Saturday, November 15, 2008

Banks and Bankers

Meeting a friend, erstwhile of Lehman Brothers,
for the first time since that company went to the wall, graphically
illustrated some of the human issues behind the some academic
media reports about the banking crisis.

He had lost many llbs in weight as well doubtless as not a few £s in share
options. Thankfully such are his talents that he is not without work.

The feeling is that with media reports of governments intent on bailing out
bankers at bank HQs, whilst letting the home owners at the end of the
food chain lose their homes, at least one venerable bank had to be seen to
go to the wall for political and media spin reasons. If so Lehman Brothers
was then in the wrong place at the wrong time so its heads had to roll.

Virtually unrestrained but legal shorting of Lehmans' shares added impetus to the
Lehman difficulties. The suspicion is that this was compounded
by naked and therefore illegal shorting. The latter
involving selling shares you don't own and have not even borrowed,
would be illegal but the fines/costs payable for culprits who are caught
are far lower than the potential gains from the short.

It has been reported that Barclays who took over Lehaman USA
was barred from repeating its white knight rescue in London
by the FSA, on the competition grounds. If so, such decision
by the FSA would smack of a slavish adherence to procedures
as if, to take a biblical analogy, the market exists
for the procedures' benefit rather than vica versa.

If the FSA
did indeed bar Barclay's rescue in London on such grounds,
why do they not do the same for Lloyds TSB rescue of HBOS?
Such barring of Barclays would seem like a monumental blunder.

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