Whack a Banker arcade and game

I saw this article: 'Whack A Banker' game proving a hit in Britain in Yahoo! News and decided to do a search.

Found it ! It can be found in Tim Hunkin’s (the inventor's) website.

Read its "making of the machine". It is both hilarious and saddening.

Highlights:
"Two weeks later:
The good news is that the 'boring' facade doesn't seem to put people off. The bad news is that none of my hammers are lasting. People carry on using them after they've disintegrated, hitting the bankers with the central steel rod so the heads are now really battered. I'm trying the expensive stitched cloth hammer I bought to see what happens next.
…..
4 days later still:
The £56 hammer I bought has now split. I knew people didn't like bankers, but I had no idea they disliked them quite so much. People were able to whack much more violently because the hammer was heavier and has a longer leash than my foam ones."

(You can see the picture of hammers in the link.)

I wonder whether these free Whack A Banker games below are as popular :-)
game link 1
game link 2

McKinsey: What next 10 questions for CFO ?

Saw an article: What next 10 questions for CFO ? on McKinsey..

It gives a glimpse on what a CFO is going to do to survive recession and financial crisis..

• What shape will a recovery take?
• Have you restructured enough?
• Is your supply chain sufficiently flexible?
• Do you have a short list of acquisition targets ready?
• Should you restart conversations with potential alliance partners?
• Are you ready to divest newly underperforming businesses?
• Do you have the financial resources needed for an upturn?
• Have you taken advantage of the buyers’ market for talent and other resources?
• Do you know what risks a recovery might bring?
• Can you sell your recovery plan to investors?

Result of Supervisory Capital Assessment Program (SCAP) (a.k.a. Bank Stress Test)

On 7 May 09, Fed released the results of the Supervisory Capital Assessment Program (SCAP).

Press release, Statement by Bernanke and Overview of Results (pdf file)

Some highlights:

1. SCAP Buffer

Page 9 of the Overview of Results (PDF) shows the summary for all 19 Participating Bank Holding Companies (BHC). Of particular interests are SCAP Buffer (total, as well as for individual banks). Total $74.6B extra needed. Refer to Pg 9 of the file for SCAP Buffer needed for individual banks.

2. Deadline (from the Joint Statement)

have until June 8th, 2009 to develop a detailed capital plan, and
until November 9th, 2009 to implement that capital plan.

3. Capital Plan (Excerpt from Joint Statement)

[three main elements:

3.1 A detailed description of the specific actions to be taken to increase the level of capital and/or to enhance the quality of capital consistent with establishing the SCAP buffer. BHCs are encouraged to design capital plans that, wherever possible, actively seek to raise new capital from private sources. These plans should include actions such as:

• Issuance of new private capital instruments;
• Restructuring current capital instruments;
• Sales of business lines, legal entities, assets or minority interests through private transactions and through sales to the PPIP;
• Use of joint ventures, spin-offs, or other capital enhancing transactions; and
• Conservation of internal capital generation, including continued restrictions on dividends and stock repurchases and dividend deferrals, waivers and suspensions on preferred securities including trust preferred securities, with the expectation that plans should not rely on near-term potential increases in revenues to meet the capital buffer it is expected to have.

3.2 A list of steps to address weaknesses, where appropriate, in the BHC's internal processes for assessing capital needs and engaging in effective capital planning.

3.3 An outline of the steps the firm will take over time to repay government provided capital taken under the Capital Purchase Program (CPP), Targeted Investment Program (TIP), or the CAP, and reduce reliance on guaranteed debt issued under the TLGP. ]

4. Mandatory Convertible Preferred under the CAP (from Joint Statement)

A BHC may apply for Mandatory Convertible Preferred (MCP) in an amount up to 2% of risk-weighted assets (or higher upon request).

In addition, (in simpler term) to consider requests to exchange outstanding preferred …for new mandatory convertible preferred issued under the CAP.

5. Redeeming Preferred Securities Issued under the CPP (from Joint Statement)

(In simpler term) Supervisors will decide on redemption; banks will have to show they are financially "strong" but it's still up to the supervisors to decide on redemption of outstanding CPP preferred stock. :-)

Question now will be:
How will the banks with shortfall raise capital ?

(My previous post on SCAP)

Report from Center for Public Integrity - Subprime 25: Who’s Behind the Financial Meltdown ?

On 6 May 2009, Center for Public Integrity has published a investigation report titled :
Who’s Behind the Financial Meltdown – the top 25 subprime lenders and their Wallstreet Backers

This Subprime 25 Interactive List is cool.
You can click on the sheets (#1 to #25) to see name, status of company, its CEO, total high interest loans.
Click on "Read More" for more "interesting" information for e.g history, summary, parent companies, bailout money, political contributions etc..

The Subprime 25
These are the top 25 subprime lenders, responsible for 7.2 million "high interest" loans made from 2005 through 2007 (72% of high-priced loans reported).

The articles and glossary from the report are extremely good reads to understand root causes of the subprime crisis.

