Did anybody profit from the 2008 crisis in Ireland?

Wanderer78

mahoganygas wrote:

I'm genuinely interested in what your opinion is. You've criticised the financial system a few times. But what are the nuts and bolts of your criticism?

Apologies, I'm probably not explaining myself very well. I'd have to agree with people like Michael Hudson that our whole financial sector is actually parasitic in nature. I posted a recent Interview with Michael Hudson previous. He explains it very well

djpbarry

Wanderer78 wrote: »

Life is not that simple I'm afraid.

It often is very simple. Working out how much you can afford to borrow is simple arithmetic.

What's complicated is trying to find someone else to blame for your own mistakes.

armabelle

Wanderer78 wrote: »

Apologies, I'm probably not explaining myself very well. I'd have to agree with people like Michael Hudson that our whole financial sector is actually parasitic in nature. I posted a recent Interview with Michael Hudson previous. He explains it very well

Where is this link to the interview?

Dohnjoe

armabelle wrote: »

I don't know about not sustainable because it has been this way for long hasnt it? And, if the "conspiracy theories" are right, then there will just be another crisis to "stabilize" things again and the people will just move on with it as they always do. Seems like people exist to sustain it and where our breaking point is will ultimately define our future I think.

The conspiracies exist because there is a market and demand for them. They offer easy appealing answers, easy villains and titillating explanations, hence their relative popularity.

There will always be individual economists, analysts, ex-finance professionals, etc who have their own theories on what happened. To the layman who doesn't understand the situation, these theories can seem "right" and "correct", especially if they neatly fit preconceived notions or world views.

People have a psychological need to blame, but we don't like blaming themselves. Hence it's far more populist to lay all the blame on Wall Street, or the government, or high-street banks.. or whichever narrative is easiest to digest

The real blame for the crisis is spread among many factors, including ourselves

But for now the system is clever in that 99% of the people can't understand it.

Finance can be inherently complicated, like almost any academic field or industry.

catbear

to support dohnjoes excellent appraisal of human propensity to offload blame elsewhere when personal decisions backfire, I'm reminded of the hoopla in 2002 when section 23 tax breaks were finishing. By popular demand from the grassroots they were extended to 2006, everyone and their donkey were suddenly property developers!

I remember being told I was talking the economy down by wishing an end to these tax breaks that encouraged property building in areas where apart from tax break development there was zero employment.

K-9

Wanderer78 wrote: »

Some believe that psychopaths are operating at the very high levels of our financial sector. Even though this may be a very extreme view, I do believe socialpathic behaviour is common in the sector. My cousin worked in the sector for a very short while. He ran from it. Filled with people obsessed with making money and void of emotions. This is a very serious problem as its having a very serious negative effect on the majority of people on the planet and planet itself

Indeed, certain jobs attract certain types of people and as the Big Short points out, who got arrested or banned from taking on other jobs in the sector? I can definitely see why people would think there is a systemic problem.

On an individual level people just have to be more careful going into a major life transaction like a mortgage, read up more and try and take a step back and look at it objectively. That's very difficult when any type of mania or tulip bubble is going on. Some people did warn us but group think is a difficult thing to ignore, same happened during the recession, everything was doom and gloom forever!

I only seriously started questioning things in 06 when I started to see how much the Irish banks were reliant on property, 90% of Anglo's business and over half BoI and AIB's was property related loans, the rest the same.

K-9

There's also a disconnect with Wall Street, people's eyes glaze over with all the terms including myself. Most of us can understand stuff like a company's results but investment banking?

The thing I could never understand with the property bubble was people felt houses doubling in price was their money? If used wisely yes, but most people just used it to move up the "property ladder". But that means, yes your own house is worth more but so is that dream house you've always had your eye on. Objectively that means the dream house is even more out of reach but people seemed to think the opposite.

Wanderer78

K-9 wrote: »

There's also a disconnect with Wall Street, people's eyes glaze over with all the terms including myself. Most of us can understand stuff like a company's results but investment banking?

