Jamie White
speaker
57 appearances
2 recordings
1 series
first heard Dec 2010
last heard Apr 2011
Jamie White’s voice in public audio — every appearance, attributed to the second.
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Appearances
But it was also believed to be there by many wholesale depositors.
That's to say investment funds, pension funds and so on, who buy the bonds issued by the banks.
The government backs the banks' borrowings regardless of the risk.
This allowed banks to get up to leverage ratios of something that were 40 or 50 to 1.
And this would have been strictly impossible.
without the government backing.
If there's a subsidy for risk-taking, it would be very irresponsible of the management of a bank not to take it, and that's to say not to take those risks.
It would be negligent towards the shareholders, and indeed the shareholders were egging them on, right?
And the share prices were going up, as they should have gone up, because shareholders effectively hold a call option.
That's to say they can get all the upside...
but they have limited downside because of limited liability.
So they love risk.
Shareholders ought to favour risk, provided it doesn't cause any costs, which it doesn't so long as the government subsidises bank borrowing.
So they acted perfectly properly in the interests of their shareholders.
It's the government's policies that perverted the system, not the individual choices of bank management.
Occasional bankers and a generally safer banking system.
Birth and death are terribly dangerous overall banks.
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