The "Data" are informative. (Click on Data)
Maps show regions of high interest loans of different percentage points above treasury securities);
Charts & Graphs are really interesting. There are charts showing increasing % of income goes to housing; increasing financing of Mortgage-Backed Securities (MBS) and the top underwriters.

Then there are the interesting parts:

• charts showing political contributions by securities and investment companies, real estate companies to parties (Democrats or Republicans) and
• top recipients of contributions by securities and investment companies, real estate companies for 2003-2004 and 2007-2008;
• top recipients of contributions by AIG in 2008 Election Cycle.

Guess who was the top recipient: 2003-2004 George W. Bush; 2007-2008 Barack Obama.
Haha, wonder what the analysts are trying to imply here :-)

I put the Widget of Subprime 25 on my blog for a limited period :-)

COP’s Hearing: “Learning from the Past--Lessons from the Banking Crisis of the 20th Century”

A lot can be learnt from past banking crisis and their solutions.

US’s Congressional Oversight Panel has lined up few experts for testimonies about banking crisis and their solutions.
Experts' views on past banking crisis and lesson learnt

The testimonies by these experts are compiled in the website above.

We can learn a lot about banking crisis listed below, solutions used then and insights gain:
1. Great Depression in 1930s;
2. Savings and Loan collapse in the 1980s: the solution then was Resolution Trust Corporation (RTC);
3. Banking Crisis in Japan in early 1990s;
4. Banking Crisis in Sweden in early 1990s (This solution is what they called "Nordic Capitalism – the future of capitalism"). Refer to my previous related post.

What will US (and the world) use as a solution to current financial crisis ?


My other related posts on:
Europe investment, financial crisis, US investment.

Nordic Capitalism – the future of capitalism ?

In this FT's article, it was said that, Jorma Ollila, advocates that Nordic style of capitalism (characterised by openness to globalisation balanced by strong government programmes to protect people from its excesses and an egalitarian education system), is the future of capitalism.


Who is Jorma Ollila?

His more prominent roles are:

1. Chairman of both Nokia and Royal Dutch Shell
2. Chairman of European Roundtable of Industrialists (an informal forum of around 45 chief executives and chairmen of major multinational companies of European parentage covering a wide range of industrial and technological sectors).

European Roundtable of Industrialists is a good place to get views of European Industrialists.

So, what is Nordic Capitalism ?
I found this insightful PDF file written by University of Jyväskylä.

Nordic economies:
Five small North European countries, which includes Denmark, Finland, Norway, Iceland, Sweden.

There is this book, Creating Nordic Capitalism – the business history of a competitive periphery, which is a good source to learn about Nordic Capitalism.

You can get a sample chapter from the website.

There are case studies given by the books on Capitalism of Sweden, Finnish, Danish and Norwegian.

Swedish Capitalism
Bonnier & Wallenberg
ASEA/ABB

Finnish Capitalism
Stora-Enso
Nokia and Tampella

Danish Capitalism
Arla Foods
Carlsberg

Norwegian Capitalism
Elkem
Kreditkassen

Iceland, as we know, is in deep trouble.

I wonder how are the status of these countries (Denmark, Finland, Norway, Sweden) and the companies used as success stories of Nordic Capitalism.

Can they withstand the onslaught of this financial crisis ?
How should the future of capitalism be ?

US: toxic asset plan - using public-private investment funds (PPIF) : Legacy Loans Program and Legacy Securities Program

To remove toxic assets from US banks, FDIC & Treasury launch Legacy Loan Programs and Legacy Securities Program.

We can get details of Legacy Loan Program and Legacy Securities Program from FDIC’s website.
Legacy Loan Program and Legacy Securities Program

The PDF files are very wordy and I feel that the easier way to understand is through the examples given.

(Excerpt from website)

Examples of Legacy Loan Program (main components related to $ highlighted)

If a bank has a pool of residential mortgages with $100 face value that they are seeking to divest, the bank would approach the FDIC. The FDIC would determine, according to the above process, that they would be willing to leverage the pool at a 6-to-1 debt-to-equity ratio. The pool would then be auctioned by the FDIC, with several private buyers submitting bids. The highest bid from the private sector – in this example, $84 – would define the total price paid by the private investors and the Treasury for the mortgages. Of this $84 purchase price, the Treasury and the private investors would split the $12 equity portion. The new PPIF would issue debt for the remaining $72 of the price and the debt would be guaranteed by the FDIC. This guarantee would be secured by the purchased assets. The private investor would then manage the servicing of the asset pool and the timing of its disposition on an ongoing basis – using asset managers approved and subject to oversight by the FDIC.


