financial crisis rating agencies
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I mean in the sense that they were not punished or held to account for their failures. Instead the cost of the entire disaster, which they were equally responsible for, was footed by the tax payer. And yes, I understand all the good reasons why, but its still distastefull. As for chapter 11, its different to the UK I know. But a firm doesnt pay bonuses when it goes bust here (unless its a bank), contractural or not. :)
Dr D Evans "The whole idea that carbon dioxide is the main cause of the recent global warming is based on a guess that was proved false by empirical evidence during the 1990s" financialpost
modified on Thursday, April 14, 2011 12:01 PM
fat_boy wrote:
I mean in the sense that they were not punished or held to account for their failures. Instead the cost of the entire disaster, which they were equally responsible for, was footed by the tax payer.
How were they equally responsible? The rating agencies are the financial equivalent of movie critics. Does a movie critic get sent to jail or fined by the government for saying nice things about a bad movie?
fat_boy wrote:
As for chapter 11, its different to the UK I know. But a firm doesnt pay bonuses when it goes bust here (unless its a bank), contractural or not.
I'm not saying that there wasn't any corruption there (I don't have the evidence, so I'm not saying either way), but remember that a wall street "bonus" for some types of employees is actually a commission. Salesman X generates ten million dollars in profits for the firm, and his contract guarantees that he gets 5% of that... So the firm is obligated to pay him $500k at the end of the year. It's not like they're saying "We like you, so here's $500k." They're paying what they owe. And with all debts, there's a "seniority" level which specifies which debts the company is obligated to pay first when defaulting. If a company gets liquidated, they don't get out of paying everyone... They (Or someone else) look at their various debts, and go down the list from most to least "senior" (Priority level), paying them off in order until the company runs out of money and assets.
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Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
I would have thought that if a company was going out of business and in bankruptcy, contracts like that would be up for axing or altering. They did this with GM. Chapter 11 is restructuring. Of course the people doing the restructuring are judges and the board. I have a hard time seeing the board renegotiating for lower compensation.
That's called seagull management (or sometimes pigeon management)... Fly in, flap your arms and squawk a lot, crap all over everything and fly out again... by _Damian S_
Depends on what the contract says. There might be a clause that allows that, or their might not.
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Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
fat_boy wrote:
I mean in the sense that they were not punished or held to account for their failures. Instead the cost of the entire disaster, which they were equally responsible for, was footed by the tax payer.
How were they equally responsible? The rating agencies are the financial equivalent of movie critics. Does a movie critic get sent to jail or fined by the government for saying nice things about a bad movie?
fat_boy wrote:
As for chapter 11, its different to the UK I know. But a firm doesnt pay bonuses when it goes bust here (unless its a bank), contractural or not.
I'm not saying that there wasn't any corruption there (I don't have the evidence, so I'm not saying either way), but remember that a wall street "bonus" for some types of employees is actually a commission. Salesman X generates ten million dollars in profits for the firm, and his contract guarantees that he gets 5% of that... So the firm is obligated to pay him $500k at the end of the year. It's not like they're saying "We like you, so here's $500k." They're paying what they owe. And with all debts, there's a "seniority" level which specifies which debts the company is obligated to pay first when defaulting. If a company gets liquidated, they don't get out of paying everyone... They (Or someone else) look at their various debts, and go down the list from most to least "senior" (Priority level), paying them off in order until the company runs out of money and assets.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels)Ian Shlasko wrote:
The rating agencies are the financial equivalent of movie critics. Does a movie critic get sent to jail or fined by the government for saying nice things about a bad movie?
Movie critics opinions are based on no scientific backing. Ratings are supposed to be backed by research and analysis. Why should a rating be used then if it has no reliability and completely arbitrary? If you can't have any faith or trust in the ratings then they mean nothing.
That's called seagull management (or sometimes pigeon management)... Fly in, flap your arms and squawk a lot, crap all over everything and fly out again... by _Damian S_
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Depends on what the contract says. There might be a clause that allows that, or their might not.
