LOL… I guess the shorts win.
Jamie Dimon’s phone is ringing again.
not that quite far… but they took back their leverage and risk, no way IBs can produce like they have in past few years with a world of any perceived risk…
in other words they can’t use the print money machine via repos etc. and leverage themselves at like 50-1
LOL. Yeah… in other words. Understatement of the year.
Why do Ibanks have to leverage themselves to make $$. Aren’t they making enough $ with investment banking? Is it necessary for them to use leverage? It sounds more like a hedge fund, like Long-Term capital.
easy answer: bonus
CFAdummy Wrote: ------------------------------------------------------- > Why do Ibanks have to leverage themselves to make > $$. Aren’t they making enough $ with investment > banking? Is it necessary for them to use leverage? > It sounds more like a hedge fund, like Long-Term > capital. Bingo. They are gambling with shareholders capital, but get to keep much of the upside potential. It’s like being long a call option that you bought with many you loaned by mortgaging your neighbors house.
An agency problem. If they didn’t borrow money, how much would these banks really make?
CFAdummy… that’s a funny question you ask. For Lehman, their return on assets is only 1/2%. When you take into account borrowing you get their ROE… which is 16%! Now the fed is lending them $$$ to stay in business… our tax dollars at work!
Umm…yeah I work at LEH…for now…
Geez…if I had known that I would have been more short. 