Brokers threatened by run on shadow bank system

[Banjo]

SAN FRANCISCO (MarketWatch) -- A network of lenders, brokers and opaque financing vehicles outside traditional banking that ballooned during the bull market now is under siege as regulators threaten a crackdown on the so-called shadow banking system.

http://www.marketwatch.com/news/sto...x?guid={FA23DF5A-918F-41DA-B794-7E553ADAFAA7}

 

[zdreg]

as if the Federal Reserve and Congress of the US were not the cause of the crisis in the 1st place.

 

[libertad]

Excellent Commentary
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This article creates a good picture of what has happened....


Over the years, the major brokerages have willfully and purposefully operated via vageries....including trying to hide commissions through markups.....purposefully vague customer statements.....not providing immediate mark to market on bond sales, ....the list goes on and on.....

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The mortgage market has served as the perfect vehicle for vageries as to marking to market for several years....as well as other types of vehicles whereby valuations are very subjective....

It is of no coincidence that this business rapidly expanded because of mark to market vageries..... commissions, fees, and bonuses were much higher because of these vageries....and now these excesses affect banking all over the world.....
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There should be big questionmarks as to the earnings of any of these firms that have heavily utilized these vehicles.....and bigger question marks as to the legalities of bonuses paid....even to the likes of Paulson .....
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Brokerages have long time lived on tranferring names on paper to be placed on a stock or debt instrument....

With today's electronic marketplace....a name label should cost almost nothing....

And to this day....the likes of a retail brokerage firm that charges $10 for a trade whose underlying cost is largely advertising.....differs dramatically from the 80 cents that a trading firm charges....

And of course to transfer a name in the other foreign exchanges is even more rediculously expensive....

This is the main reason that the business model for brokerage has changed....

There really should be three separate businesses....

Securities creation.....both stocks and debt.....

Electronic names transfer........brokerage.....

Research and Opinion


The conflicts of interest are not going away until these businesses are independently owned and totally separated.....
If not....in the future it will happen all over again....just another product chock full of vageries.....

Also....the number 1 issue is transparency and disclosure via which the mark to market must be listed and decided upon by a public marketplace....and not left to the decision of brokerage firm management that is paying themselves bonuses from a public company....

The same story goes for banks....

 

[Aaron Copland]

These investment banks want help from the fed when they make dumb decisions.

But want to be free of regulation when things are rosey, so they can give themselfs fat pay checks.

Investment banks benifit wallstreet, screw wallstreet and there FEES. Bunch of leaches from hell.

 

[Covertibility]

Here's an interesting read about history relative to the current banking crises, Walter Bagehot Was Wrong

But the one thing that popped out was toward the end:

....According to the Financial Times, investment bankers the world over are bundling up mortgages to deposit in the special liquidity facilities created by the ECB and the Bank of England. "The Bank of England," the paper reported on May 16, "recently created a facility for UK banks to access funding for mortgages and the Financial Times has learnt that almost £90 billion ($175 billion) worth of bonds are being created to be placed there — almost twice the £50 billion initially expected when the scheme was launched only three weeks ago. ...

"Investment bankers who work in securitization," the FT went on, "say that their main business is structuring bonds that are eligible for ECB liquidity operations. Some analysts have concerns about whether the bonds being created will ever be saleable if markets recover."

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Ya wonder if the central banks actually care what they're accepting anymore if it means to keeping the system afloat. The investment banks will get hit with regulation after this all passes.