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Author of the Guardians Saga (Sci-Fi/Fantasy novels)Well supposedly in bankruptcy court anything is possible, but I doubt that this particular issue was on the table.
That's called seagull management (or sometimes pigeon management)... Fly in, flap your arms and squawk a lot, crap all over everything and fly out again... by _Damian S_
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Ian Shlasko wrote:
The rating agencies are the financial equivalent of movie critics. Does a movie critic get sent to jail or fined by the government for saying nice things about a bad movie?
Movie critics opinions are based on no scientific backing. Ratings are supposed to be backed by research and analysis. Why should a rating be used then if it has no reliability and completely arbitrary? If you can't have any faith or trust in the ratings then they mean nothing.
That's called seagull management (or sometimes pigeon management)... Fly in, flap your arms and squawk a lot, crap all over everything and fly out again... by _Damian S_
wolfbinary wrote:
Movie critics opinions are based on no scientific backing.
Movie critic opinions are based on their research (Seeing the movie) and analysis (Applying their knowledge of the medium to judge its merits and shortcomings).
wolfbinary wrote:
Why should a rating be used then if it has no reliability and completely arbitrary? If you can't have any faith or trust in the ratings then they mean nothing.
Why do people listen to Roger Ebert? Because they trust that he's a good judge of the movie, and that his analysis after seeing the movie was accurate. Same reason people trust the analysts at S&P or Moody's.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
Well supposedly in bankruptcy court anything is possible, but I doubt that this particular issue was on the table.
That's called seagull management (or sometimes pigeon management)... Fly in, flap your arms and squawk a lot, crap all over everything and fly out again... by _Damian S_
I dunno... I wasn't there, so I can only speculate...
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Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
fat_boy wrote:
I mean in the sense that they were not punished or held to account for their failures. Instead the cost of the entire disaster, which they were equally responsible for, was footed by the tax payer.
How were they equally responsible? The rating agencies are the financial equivalent of movie critics. Does a movie critic get sent to jail or fined by the government for saying nice things about a bad movie?
fat_boy wrote:
As for chapter 11, its different to the UK I know. But a firm doesnt pay bonuses when it goes bust here (unless its a bank), contractural or not.
I'm not saying that there wasn't any corruption there (I don't have the evidence, so I'm not saying either way), but remember that a wall street "bonus" for some types of employees is actually a commission. Salesman X generates ten million dollars in profits for the firm, and his contract guarantees that he gets 5% of that... So the firm is obligated to pay him $500k at the end of the year. It's not like they're saying "We like you, so here's $500k." They're paying what they owe. And with all debts, there's a "seniority" level which specifies which debts the company is obligated to pay first when defaulting. If a company gets liquidated, they don't get out of paying everyone... They (Or someone else) look at their various debts, and go down the list from most to least "senior" (Priority level), paying them off in order until the company runs out of money and assets.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels)Ian Shlasko wrote:
How were they equally responsible? The rating agencies
You have to ask? I saw a guy from such an agency interviewed on Dispatches after the crash who said he was pressurised to rate everything up in order to get a trade. Note that HSBC has its own in house ratings department, not that it is one of the worlds really big banks that wasnt badly affected by the crash. Look at its share price history. (It also had a very good CEO, I saw him interviewed on CNBC a few months back.) I know how bankruptcy works in a company, but given that its performance has clearly been below par how can rewarding that bad performance be fair at the tax payers expense? If the tax payer is going to bail, out the bank the bank will have to reissue its shares with a propoprtionate amount going to the tax payer, to be sold at the tax payers discretion, not as Brown did, to generate a bit of cash prior to his eleciton (failure). In the long term it is entirely possible that the tax payer benefits by this if the share price recovers substantially. So it could be considered a loan from the people to the bank. These events were a gross failing of capitolism. We must ensure that the fix is fair.
