If only it was all a giant spoof, a huge joke played on us all!
I was intrigued by a quick look-up on WikiPedia to see that the history of April 1st, as a day for foolish ideas, goes back a very long way. Here’s a small extract from the relevant page on WikiPedia,
In Chaucer’s Canterbury Tales (1392), the “Nun’s Priest’s Tale” is set Syn March bigan thritty dayes and two<. Chaucer probably meant 32 days after March, i.e. May 2, the anniversary of the engagement of King Richard II of England to Anne of Bohemia, which took place in 1381. However, readers apparently misunderstood this line to mean “32nd of March,” i.e. 1st April. In Chaucer’s tale, the vain cock Chauntecleer is tricked by a fox.
I mean wouldn’t it be wonderful if there was a press release today from, say, Goldman Sachs, sort of along the following lines,
At Goldman Sachs, success without integrity is failure.
Goldman Sachs’ culture reflects more than a structure. It is a statement of values. Our commitment to integrity, teamwork, excellence, meritocracy and innovation enables us to build our relationships, with clients and with colleagues, on honesty and trust. It drives our ability to deliver extraordinary client service and to generate superior long-term financial performance for our shareholders. Our values inspire us to give back to the community through volunteerism, philanthropy, scholarships and outreach. Each of us in the firm takes pride in our role as a steward of the Goldman Sachs legacy. We understand that our assets are our people, capital and reputation. If any of these is ever diminished, the last is the most difficult to restore.
The above part is taken from the Goldman Sachs website. Great stuff. Let me see if I can add to that, in recognition of the date.
Since the publication in the Financial Times in August 2009 of an article referring to our reputation, from which is quoted, “In a survey of 17,000 Americans, Brand Asset Consulting found that Goldman’s stature – as measured by several gauges of brand strength – had suffered in 2008 and 2009.” the Board of Directors have this day resolved:
- to ensure that no person in the company is paid more than 25 times the annual pay of the lowest worker
- that the company shall end the practise of claiming tax favours for any form of executive compensation, including stock options
- that the money saved from the previous two resolutions shall be paid into an industry-wide fund to support all those citizens that are homeless and destitute as a direct result of the global financial crisis of recent times.
There, isn’t that nice!
Learning from Dogs 
The Basel Committee makes a shocking confession!
The Basel Committee for Banking Supervision, speaking for all sophisticated bank regulators around the world, issued today an urgent statement regarding the discovery of a fundamental mistake committed in Basel II and which they now understand was responsible for causing the current financial crisis.
The mistake was that though the markets and the banks were already incorporating the information about the possibilities of default that were contained in the credit ratings when calculating the corresponding risk premiums to set interest rates for their clients, the regulators based the capital requirements for banks on exactly the same credit ratings, and so, unwittingly, accounted for said credit information twice.
The result of it was, of course, the excessive financing of everything that was officially deemed as having a low risk of default, like whatever had swell ratings like Greece and securities backed by lousily awarded mortgages to the subprime sector; and the insufficient financing of whatever was officially deemed as more risky, like the small businesses and entrepreneurs who are vital for maintaining that dynamism of the economy that creates jobs.
The Basel Committee expresses its most sincere regrets for such a mistake and promises to take immediate corrective action.
PS. April Fool´s joke disclaimer: Sorry, unfortunately, the Basel Committee and the sophisticated bank regulators, three years into a crisis of its own making, are still not (publicly) aware of their mistake.
The Independent Evaluation Officer of the International Monetary Fund has recently in an Evaluation Report come to the conclusion that, for IMF at least, “the ability to correctly identify the mounting risks was hindered by a high degree of groupthink…” The reason why the truth of what happened does not come out must probably now be attributed to group-interests.
Source: Per Kurowski
A former Executive Director at the World Bank (2002-2004)
Some of his pregame warnings:
November 1999, The Daily Journal: “The possible Big Bang that scares me the most is the one that could happen the day those genius bank regulators in Basel, playing Gods, manage to introduce a systemic error in the financial system, which will cause the collapse”
January 2003, The Financial Times: “serious problems, not the least by leveraging the rate differentials between those liked and those rejected by our financial censors. Today, whenever a country loses its investment-grade rating, many investors are prohibited from investing in its debt, effectively curtailing demand for those debt instruments, just when that country might need it the most, just when that country can afford it the least. Everyone knows that, sooner or later, the ratings issued by the credit agencies are just a new breed of systemic errors, about to be propagated at modern speeds.”
October 2004, in a formal written statement delivered at the Executive Board of the World Bank: “We believe that much of the world’s financial markets are currently being dangerously overstretched through an exaggerated reliance on intrinsically weak financial models that are based on very short series of statistical evidence and very doubtful volatility assumptions.”
November 2004, The Financial Times: “help us get some diversity of thinking to Basel urgently; at the moment it is just a mutual admiration club of firefighters”
http://subprimeregulations.blogspot.com/
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Thanks Per, Your points are well made, as usual.
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