Showing posts with label US banks. Show all posts
Showing posts with label US banks. Show all posts
Tuesday, March 24, 2009
Did you know (At least I didn't know) that another not so well known financial crisis happened a century ago? In early 1906, the US banker Jacob Schiff told a group of colleagues that if the United States did not modernize its banking and currency systems, its economy would, in effect, fall off a cliff — that the country would “have such a panic ... as will make all previous panics look like child’s play.”
Yet the United Sates failed to reform its financial institutions, and conditions deteriorated steadily over the next 20 months. There was a worldwide credit shortage. The American stock market crashed twice. The young Dow Jones industrial average lost half of its value.
In October 1907, when a panic started among trust companies in New York and terrified depositors lined up to get their money out, Schiff’s dire prediction seemed about to come true. The United States had no Federal Reserve, the Treasury secretary did not have much political authority, and the president, Theodore Roosevelt, was off shooting game in Louisiana.
J. Pierpont Morgan, a 70-year-old private banker, quietly took charge of the situation.
Sounds interesting? Read the full story HERE
Yet the United Sates failed to reform its financial institutions, and conditions deteriorated steadily over the next 20 months. There was a worldwide credit shortage. The American stock market crashed twice. The young Dow Jones industrial average lost half of its value.
In October 1907, when a panic started among trust companies in New York and terrified depositors lined up to get their money out, Schiff’s dire prediction seemed about to come true. The United States had no Federal Reserve, the Treasury secretary did not have much political authority, and the president, Theodore Roosevelt, was off shooting game in Louisiana.
J. Pierpont Morgan, a 70-year-old private banker, quietly took charge of the situation.
Sounds interesting? Read the full story HERE
Saturday, March 21, 2009
Recently I stumbled upon an article on fixing the toxic asset problems of the US banks by Lowell Bryan and Toos Daruvala (Directors of the NY McKinsey Office). The article is well argued but as suggested it is just a conversation starter. They are arguing that mark-to-market (also called fair value accounting) is not good in times of high volatility and they are suggesting that mark-to-model approach is the best suited in these times. But they somehow overlooking the fact that mark-to-model has its own flaws because everybody will be having their own model and there will be no standards. On top of that investors are not fools who will believe the models of these financial institutions and they will still be more inclined towards the mark-to market model since value of a asset is its price in the market not in some formulae.
The original article can be read below:
The original article can be read below:
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