Dr D Evans "The whole idea that carbon dioxide is the main cause of the recent global warming is based on a guess that was proved false by empirical evidence during the 1990s" financialpost
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wolfbinary wrote:
Movie critics opinions are based on no scientific backing.
Movie critic opinions are based on their research (Seeing the movie) and analysis (Applying their knowledge of the medium to judge its merits and shortcomings).
wolfbinary wrote:
Why should a rating be used then if it has no reliability and completely arbitrary? If you can't have any faith or trust in the ratings then they mean nothing.
Why do people listen to Roger Ebert? Because they trust that he's a good judge of the movie, and that his analysis after seeing the movie was accurate. Same reason people trust the analysts at S&P or Moody's.
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Author of the Guardians Saga (Sci-Fi/Fantasy novels)Movie critics are a completely spurious argument, I am surprised at you Ian.
Dr D Evans "The whole idea that carbon dioxide is the main cause of the recent global warming is based on a guess that was proved false by empirical evidence during the 1990s" financialpost
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Movie critics are a completely spurious argument, I am surprised at you Ian.
Dr D Evans "The whole idea that carbon dioxide is the main cause of the recent global warming is based on a guess that was proved false by empirical evidence during the 1990s" financialpost
It's called an analogy.
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Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
It's called an analogy.
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Author of the Guardians Saga (Sci-Fi/Fantasy novels)Very funny. Its also irrelevant. Why not use a restaurant critic instead? After all the quality of the 'amuse bouche' is entirely relevant to the health of the worlds financial system. :laugh:
Dr D Evans "The whole idea that carbon dioxide is the main cause of the recent global warming is based on a guess that was proved false by empirical evidence during the 1990s" financialpost
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Ian Shlasko wrote:
How were they equally responsible? The rating agencies
You have to ask? I saw a guy from such an agency interviewed on Dispatches after the crash who said he was pressurised to rate everything up in order to get a trade. Note that HSBC has its own in house ratings department, not that it is one of the worlds really big banks that wasnt badly affected by the crash. Look at its share price history. (It also had a very good CEO, I saw him interviewed on CNBC a few months back.) I know how bankruptcy works in a company, but given that its performance has clearly been below par how can rewarding that bad performance be fair at the tax payers expense? If the tax payer is going to bail, out the bank the bank will have to reissue its shares with a propoprtionate amount going to the tax payer, to be sold at the tax payers discretion, not as Brown did, to generate a bit of cash prior to his eleciton (failure). In the long term it is entirely possible that the tax payer benefits by this if the share price recovers substantially. So it could be considered a loan from the people to the bank. These events were a gross failing of capitolism. We must ensure that the fix is fair.
Dr D Evans "The whole idea that carbon dioxide is the main cause of the recent global warming is based on a guess that was proved false by empirical evidence during the 1990s" financialpost
fat_boy wrote:
You have to ask? I saw a guy from such an agency interviewed on Dispatches after the crash who said he was pressurised to rate everything up in order to get a trade.
I never said the rating agencies were completely honest or completely blameless. I said they're not EQUALLY responsible for the crash. Don't try to change my argument.
fat_boy wrote:
Note that HSBC has its own in house ratings department, not that it is one of the worlds really big banks that wasnt badly affected by the crash. Look at its share price history. (It also had a very good CEO, I saw him interviewed on CNBC a few months back.)
Right, so if the companies had been a little more responsible and done their due diligence instead of just mindlessly trusting the rating agencies, they would have been fine.
fat_boy wrote:
I know how bankruptcy works in a company, but given that its performance has clearly been below par how can rewarding that bad performance be fair at the tax payers expense?
Fairness is irrelevant. If the company signs a contract with its employee, they have to fulfill it. If that debt is senior to their obligations to the investors, then it gets paid first.
fat_boy wrote:
These events were a gross failing of capitolism. We must ensure that the fix is fair.
It has nothing to do with fairness. It has to do with the law. Senior debts get paid before sub-senior ones.
