Comments on: Moody’s ratifies interbank mistrust

By: Foppe

Foppe — Sat, 23 Jun 2012 05:43:29 +0000

Euhm, felix.. Did you really just write “What’s more, because central banks don’t lend at different rates on the basis of perceived differences in credit risk, it hurts price discovery.”?
I realize that you’re talking about ‘simple’ lending here, but are you really saying that ‘differences in credit risk’ were meaningfully detected before the crisis started? I don’t mean to be unkind, but are you perchance willfully blind? I mean, you can argue that price discovery prior to the onset of the crisis worked, but that the banks all willfully ignored the information, but even then the rates didn’t tell outsiders anything about differences in credit risk. So why not conclude that this “market indicator” too is fictional?

By: y2kurtus

y2kurtus — Sat, 23 Jun 2012 03:06:48 +0000

“It’s easy — and wrong — to dismiss this move by Moody’s as a typical late-to-the-game ratings-agency move.”

Well from this bankers standpoint capital ratios are up about 100% from 2009 and ratings have been lowered.

If Moodys is right today they were so wildly off two years ago, that no one should ever listen to them again. It’s like a weather man who got the tempature exactly right three days in a row… but last week he said it would be 145 degrees. Who would ever listen to that guy again?

By: crocodilechuck

crocodilechuck — Fri, 22 Jun 2012 21:40:08 +0000

“That’s a good thing, from a systemic perspective: creditors, rather than taxpayers, should take the hit when banks fail”

Tell that to Hank Paulson and Tim Geithner.

“The market has basically given up trying to make fine-grained credit distinctions between different big banks, since the banks’ disclosures are so impenetrable as to make doing so impossible.”

Bring back FASB 157.

By: dWj

dWj — Fri, 22 Jun 2012 19:21:21 +0000

I wonder whether it might be less credible to say “we will never bailout banks again” than to say “we won’t bailout the first big bank to fail, but we may backstop banks that would be sunk by the fallout from that.” If creditors are willing to lend to banks, but not to a bank that might be the first to fail, that could have much of the benefit of a full market discipline, with fewer of the credibility constraints.

By: MrRFox

MrRFox — Fri, 22 Jun 2012 18:00:28 +0000

In the situation we are in, not so clear that it’s a bad thing that we have to face this -

“Unless and until that happens — which means, for the foreseeable future — the global banking system is going to look sclerotic and fragile.”

Governments are going to be scooping-up all the money anyone has to lend for a good long while. More will have to be printed. There’s really nothing left for anyone else – unless the Fed prints even more of it. In a situation like that, why are activist-banks even necessary? Or desirable?

Keep Wall Street weak.