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They're conflating 2 issues. The first issue is liquidity management. The second is accounting. If the accounting auditors are doing their job then the bank ma

They're conflating 2 issues. The first issue is liquidity management. The second is accounting. If the accounting auditors are doing their job then the bank managers don't get to cook the books. The accounting rules are set by the accounting industry. If the financial statements don't reflect what's happening, it's the accountants fault. So, it's incorrect to imply that bankers are doing something nefarious. At this point no one has suggested an Enron or FTX type scandal. What's more likely is just the incompetence with liquidity management, incompetence with the crisis handling.

fsckboy 4y ago
> What's more likely is just the incompetence with liquidity management, incompetence with the crisis handling. no, what's more likely (if what has been said between the two of us comports with reality) is that the incentives for the officers of the bank are in conflict with the healthy management of the bank. Bankers running a bank into the ground cannot be blamed on regulators or the accounting profession which only "review" what has happened, they never have their fingers on the levers (although additional accounting and banking regulations may be required to avoid this type of problem in the future)
- chris_va 4y ago
  In this case, those folks lost all their money, so it seems like they actually did have pretty well aligned incentives... I think the more subtle distinction would be making short term risk adjusted incentive identical to long term risk adjusted incentive, so people don't mistakenly think gambling is a good idea.
- appleiigs 4y ago
  If the accounting and regulations reflected what was actually happening (mark-to-market) instead of some accounting non-sense (book-value), then the performance of the bankers would be reported accordingly. The accountants don’t just review. As i mentioned, they established the accounting rules for the financial statements - which incentives are measured against. The accounting is so far off that financial analysts spend a significant amount of time un-doing the obsfuscation the accounting does. And if they can’t see it, stuff like SVB happens

fsckboy 4y ago

> What's more likely is just the incompetence with liquidity management, incompetence with the crisis handling. no, what's more likely (if what has been said between the two of us comports with reality) is that the incentives for the officers of the bank are in conflict with the healthy management of the bank. Bankers running a bank into the ground cannot be blamed on regulators or the accounting profession which only "review" what has happened, they never have their fingers on the levers (although additional accounting and banking regulations may be required to avoid this type of problem in the future)

chris_va 4y ago
In this case, those folks lost all their money, so it seems like they actually did have pretty well aligned incentives... I think the more subtle distinction would be making short term risk adjusted incentive identical to long term risk adjusted incentive, so people don't mistakenly think gambling is a good idea.
appleiigs 4y ago
If the accounting and regulations reflected what was actually happening (mark-to-market) instead of some accounting non-sense (book-value), then the performance of the bankers would be reported accordingly. The accountants don’t just review. As i mentioned, they established the accounting rules for the financial statements - which incentives are measured against. The accounting is so far off that financial analysts spend a significant amount of time un-doing the obsfuscation the accounting does. And if they can’t see it, stuff like SVB happens