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Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
Very funny. Its also irrelevant. Why not use a restaurant critic instead? After all the quality of the 'amuse bouche' is entirely relevant to the health of the worlds financial system. :laugh:
Dr D Evans "The whole idea that carbon dioxide is the main cause of the recent global warming is based on a guess that was proved false by empirical evidence during the 1990s" financialpost
Analogy... Look it up. A is to B as X is to Y...
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Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
fat_boy wrote:
You have to ask? I saw a guy from such an agency interviewed on Dispatches after the crash who said he was pressurised to rate everything up in order to get a trade.
I never said the rating agencies were completely honest or completely blameless. I said they're not EQUALLY responsible for the crash. Don't try to change my argument.
fat_boy wrote:
Note that HSBC has its own in house ratings department, not that it is one of the worlds really big banks that wasnt badly affected by the crash. Look at its share price history. (It also had a very good CEO, I saw him interviewed on CNBC a few months back.)
Right, so if the companies had been a little more responsible and done their due diligence instead of just mindlessly trusting the rating agencies, they would have been fine.
fat_boy wrote:
I know how bankruptcy works in a company, but given that its performance has clearly been below par how can rewarding that bad performance be fair at the tax payers expense?
Fairness is irrelevant. If the company signs a contract with its employee, they have to fulfill it. If that debt is senior to their obligations to the investors, then it gets paid first.
fat_boy wrote:
These events were a gross failing of capitolism. We must ensure that the fix is fair.
It has nothing to do with fairness. It has to do with the law. Senior debts get paid before sub-senior ones.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels)Ian Shlasko wrote:
I never said the rating agencies were completely honest or completely blameless. I said they're not EQUALLY responsible for the crash. Don't try to change my argument.
Here we go with the usual argument. OK, so what is it, 48%, 35%? Who cares. They were inept, greedy and culpable.
Ian Shlasko wrote:
Right, so if the companies had been a little more responsible and done their due diligence instead of just mindlessly trusting the rating agencies, they would have been fine.
Yeah, and the banks were inept, greedy and culpable. If a bonus is paid out for THAT kind of perfomance can I work there! :)
Dr D Evans "The whole idea that carbon dioxide is the main cause of the recent global warming is based on a guess that was proved false by empirical evidence during the 1990s" financialpost
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Analogy... Look it up. A is to B as X is to Y...
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Author of the Guardians Saga (Sci-Fi/Fantasy novels)Give it up Ian, its not an argument you can win.
Dr D Evans "The whole idea that carbon dioxide is the main cause of the recent global warming is based on a guess that was proved false by empirical evidence during the 1990s" financialpost
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Give it up Ian, its not an argument you can win.
Dr D Evans "The whole idea that carbon dioxide is the main cause of the recent global warming is based on a guess that was proved false by empirical evidence during the 1990s" financialpost
If you don't understand the concept of an analogy, then this entire part of the thread is already pointless... So that's the end of that.
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Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
If you don't understand the concept of an analogy, then this entire part of the thread is already pointless... So that's the end of that.
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Author of the Guardians Saga (Sci-Fi/Fantasy novels)Ian, dont be such a dick. You cant equate a movie critic to a firm whose intent os to analyse the quality and hence worth of a debt product. Especially when those debt products can be fiendishly complex. Really, its about time you stopped trying to be clever and faced reality.
Dr D Evans "The whole idea that carbon dioxide is the main cause of the recent global warming is based on a guess that was proved false by empirical evidence during the 1990s" financialpost
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Ian Shlasko wrote:
I never said the rating agencies were completely honest or completely blameless. I said they're not EQUALLY responsible for the crash. Don't try to change my argument.
Here we go with the usual argument. OK, so what is it, 48%, 35%? Who cares. They were inept, greedy and culpable.
Ian Shlasko wrote:
Right, so if the companies had been a little more responsible and done their due diligence instead of just mindlessly trusting the rating agencies, they would have been fine.
