Investment strategist: 'Big banks make their money from optimism' | Joris Luyendijk | guardian.co.uk

Investment strategist: 'Big banks make their money from optimism' | Joris Luyendijk | guardian.co.uk:

"In big banks and asset management companies it's very difficult to be negative about the future. The reason is simple: they make their money from optimism. If you are going to tell investors that the economy is going down, they will move their money somewhere safe and reliable such as cash. It is tricky to charge fees for trading or managing cash. It also becomes more difficult to convince investors to purchase riskier products.

"Pension funds have all this money on their hands. People working there want to outsource risks so they give the money to asset and hedge fund managers. If things go wrong, they have somebody to blame."

And I thought I was cynical. Read it! Many good points.

Favorite quote?

"If you take an honest look at the financial sector today, you see banks can borrow money almost for free on what is called the short-term market, then lend that money to governments for 2% or 3%. Now why would they lend to small businesses if they can make money so easily? This is what 'zero interest rates' are doing to our economy, as well as taxing savers with inflation at over 5%. You take on new debt to pay off your old debt. It's like drinking your hangover away with ever more drinks. You are destroying your liver. That's what's currently happening."

HT: MoneyScience

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Fed Faces New Scrutiny for Trillions in Assistance to Banks After Crisis | PBS NewsHour | Nov. 29, 2011 | PBS

Just shaking my head....we have so little idea of what goes on. Think that Enron or Adelphia etc were bad when they hid billions? Try trillions!


Fed Faces New Scrutiny for Trillions in Assistance to Banks After Crisis | PBS NewsHour | Nov. 29, 2011 | PBS:

"JUDY WOODRUFF: What did you learn about the scope of what the Fed did and who the recipients were?

BOB IVRY: It was a lot bigger than we thought, Judy, compared to TARP. TARP was the Treasury program that helped the banks get through a tough time in 2008.

And that was lending up to $700 billion. In one day, the Fed had loans out totaling $1.2 trillion. So, that one day in December of 2008 just completely dwarfs the much better known TARP program."

Now clearly it is not all bad. For instance, the Fed (in its role as lender of last resort) should be making these loans to the firms that needed it, but what about those that didn't need it but wanted a nice handout?


Also there is a debate as to how much of this was previously disclosed:

"JUDY WOODRUFF: Now, we know that you and Bloomberg News went to great lengths to get this information. There was a FOIA, a Freedom of Information, request that went all the way, I gather, to the Supreme Court.
But we did at the NewsHour talk to Fed officials today. And they say the extent to which this was hidden, was secret is being overstated here to some extent. They're saying that they made weekly reports about the amount of lending; then, ultimately, the information came out after the Dodd-Frank bill was passed into law.
BOB IVRY: They did disclose the information in aggregate form, meaning that you just got a lump: This particular program, for instance, lent this week this amount of money.
What we didn't know before very recently was that a bank like Morgan Stanley took $107 billion in one day or that Bank of America or Citigroup were borrowing on a single day at their peak almost $100 billion.
So, all that is now public. And that's because Bloomberg and Bloomberg News sued the Federal Reserve to get this money and to get this"

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