6 ms·

Sales is sales. They were not doing this any more than than they would for any other product, and no financial investment is safe. Blaming the banks who sold t

by sambe 14y ago

Sales is sales. They were not doing this any more than than they would for any other product, and no financial investment is safe. Blaming the banks who sold these seems totally crazy to me. The prospectus is available, and the contents are pretty well known in the industry anyway - it's in the name. Note that other banks were quite often counterparty, not the man on the street who feels overburdened by small print. More likely the fraud & negligence for this specific part of the problem is committed by ratings agencies.

rayiner 14y ago
If a car dealer sells you a car he thinks will break down in six months, you definitely have a case against him. Answering "caveat emptor" to everything is what's crazy. We're civilized people, we should abide by reasonable standards of business conduct. Especially when you're in a profession that holds itself out as representing the interests of its clients. You wouldn't have a problem with your lawyer taking bets against your case? Or your accountant using the information he learns from auditing you to profit on the side? I think these things fall below the standard of reasonable business conduct. I think the excessive reliance on caveat emptor is the product of a failed economic ideology.
- sambe 14y ago
  Those are terrible analogies. They did not hide bad loans in there and claim they were good. The products specifically consiste of a subprime tranch. In the financial world you are always buying products with risk attached. The amount and nature of the risk varies with the product; remember lots of people made money on CDOs as they will continue to do, as they did and do on junk bonds, and every other product that has bankrupted someone in the past. Attempting to put some arbitrary limit on what can and cannot be sold seems rigid and counterproductive. You realise that you can still buy Greek government bonds, right? Further, there is a reason caveat emptor is heavily restricted in the consumer domain: the overhead of people trying to assess and manage the risk of every single purchase they make far outweighs the cost of legislation and the onus on the company to deal with it instead. Note also that the strongest protections apply to new products. If you buy a used car without guarantee something can go wrong without any liability for the seller, so you are not even factually correct. I cannot see a legitimate reason to downbote my parent unless considered to be factually incorrect. Probably better to state the inaccuracies, you know, kind of friendlier where they are non-trivial. Spent today upvoting similarly against-the-consensus comments; exceptionally disappointing that such discussion must be one-sided on HN.
  - corford 14y ago
    Car analogy aside, I thought the other two were very apt. >In the financial world you are always buying products with risk attached. Which is why investors use ratings agencies to help them gauge the risk. Good job none of those AAA rated tranches were cut with toxic assets... Oh, they were? Woops. I don't think anyone is arguing that financial products don't carry inherent risk. What would be nice is if the banks and investment houses worked hard to mitigate this risk for their clients rather than throwing them to the lions (or in many cases simply out and out lying) and profiting regardless. If they aren't capable of doing this themselves, then they should be regulated in to compliance. I don't expect my accountant to fuck me and the same goes for my financial advisor.
    - sambe 14y ago
      That was precisely the conclusion of my (heavily downvoted) reply. The ratings agencies are not the banks. What is unclear about this? I wouldn't even think it controversial. The parent that I replied to stated that the instruments were marketed as safe when they were anything but. The implication in my view was that you should not be able to sell unsafe things (and the only other reply confirms this). Even if I misread this, it's simply not factually correct to say that they were marketed as safe. They will - like anything else - be marketed as a good product. Which means a good risk/reward ratio. Which means fuck all, if you don't trust ratings agencies. But again we are back to the same issue. Is it a good thing that ratings agencies make money from the companies selling the products they rate? Wow, you know what? That's an interesting point! Maybe it's easier just to click the down-arrow though - it's not as if the discussion is valuable. whatever, hating on bankers is more important than facts. apologies for the sarcasm.
      - corford 14y ago
        Except it isn't just the ratings agencies is it? The banks have been mis-selling and over hyping virtually everything that goes across their desk. Dodgy prospectuses, mis-selling interest rate swaps (http://www.telegraph.co.uk/finance/rate-swap-scandal/9364019/Big-Four-banks-admit-to-mis-selling-interest-rate-swaps.html http://www.telegraph.co.uk/finance/rate-swap-scandal/9364019...), mis-selling payment protection insurance, rigging municipal bond auctions and the list goes on. This is before we even wade in to the whole LIBOR scandal. How are you supposed to, as an investor, accurately gauge risk if the independent base rate used to calculate your interest has itself been compromised by the very banks you're buying the investment products from?

