Comments on: Martin Mayer on Past and Current Misdeeds in Finance

By: a

Mon, 16 Jun 2008 07:53:00 +0000

Good IRA interview (as usual).

I’d just like to beg to differ on one of Mayer’s three laws. He says, “The first law is that when the whole is priced to sell for less than the sum of the parts, some of the parts are overpriced.”

In my experience this should be, “When the whole is priced to sell for more than the sum of the parts, an addend is missing.” E.g. when a complicated derivative is created from parts A, B, and C and sold for more than A + B + C and thus creating value for the bank, it’s often because the bank has considered another term D to be neglibible and close to 0 (where D could be the price of liquidity risk or counterparty risk or operational risk or …) and so has dropped D from the equation.

By: Anonymous

Anonymous — Sun, 15 Jun 2008 12:05:00 +0000

Re: Burnside – Amen!

By: ruetheday

ruetheday — Sun, 15 Jun 2008 11:46:00 +0000

"what got forgotten was the reason why we separated commercial banking and investment banking in the 1930s"

Amen to that. Repeal Gramm-Leach-Bliley and reinstate Glass-Steagall.

The fact that Phil Gramm is McCain's primary economic economic advisor and potential running mate bodes ill for any sort of responsible capital market regulation.

By: burnside

burnside — Sun, 15 Jun 2008 11:42:00 +0000

Yves,

Full text was an exceptional read. Thank you for it.

By: Richard Kline

Richard Kline — Sun, 15 Jun 2008 07:51:00 +0000

I read the whole thing: That is the best discussion of macro-finance I’ve ever seen; Mayer is a perspicacious dude. I didn’t think that my credibility/antipathy ratio on the banking industry could go much lower, but after reading that all I had to go down to the basement with a pick and shovel, crack the concrete, and dig down another six feet to find the level where those folks are lying low these days. *icckkkk*