[movermike] movermike: The New "Bank Runs"

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Posted by movermike:
The New "Bank Runs"
http://www.movermike.com/posts/1186741924.shtml


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   Nice overview of the financial panic that has gripped Wall Street by
   [1]Floyd Norris at the NYT. Two points pop out.

   First, our institutions, the central banks, appear to be obsolete.
   Norris writes that

     ...the new financial architecture (that has) emerged in the last
     decade (is) one that relies more on securities and less on banks as
     intermediaries.

     ...these (central) banks have little regulatory oversight of the
     securities that are in trouble and may not even know who is holding
     them.

   Second, the Wall Street quants figured out how to slice and dice
   mortgages to get AAA ratings on subprime paper, but they couldn't
   hedge againse liquidity.

     âOur current system of levered finance and its related structures
     may be critically flawed,â said William H. Gross, the chief
     investment officer of Pimco, a mutual fund company. âNothing within
     it allows for the hedging of liquidity risk, and that is the
     problem at the moment.â

   [2]Bank Runs [3]Floyd Norris [4]Mover Mike

References

   1. http://www.nytimes.com/2007/08/10/business/10liquidity.html?pagewanted=1&_r=1&th&adxnnl=0&emc=th&adxnnlx=1186740600-waq3yBeJvq7G+Vj5ODHyvQ
   2. http://technorati.com/tag/Bank+Runs
   3. http://technorati.com/tag/Floyd+Norris
   4. http://technorati.com/tag/Mover+Mike