by sambe 14y ago

rayiner 14y ago

If a car dealer sells you a car he thinks will break down in six months, you definitely have a case against him. Answering "caveat emptor" to everything is what's crazy. We're civilized people, we should abide by reasonable standards of business conduct. Especially when you're in a profession that holds itself out as representing the interests of its clients. You wouldn't have a problem with your lawyer taking bets against your case? Or your accountant using the information he learns from auditing you to profit on the side? I think these things fall below the standard of reasonable business conduct. I think the excessive reliance on caveat emptor is the product of a failed economic ideology.

sambe 14y ago
Those are terrible analogies. They did not hide bad loans in there and claim they were good. The products specifically consiste of a subprime tranch. In the financial world you are always buying products with risk attached. The amount and nature of the risk varies with the product; remember lots of people made money on CDOs as they will continue to do, as they did and do on junk bonds, and every other product that has bankrupted someone in the past. Attempting to put some arbitrary limit on what can and cannot be sold seems rigid and counterproductive. You realise that you can still buy Greek government bonds, right? Further, there is a reason caveat emptor is heavily restricted in the consumer domain: the overhead of people trying to assess and manage the risk of every single purchase they make far outweighs the cost of legislation and the onus on the company to deal with it instead. Note also that the strongest protections apply to new products. If you buy a used car without guarantee something can go wrong without any liability for the seller, so you are not even factually correct. I cannot see a legitimate reason to downbote my parent unless considered to be factually incorrect. Probably better to state the inaccuracies, you know, kind of friendlier where they are non-trivial. Spent today upvoting similarly against-the-consensus comments; exceptionally disappointing that such discussion must be one-sided on HN.
- corford 14y ago
  Car analogy aside, I thought the other two were very apt. >In the financial world you are always buying products with risk attached. Which is why investors use ratings agencies to help them gauge the risk. Good job none of those AAA rated tranches were cut with toxic assets... Oh, they were? Woops. I don't think anyone is arguing that financial products don't carry inherent risk. What would be nice is if the banks and investment houses worked hard to mitigate this risk for their clients rather than throwing them to the lions (or in many cases simply out and out lying) and profiting regardless. If they aren't capable of doing this themselves, then they should be regulated in to compliance. I don't expect my accountant to fuck me and the same goes for my financial advisor.
  - sambe 14y ago
    That was precisely the conclusion of my (heavily downvoted) reply. The ratings agencies are not the banks. What is unclear about this? I wouldn't even think it controversial. The parent that I replied to stated that the instruments were marketed as safe when they were anything but. The implication in my view was that you should not be able to sell unsafe things (and the only other reply confirms this). Even if I misread this, it's simply not factually correct to say that they were marketed as safe. They will - like anything else - be marketed as a good product. Which means a good risk/reward ratio. Which means fuck all, if you don't trust ratings agencies. But again we are back to the same issue. Is it a good thing that ratings agencies make money from the companies selling the products they rate? Wow, you know what? That's an interesting point! Maybe it's easier just to click the down-arrow though - it's not as if the discussion is valuable. whatever, hating on bankers is more important than facts. apologies for the sarcasm.
    - corford 14y ago
      Except it isn't just the ratings agencies is it? The banks have been mis-selling and over hyping virtually everything that goes across their desk. Dodgy prospectuses, mis-selling interest rate swaps (http://www.telegraph.co.uk/finance/rate-swap-scandal/9364019/Big-Four-banks-admit-to-mis-selling-interest-rate-swaps.html http://www.telegraph.co.uk/finance/rate-swap-scandal/9364019...), mis-selling payment protection insurance, rigging municipal bond auctions and the list goes on. This is before we even wade in to the whole LIBOR scandal. How are you supposed to, as an investor, accurately gauge risk if the independent base rate used to calculate your interest has itself been compromised by the very banks you're buying the investment products from?