This is interesting, and so is the Starling piece. I was involved in the US RMBS litigation on the government/plaintiff side, from which we all naturally took a harsh view of the issuers and underwriters. So perspectives from the bank side are interesting now that it’s all in the past. Curious about your thoughts on the Mavin book and whether it’s worth a read.
Another problem with DB is that they were an operational Shoggoth: data management system bolted on data management system with only the most perfunctory systems integration. This is always a potential problem with acquisition-hungry banks. Systems integration is a pure cost, and cost centers are seldom beloved.
oh absolutely 100% - the rot started with Bankers' Trust. I used to satirise them with the saying "if it can produce the annual results, it's integrated", but that seems to have been not far off the truth.
We used to call it "Trusters' Bank", in honor of their derivatives counterparties. After none of their top execs suffered any bad consequences, I decided that the motto of industry-regulator relations was: "We pretend to regulate you; you pretend to respect us."
Someone must have done a look back at the two cultures (CSFB / CSFP & Deutsche Bank / Bankers Trust) effect in detail no? Might be fun if you had some spare time …
Another great post! Curious about this line though:
The trouble was that the crisis was (in my view, incorrectly) blamed on “excessive risk taking”, rather than “excessive attempt to avoid risk, by advertising securities as riskless when they weren’t”.
Isn't knowingly breaching regulations (in this example, finproms regs) a fairly clear example of excess in risk-taking?
Because there were new ways to measure & manage risk banks thought that they weren't holding risk, but laying it off to other institutions. In practice many banks were too slow to move their holdings on, and other institutions (AIG) didn't look at worse cases
Gillian Tett in "Fools Gold" is very good how techniques designed to measure (and hence manage) risk became misused and toxic
Of course some of the disaster was just down to incompetence; RBS management apparently not knowing that they had exposure to sub-prime, while the Greenwich unit was piling up risk.
This is interesting, and so is the Starling piece. I was involved in the US RMBS litigation on the government/plaintiff side, from which we all naturally took a harsh view of the issuers and underwriters. So perspectives from the bank side are interesting now that it’s all in the past. Curious about your thoughts on the Mavin book and whether it’s worth a read.
only 20% through according to Kindle but yes it is - Duncan is a very good writer and has clearly talked to a lot of the right insiders.
Another problem with DB is that they were an operational Shoggoth: data management system bolted on data management system with only the most perfunctory systems integration. This is always a potential problem with acquisition-hungry banks. Systems integration is a pure cost, and cost centers are seldom beloved.
oh absolutely 100% - the rot started with Bankers' Trust. I used to satirise them with the saying "if it can produce the annual results, it's integrated", but that seems to have been not far off the truth.
We used to call it "Trusters' Bank", in honor of their derivatives counterparties. After none of their top execs suffered any bad consequences, I decided that the motto of industry-regulator relations was: "We pretend to regulate you; you pretend to respect us."
Someone must have done a look back at the two cultures (CSFB / CSFP & Deutsche Bank / Bankers Trust) effect in detail no? Might be fun if you had some spare time …
Another great post! Curious about this line though:
The trouble was that the crisis was (in my view, incorrectly) blamed on “excessive risk taking”, rather than “excessive attempt to avoid risk, by advertising securities as riskless when they weren’t”.
Isn't knowingly breaching regulations (in this example, finproms regs) a fairly clear example of excess in risk-taking?
Because there were new ways to measure & manage risk banks thought that they weren't holding risk, but laying it off to other institutions. In practice many banks were too slow to move their holdings on, and other institutions (AIG) didn't look at worse cases
Gillian Tett in "Fools Gold" is very good how techniques designed to measure (and hence manage) risk became misused and toxic
Of course some of the disaster was just down to incompetence; RBS management apparently not knowing that they had exposure to sub-prime, while the Greenwich unit was piling up risk.
Right - that makes sense! Thanks for the clarification