Friday, 30 January 2015

Bank so called liquidity.

The Basel regulators are trying to raise the amount of liquid assets that banks hold, and one of the assets that is allegedly liquid for these purposes are mortgage backed securities (MBSs). See 2nd last para here. Are you laughing yet?

If not, remember it was those MBSs that played a big role in sparking off the crisis. This Basel “solution” to bank problems is a bit like trying to cure a alcoholic by giving him crates of whiskey.

Of course there will be worthy sounding rules and hoops that MBSs will have to jump through before they qualify for the above role. But then the dodgy MBSs that sparked off the crises were deemed OK by credit rating agencies.

I might be wrong, but this sounds like just one more of the impressively complex new rules that banks have to obey which boil down to nothing.

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