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Isn't the root of the problem this: > To fund all this loan-making, the shadow banks have turned to insurance companies, pension funds, university endowments a
by lbotos 7y ago
Isn't the root of the problem this:
> To fund all this loan-making, the shadow banks have turned to insurance companies, pension funds, university endowments and wealthy investors, offering them a chance to buy into a diversified pool of loans that offer returns ranging from 6 percent to 13 percent, depending on the level of risk they are willing to assume.
If some hedge funds and "wealthy investors" want to take on risky investments that are "unregulated" I'm all for it. Would you agree the risks for systemic collapse come in when it's straddled onto say insurance companies or pension funds?
- belorn 7y agoThe root issue of credit card bubbles is not that hedge funds and investors may loose on risky investments, but that those same investors are so interconnected with society that society has to bail them out if they end up loosing it all.
- dd36 7y agoAlso that the executives can bail before it gets too bad.
- bastawhiz 7y agoWhat shape would the regulation for the latter look like? Should policy holders or pensioners have the ability to veto these investments? I don't want someone to lose their pension over a poor investment by a greedy fund manager. But I also can't think of how you'd draw a line where the investment is "too risky", or rather "too high of a risk to justify the effects on the persons who would be affected if the investment fell through".
- skybrian 7y agoIn principle, it seems like it would be pretty easy to limit pensions to a short list of conventional investments specified by a regulator, such as the sort of thing normally allowed in a 401k. The line would be fairly arbitrary but I don't see why that would make it particularly hard to implement?
- aaronblohowiak 7y agoSounds like you want defined contribution not defined benefit retirement
- r00fus 7y agoSystemic risk. If everyone is making riskier bets for a significant, then those who do right may be outcompetes for long enough that they go by the wayside while the risk-takers dominate. Then when the “black swan” comes the risk averse are already gone. Oh and the system is full of TBTF entities.
- TuringNYC 7y agoHedge funds usually manage other people’s money in addition to their own, in fact, pension money is the most common source of other money that hedge funds manage.
- dnautics 7y agoI think we have to dig deeper. Why exactly is it that people have to rely on pension funds or put their assets into mutual funds to retire safely?