Yeah, and the banks were inept, greedy and culpable. If a bonus is paid out for THAT kind of perfomance can I work there! :)
Dr D Evans "The whole idea that carbon dioxide is the main cause of the recent global warming is based on a guess that was proved false by empirical evidence during the 1990s" financialpost
fat_boy wrote:
Here we go with the usual argument. OK, so what is it, 48%, 35%? Who cares. They were inept, greedy and culpable.
Inept, maybe. Greedy, I don't know... The rating agencies didn't get paid more for giving a higher rating, unless there were some under-the-table payouts in there that I'm unaware of. They acted like public auditors, in that a company would hire them to give a supposedly-unbiased rating to that company's financial status. They would then publish the results, which the banks and investment firms took as gospel.
fat_boy wrote:
Yeah, and the banks were inept, greedy and culpable.
Very true. I don't think anyone is going to argue that the banks were at fault... I mean, that's pretty obvious.
fat_boy wrote:
If a bonus is paid out for THAT kind of perfomance can I work there!
Aside from any corruption among the ranks, the contracts would generally be a percentage of profits. If you make your firm ten million dollars richer, you get a percentage of that as your bonus. If you lose money for the bank, you get no bonus, unless the higher-ups want to do you a favor. In this case, some people made money (And were due bonuses), while others lost a LOT of money, bringing the net result way into the negative region. If bonuses were discretionary, the earners should get a "Sorry, we can't afford to give you a bonus" (That's known as "netting risk", and it's one of the things you deal with when working for a big firm) but if it was contracted without any bankruptcy clauses, I would assume the company still has to pay.
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Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
Ian, dont be such a dick. You cant equate a movie critic to a firm whose intent os to analyse the quality and hence worth of a debt product. Especially when those debt products can be fiendishly complex. Really, its about time you stopped trying to be clever and faced reality.
Dr D Evans "The whole idea that carbon dioxide is the main cause of the recent global warming is based on a guess that was proved false by empirical evidence during the 1990s" financialpost
What part of the term ANALOGY do you not understand? "Movie Critic" : "Movies" :: "Credit Analyst" : "Credit"
fat_boy wrote:
You cant equate a movie critic to...
Do you see an "=" sign in that relation? Analogy, not equation. If you're prepared to have an intelligent discussion, then by all means let's do so. If you're going to devolve into trollish behavior like you do on the GW threads, then I'm not going to participate.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
What part of the term ANALOGY do you not understand? "Movie Critic" : "Movies" :: "Credit Analyst" : "Credit"
fat_boy wrote:
You cant equate a movie critic to...
Do you see an "=" sign in that relation? Analogy, not equation. If you're prepared to have an intelligent discussion, then by all means let's do so. If you're going to devolve into trollish behavior like you do on the GW threads, then I'm not going to participate.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels)What part of reality dont you understand? You think a movie critics work is anywhere near as complicated as a credit rsik analyst, and neither is the implicaiton of a bad assessment!
Dr D Evans "The whole idea that carbon dioxide is the main cause of the recent global warming is based on a guess that was proved false by empirical evidence during the 1990s" financialpost
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I would have thought that if a company was going out of business and in bankruptcy, contracts like that would be up for axing or altering. They did this with GM. Chapter 11 is restructuring. Of course the people doing the restructuring are judges and the board. I have a hard time seeing the board renegotiating for lower compensation.
That's called seagull management (or sometimes pigeon management)... Fly in, flap your arms and squawk a lot, crap all over everything and fly out again... by _Damian S_
I can think of a logical rationale in defense of the logic of paying out bonuses that are basically commissions while in bankruptcy protection. If these "bonuses" are a percentage of a sales or business an employee brought to the company, and the point of the company going into protection is to remain operational, doesn't it make sense to pay out commissions to keep accounts. If they were able to legally not pay these bonuses, the said employees would surely leave, taking their client portfolio with them, causing the protected company to fail.
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