The thing I could never understand with the property bubble was people felt houses doubling in price was their money? If used wisely yes, but most people just used it to move up the "property ladder". But that means, yes your own house is worth more but so is that dream house you've always had your eye on. Objectively that means the dream house is even more out of reach but people seemed to think the opposite.

mate of mine spotted the crash in the early noughties. have to give it to him as i didnt see it coming at all. its been disturbing to watch its devastating effect on our country. its very upsetting to see our serious issues regarding housing and the homelessness, and of course our health service issues. the worse part of it is watching our politicians fumble over dealing with these issues, and theyre still f ing talking about water! we re in serious trouble!

id have to agree with michael hudson regarding the financial sector, if the financial sector is doing good, it doesnt necessarily mean the real world economy is doing good. there certainly is a disconnect there. ah good ould investment banking! according to ha-joon chang, not even the managers of derivatives and hedge funds understand what the hell is going on in their own systems! has skynet become self aware

group think its a dangerous thing in these circumstances. i class neoclassical theory as the anti human, anti environmental theory! very dangerous indeed.

mahoganygas

Wanderer78 wrote: »

id have to agree with michael hudson regarding the financial sector, if the financial sector is doing good, it doesnt necessarily mean the real world economy is doing good. there certainly is a disconnect there.

The purpose of the financial sector is not to improve the world economy.
How can there be a disconnect if they are not directly related?

Wanderer78 wrote: »

ah good ould investment banking! according to ha-joon chang, not even the managers of derivatives and hedge funds understand what the hell is going on in their own systems! has skynet become self aware

That's a generic statement to make, and seems to tar an entire industry with one brush.
I've brought my car to many mechanics who hadn't a clue what they were doing. Does that mean all mechanics are clueless?

Hedge funds have been losing money for years. In my opinion it's because the market has been flooded with new managers who haven't a clue what they are doing. They were in it for a quick buck because hedge fund investment was new and sexy. It's unsurprising that a lot of these outfits have now closed.
But then you look at the top 25 hedge fund managers who took home $13 billion last year.

In every profession there are people who are good at their job and people who are not. To paint a picture that hedge fund managers don't know what they are doing is disingenuous.

walshyn93

mahoganygas wrote: »

The purpose of the financial sector is not to improve the world economy.
How can there be a disconnect if they are not directly related?


That's a generic statement to make, and seems to tar an entire industry with one brush.
I've brought my car to many mechanics who hadn't a clue what they were doing. Does that mean all mechanics are clueless?

Hedge funds have been losing money for years. In my opinion it's because the market has been flooded with new managers who haven't a clue what they are doing. They were in it for a quick buck because hedge fund investment was new and sexy. It's unsurprising that a lot of these outfits have now closed.
But then you look at the top 25 hedge fund managers who took home $13 billion last year.

In every profession there are people who are good at their job and people who are not. To paint a picture that hedge fund managers don't know what they are doing is disingenuous.

The purpose of the financial sector is supposed to be to facilitate trading, lending and transactions. Unfortunately that has become a secondary concern for most banks. Some banks like JP Morgan focus heavily on the fundamentals of banking are doing much better than the likes of gamblers like Goldman Sachs.

mahoganygas

walshyn93 wrote: »

The purpose of the financial sector is supposed to be to facilitate trading, lending and transactions. Unfortunately that has become a secondary concern for most banks. Some banks like JP Morgan focus heavily on the fundamentals of banking are doing much better than the likes of gamblers like Goldman Sachs.

The traditional sense of a bank is to to hold deposits and give out loans. JP Morgan has several retail banking divisions (chase, wamu etc) under their umbrella. But they also have separate investment banking divisions.

GS was always an investment bank.

There is no requirement for an investment bank to also be a retail bank.

djpbarry

K-9 wrote: »

The thing I could never understand with the property bubble was people felt houses doubling in price was their money? If used wisely yes, but most people just used it to move up the "property ladder". But that means, yes your own house is worth more but so is that dream house you've always had your eye on. Objectively that means the dream house is even more out of reach but people seemed to think the opposite.

