By Steven Baker MP, on 20 December 11
Following his recent paper The law of opposites: Illusory profits in the financial sector, TCC Advisory Board member and founder of Cobden Partners Gordon Kerr appeared on Bloomberg. The video is here.
Click for video
Gordon dealt with the flaws in IFRS, the reasons for the debt crisis, the case for hardening money, the need for international money in support of trade and more.
Later in the day, I said in the Commons that the Government’s response to the ICB report seemed to take accounting for granted, asking the Chancellor to consider the issue seriously in the forthcoming white paper.
By Dr Tim Evans, on 10 February 10
One of my favorite think tanks in the world is the Independent Institute www.independent.org.
Their web site, scholarly journal and work is of the highest quality and well worth keeping an eye on. Very much in line with a lot of TCC’s ideas, I saw this this yesterday:
Lost Trust: The Real Cause of the Financial Meltdown
By Bruce Yandle
Accounting standards, credit ratings, and credit-default swaps were created to help facilitate financial transactions by fostering trust. In the run-up to the credit-market freeze of 2008 those assurance mechanisms collapsed under the weight of political and regulatory pressures to aggressively expand homeownership and other policies.
Enjoy.
By Gordon Kerr, on 21 January 10
Financial engineer Gordon Kerr explains how to destroy the British banking system through the use of derivatives which take advantage of the regulatory system, then sets out four measures to solve the problem.
Nine years ago I worked as a structuring engineer in a three-man team within the investment banking unit of a major British bank. One of us was very bright. He stunned me one day with an idea as to how we could:
- Produce immediate (but illusory) substantial profits for our bank, thus ensuring that we would enjoy generous personal remuneration;
- Generate ‘virtual’ share capital to boost our bank’s capital reserves;
- Leave the actual investment risk exposure and profit expectation of our bank almost exactly the same after the transaction as before it.
Was this idea the kind of rocket science derivative engineering that justifies master of the universe labels for the three of us who designed and implemented it? No: it was extremely simple. Here’s how it worked. We transmuted some loan assets into a derivative transaction for regulatory purposes, whilst leaving the actual loan arrangements unaltered.
Continue reading “How To Destroy the British Banking System –- Regulatory Arbitrage via ‘Pig on Pork’ Derivatives.”
