillar II techniques and intervene regarding the adequacy of such leverage ratios only on a case-by-case basis.”
Again.....
Notwithstanding the hubris of these risk managers lecturing others on how to contain risk ... Pam Martens and Russ Martens
ReplyDeleteSpeaking of risk containment, what kind of sense does it make to have just ONE payment system, the one that must work THROUGH the banks, etc. or not work at all? And which backs what should be risk-free, always liquid demand deposits with at-risk, not necessarily liquid assets? And which holds the economy hostage thereby?
“collapse because of negligently managed risk,”
ReplyDeleteThe risk was not managed negligently, it was the NON-risk that was managed negligently....
I came across a video the other day where some right wing guy blamed to 2008 crash on the left because the Democrats had forced Freddie Mac and Fannie May to lend to poor non credit worthy people so they could buy a home. The Democrats had messed with the natural process of the market, he said. I have heard this from the right before, so as you can see, no blame is put on the banks by the right, even though the bankers control the Democratic Party and probably saw this as a get rich scheme; even though they knew the loans were really bad so they offloaded them as quick as possible and then bet upon them failing. Those bankers should have been out on trail. It was criminal behavior, but all forgotten today.
ReplyDeleteThat was the argument at the time.
ReplyDeleteYou see, the banks were actually being virtuous by using "red-lining" to keep "those people" from getting loans, but the bad gub'ment made them erase those red lines and hand out "sub-prime" loans, which, "of course," went bust when the deadbeats could not pay. Case closed.
“Case closed.”
ReplyDeleteMaybe by Inspector Clueseau....