Tuesday, May 27, 2008

Creativeness and oops

Of course, that one does 'oops and loops by necessity leads to oops. Our task is to try to control the risks which implies a whole lot of stuff. We can look to both engineering and financial examples to study this further.

But, in looking at finance, does anyone remember that about 18 months ago or so some experts were claiming that the tranche, and its ilk, spread risks such that we would not, ever, have any type of financial meltdown? Was there not some type of meltdown of late? If you don't think so, go talk to the Bear Stearns people, meaning, of course, those who lived and strove for the company and not those cats, of the fat variety, at top.

So, along with tranching, leveraging, and other creative things, we see another bit of activity that was verboten in the 80s, namely "brokered deposits." One quote in the article mentions that we need to manage these things; yet, are we not always faced with the problem described by Minsky, namely froth?

Not to stand in the way of progress, but it seems that a whole lot of financial experimenting has gone on the past couple of decades without much oversight, for several reasons. Of course, as old Alan said, the Fed doesn't have any better forward-looking glasses than do the rest of us. They would better focus on bail-outs, as we have seen in abundance, of late.

Yet, one would expect that we would have some core of mature insight with which to apply our prowess in mathematics and computing.


07/23/2009 -- After the bust and the rebound, toxic assets are still a problem due to tranche realities.

01/27/2009 -- Lessons to be learned (as opposed to learnt), including, by necessity, Ponzi.

11/20/2008 -- Boon and bust, the way of fairy dust.

06/12/2008 -- Turns out to be worse in several senses. It raises uncertainty for the bank since they have other than the traditional relationship with customers. At the same time, gaming types can come in and make trouble for the customers, through various types of malfeasance.

One lesson may be that if you have the money, do your own work in laddering, etc. Ah, but that goes against the grain of having other people do the work.

Modified: 07/23/2009

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