This.

For the life of me, I could never understand how otherwise intelligent people could be seduced by such nonsense. The depressing/hilarious thing is, I’m seeing exactly the same thing happening here in London now. Granted, prices here are in another universe relative to Dublin at the peak of the boom, but I still see people buying absolutely anything they can get their hands on while talking about “trading up” in a few years.

djpbarry

walshyn93 wrote: »

The purpose of the financial sector is supposed to be to facilitate trading, lending and transactions. Unfortunately that has become a secondary concern for most banks.

The purpose of a bank, like any other business, is to generate profits. Everything else is secondary.

walshyn93

mahoganygas wrote: »

The traditional sense of a bank is to to hold deposits and give out loans. JP Morgan has several retail banking divisions (chase, wamu etc) under their umbrella. But they also have separate investment banking divisions.

GS was always an investment bank.

There is no requirement for an investment bank to also be a retail bank.

I know that, I was merely pointing out that they're performing poorly.

And if by traditional you mean going back to ancient times maybe the point was to keep money safe. If by traditional you mean any time before the era of bulge bracket banking then there's a bit more to it.

walshyn93

djpbarry wrote: »

The purpose of a bank, like any other business, is to generate profits. Everything else is secondary.

If you read carefully I said the purpose of the "financial sector", not the purpose of an individual bank.

Not that I don't like to hear the cliche about businesses existing to make money whenever possible.

djpbarry

walshyn93 wrote: »

If you read carefully I said the purpose of the "financial sector", not the purpose of an individual bank.

Not that I don't like to hear the cliche about businesses existing to make money whenever possible.

It's not a cliché. Anyone who thinks that the financial services sector exists to provide a service is kidding themselves. It exists to extract as much wealth as possible from society.

The only difference between individual financial institutions is some are greedier than others and operate their businesses in a riskier, less sustainable manner.

mahoganygas

djpbarry wrote: »

It's not a cliché. Anyone who thinks that the financial services sector exists to provide a service is kidding themselves. It exists to extract as much wealth as possible from society.

That's a perverse way of putting it, but it's fairly accurate I suppose.
You could argue that almost any other business is the same?

Financial institutions are been increasingly vilified since the financial crisis.
Do all financial institutions deserve this? Certainly not.
Do most? I don't think so. But I suspect some posters here do.

Do some people think that financial institutions do not provide benefit to society, despite having the aim to "extract as much wealth as possible from society?"

K-9

I suppose the difference is the taxpayer doesn't bail out Tesco or Debenhams if they get in bother. Because of that banks should be strictly regulated.

Dohnjoe

djpbarry wrote: »

It's not a cliché. Anyone who thinks that the financial services sector exists to provide a service is kidding themselves. It exists to extract as much wealth as possible from society.

The banking industry helps create wealth and growth, directly and indirectly. It does provide an essential service .. much of the modern world wouldn't function well without it

The issue is that it's so intertwined, that a crisis can escalate and become systemic - which can affect jobs, growth, stability, etc

mahoganygas

K-9 wrote: »

I suppose the difference is the taxpayer doesn't bail out Tesco or Debenhams if they get in bother. Because of that banks should be strictly regulated.

Tesco and Debenhams don't get bailed out.

But Dublin Bus, Irish Rail and our banks do.

The difference is that Tesco isn't vital to our society.

mahoganygas

K-9 wrote: »

Because of that banks should be strictly regulated.

Why should banks be strictly regulated and not any other financial institution?
AIG was bailed out for $180 billion. Should the insurance industry not be heavily regulated too?

Also, which aspects of banking do we strictly regulate? Retail banking? That would spell disaster for our Credit Unions. Investment banking? That's happening right now and is forcing so many derivatives traders to leave the market. The result: we now have more banks which are too big to fail instead of less.

