Question for Generali (Greece & Goldman)

purch

Wookster, why - and how - would Generali know?

The Gen'ster has the knack of understanding what is going on, and the ability to explain it in a concise manner.

P.S. I just re-read my answer, and I managed to confuse myself even though I s'possed to understand this stuff :eek:

Generali

lemonjelly wrote: »

Is it dodgy? Is it legal?

What about "is it ethical?";)

That's a good question. It's not an entirely honest deal as it is designed to hide the amount of outstanding debt. Is obfuscation unethical though?

Generally, investment bankers think ethics is where the train from Fenchurch Street goes.

Generali

purch wrote: »

The Gen'ster has the knack of understanding what is going on, and the ability to explain it in a concise manner.

P.S. I just re-read my answer, and I managed to confuse myself even though I s'possed to understand this stuff :eek:

In that case you managed to confuse me too because I thought you gave a good answer!

purch

Of course this "trade" would have created a large negative cash flow position for Goldman, which they would have had to fund.

As Goldman Squid is not renowned for it's charitable works we can assume that the ultimate cost of this clever piece of financial engineering will have been high for Greece.

Also, any competent internal/external auditor should have highlighted the obvious discrepancy in the FX rates used.

The fact that apparently they did not showcases in a nutshell, why the World is in the complete economic mess it is today.

sabretoothtigger

An auditor in a competitive system would have found fault but in government the bias is to support 'policy' ,do your job and no more, dont ask questions etc

The only reason capitalism works is because of people looking over your shoulder trying to make a profit from your mistakes. The opposite would be where there is no profits and regulations restrict overview for reasons of national interest

Generali

purch wrote: »

Of course this "trade" would have created a large negative cash flow position for Goldman, which they would have had to fund.

As Goldman Squid is not renowned for it's charitable works we can assume that the ultimate cost of this clever piece of financial engineering will have been high for Greece.

Also, any competent internal/external auditor should have highlighted the obvious discrepancy in the FX rates used.

The fact that apparently they did not showcases in a nutshell, why the World is in the complete economic mess it is today.

Have you been audited? The auditors only check a small sample of trades.

Anyway, if both the spot and forward legs use the same spot rate and forward points are consistent with making money then it's hard to see where there'd be a problem from an audit POV.

The problem for me is the trading mentality that has pervaded banking. When I started out, banks were conservative beasts that were focused on not losing money. Now the idea seems to be more akin to being a Professional gambler.

purch

Have you been audited?

Yeah, they usually believed everything you told em ............."that drawer is where I put my very best trades" :eek:

......I agree with point 2.....when I was a wee lad the likes of Goldman, Salomon Bros, Baer Stearns, Stanley Morgan (after he retired from the Patriots) and even Merrill Lynch were considered "corporates" and not many Banks would trade with them, or if they did they would expect a risk premium for entering the trade.

Nowadays, these !!!!ers control the market :eek:

Generali

purch wrote: »

Yeah, they usually believed everything you told em ............."that drawer is where I put my very best trades" :eek:

......I agree with point 2.....when I was a wee lad the likes of Goldman, Salomon Bros, Baer Stearns, Stanley Morgan (after he retired from the Patriots) and even Merrill Lynch were considered "corporates" and not many Banks would trade with them, or if they did they would expect a risk premium for entering the trade.

Nowadays, these !!!!ers control the market :eek:

And worse, the normal banks try to compete with them. Even MF Global was up to these dumb-bottom shennanigans. Why was a broker trying to guess the outcome of the debt problems in Europe as a way of funding day-to-day business? If they've lost $700,000,000 of client money then they should go to gaol including (especially?) the ops people.

gagahouse

Generali wrote: »

Have you been audited? The auditors only check a small sample of trades.

Haha, reminds me of taking auditors round a warehouse with boxes stacked up to 3 metres high. They took one look and quickly looked at the bottom shelves only and that was their "audit".

I love this quaint notion that auditors should be omniscient always, there is a physical limit to what you can audit.

In a bank where thousands of trades, some multi legged and complex, are done daily it's impossible for any outside auditor to know the true picture.

Regulators are clamouring for trade data from the opaque OTC markets, we will give them everything they require but there is no way on earth a bunch of mostly lawyers (I deal with regulators often) can grasp what is actually going on at a systemic level. They don't understand what they are looking at, are often politically driven, and even if they did understand there is no way they can cope with the volume of data.

But it makes a good story for the public, "look we're doing something".

sabretoothtigger

I love this quaint notion that auditors should be omniscient always, there is a physical limit to what you can audit.

Ultimately the risk is with the investors and creditors and its upto them to do the auditing and it is never known for sure of course.
Its back to the whole idea of credit rating and how some regulations require certain grades, it ends up completely manipulated and political like you say. Caveat emptor is the only universal rule


See Olympus for another example and I say that as a holder of Japanese funds. I just hope my fund manager is maverick enough to stay away from such convectional and apparently routine deceptions

the normal banks try to compete with them

Isnt everyone trying to compete with 0.5% interest rates what causes normal companies to become radical