I'd be wary of any knee jerk reaction to "strictly regulate" banks.

djpbarry

mahoganygas wrote: »

That's a perverse way of putting it, but it's fairly accurate I suppose.
You could argue that almost any other business is the same?

You could, but I think it’s a more difficult argument to make in many cases. I don’t doubt that most people go into business to make money, but I think there’s something else that drives most business people, typically a passion for the product or service that their business offers. You’ll have a hard time convincing me that the Elon Musks, Bill Gates, Jeff Bezos, Richard Bransons and Steve Jobs of this world are driven solely by wealth generation. I’m sure power and status has a lot to do with it too, but I think there’s also a large element of wanting to do something that nobody else has done before.

I accept that I’m being very general here and I don’t doubt there are exceptions.

mahoganygas wrote: »

Financial institutions are been increasingly vilified since the financial crisis.

I agree and I’m certainly not laying the blame for the crisis solely at their door.

mahoganygas wrote: »

Do some people think that financial institutions do not provide benefit to society, despite having the aim to "extract as much wealth as possible from society?"

Sure, they provide a service. But does the quality of that service justify the vast amount of wealth accrued by entities in the financial services industry? I would have to say no.

catbear

mahoganygas wrote: »

I'd be wary of any knee jerk reaction to "strictly regulate" banks.

Well strictly speaking with a 25% stake in BofI, an large chunk of PSTB and nearly full ownership of AIB it's regulation is of secondary concern to actual supervision.

mahoganygas

djpbarry wrote: »

You could, but I think it’s a more difficult argument to make in many cases. I don’t doubt that most people go into business to make money, but I think there’s something else that drives most business people, typically a passion for the product or service that their business offers. You’ll have a hard time convincing me that the Elon Musks, Bill Gates, Jeff Bezos, Richard Bransons and Steve Jobs of this world are driven solely by wealth generation. I’m sure power and status has a lot to do with it too, but I think there’s also a large element of wanting to do something that nobody else has done before.

It's a good point. There are no entrepreneurs in banks.
But I suppose that has more to do with banking being an old industry. When was the last time you heard of a brand new bank being set up?
Mature industries tend not to need new entrants. Instead focusing on consolidation with mergers to achieve cost efficiencies.

Look at the motor industry. When was the last time you heard of a new car company becoming popular? Elon Musk broke the mold but I think that has more to do with the advent of new technology. That doesn't really happen in banking.

Back to your original point, are banks adding enough value to society to justify their fees or do they take too much out of society (bailouts, concentration of wealth etc)?
It's an incredibly difficult question to answer. If we didn't see the explosion in financial services in the 80's then certainly globalisation would not have happened.

The way I view it is that banks are like water services. The system costs money to maintain but without them, civilization would crumble. I think that it's a cost we should be willing to bare and view banking, in its current form as a necessity.

And yes, i'm aware of the irony of choosing water services as an analogy! :pac:

Rightwing

It's much easier to quickly make large profits in a falling market. There will always be a few investors like Quinn with a lot of cash that can and will be quickly transferred.

The old Wall St adage 'Up the stairs, down the elevator' is quite true.

K-9

mahoganygas wrote: »

Why should banks be strictly regulated and not any other financial institution?
AIG was bailed out for $180 billion. Should the insurance industry not be heavily regulated too?

Also, which aspects of banking do we strictly regulate? Retail banking? That would spell disaster for our Credit Unions. Investment banking? That's happening right now and is forcing so many derivatives traders to leave the market. The result: we now have more banks which are too big to fail instead of less.

I'd be wary of any knee jerk reaction to "strictly regulate" banks.

Insurance and indeed banking are regulated, some will say not enough, some will say too much which seemed to be the thinking particularly from the 90's on.

djpbarry

mahoganygas wrote: »

It's a good point. There are no entrepreneurs in banks.

Well, maybe I’m being a little unfair. Maybe not banks, but certainly the financial sector has seen a few innovative ideas over the last decade or so: PayPal, RateSetter, Nutmeg, TransferWise, etc.

Although, it’s probably the gambling sector that has had most of the innovation.