Example of Legacy Securities Program (main components related to $ highlighted)

Treasury will launch the application process for managers interested in the Legacy Securities Program. An interested FM would submit an application and be pre-qualified to raise private capital to participate in joint investment programs with Treasury. Treasury would agree to provide a one-for-one equity match for every dollar of private capital that the FM raises and provide fund-level leverage for the proposed PPIF. The FM would commence the sales process for the PPIF and raise $100 of private capital for the PPIF. Treasury would provide $100 of equity capital to be invested on side-by-side basis with private capital and would provide up to a $100 loan to the PPIF if the fund met certain guidelines. Treasury would also consider requests from the FM for an additional loan of up to $100 subject to further restrictions. As a result, the FM would have $300 (or, in some cases, up to $400) in total capital and would commence a purchase program for targeted securities. The FM would have full discretion in investment decisions, although the PPIFs will predominately follow a long-term buy and hold strategy. Depending on the amount of loans provided directly from Treasury, the PPIF would also be eligible to take advantage of the expanded TALF program for legacy securities when that program is operational.

Recession Survival Guide – compiled by Harvard Business Publishing

Recession (or even Depression), economic downturn, financial crisis/tsunami/meltdown, layoffs, foreclosures, bankruptcies, frauds, ….etc… the list goes on..

We are bombarded by headlines of these words in media everyday.
What should we do in this critical moment ?

Harvard Business Publishing has compiled a "Recession Survival Guide".
website

Its many articles are divided into sections of:
1. voices on the recession
2. how to cope
3. how to lead
4. keep innovating
5. perspectives

I wish to search for ways to survive on this recession.

If you have ideas on Recession Survival, feel free to share with me here.

ACRA Singapore - area of concern in financial statement audit in current economic environment

Just saw in newspaper ACRA (Accounting and Corporate Regulatory Authority) Singapore has come out with a list of areas of concern in financial statement audit in current economic environment.

link

The PDF file in the link is a good read.

Areas of concern:
1. Planning and fraud considerations
2. Cash at banks
3. Going concern
4. Valuation of financial instruments held at fair value
5. Impairment of assets
6. Deferred tax asset recognition
7. Provision for onerous contracts and restructuring
8. Disclosure in financial statements, off-balance sheets items
9. Communication with those charged with governance

Refer to the PDF file in the link for details.
It even mentions the references/standards applicable to the areas of concern.

To improve on how to spot frauds, maybe we should learn from these references/standards.


Note:
Do check out my other related posts on Singapore investment, financial crisis and
fraud prevention.

OECD - The Current Financial Crisis – Causes and Policy Issues (2)

Article "The Current Financial Crisis – Causes and Policy Issues" in (OECD)’s website
PDF file

The second part of the report is on policy issues.
Some highlights:

Crisis Management
Three basic and separable steps to deal with a banking system solvency crisis:
1. Guarantee liabilities to stop bank runs.

2. Separate the good assets from the bad assets, and get the bad assets off bank balance sheets

method 1: ‘asset management’ approach to buying toxic assets
e.g TARP in its initial form; actions during Asia Crisis

method 2: nationalise banks, separate the bad assets, and then sell the cleaned-up banks back to the private sector.
e.g approach used in Scandinavia in 1991; Resolution Trust Corporation (RTC) in US’s Savings and Loans (S&L) Crisis

Method 3: Encourage a large better capitalised bank to take over a smaller failing bank and absorb its losses

3. Recapitalise the asset-cleansed banks by finding new equity holders, via selling common shares or preference shares to private entities or government

Exit Strategy and Long Term Reform
3 areas:
1. Reform in incentive systems
2. Matching cost of capital to the risks that institutions actually take, by regulatory influence
3. Exit government bank ownership and insurance commitments through asset sales and debt management techniques.

Its "Figure 4. Incentive structure, influences and outcomes" shows main channels of influence. It is an insightful summary.

Some concepts that I think worthwhile to learn about and explore further:
Theory of the second best :
if market failures are present then reforms to improve pieces of the system (as opposed to reforming the global interactions between regulatory, tax, remuneration and other governance factors, etc.) may not help and indeed may make things worse.

Basel I and Basel II : to match capital regulation with the riskiness of bank lending
Capital rules : pro-cyclical
end result: not able to avert financial crisis.

OECD - The Current Financial Crisis – Causes and Policy Issues (2)

Article "The Current Financial Crisis – Causes and Policy Issues" in (OECD)’s website
PDF file

The second part of the report is on policy issues.
Some highlights:

Crisis Management
Three basic and separable steps to deal with a banking system solvency crisis:
1. Guarantee liabilities to stop bank runs.

2. Separate the good assets from the bad assets, and get the bad assets off bank balance sheets

method 1: ‘asset management’ approach to buying toxic assets
e.g TARP in its initial form; actions during Asia Crisis

method 2: nationalise banks, separate the bad assets, and then sell the cleaned-up banks back to the private sector.
e.g approach used in Scandinavia in 1991; Resolution Trust Corporation (RTC) in US’s Savings and Loans (S&L) Crisis

Method 3: Encourage a large better capitalised bank to take over a smaller failing bank and absorb its losses

3. Recapitalise the asset-cleansed banks by finding new equity holders, via selling common shares or preference shares to private entities or government

Exit Strategy and Long Term Reform
3 areas:
1. Reform in incentive systems
2. Matching cost of capital to the risks that institutions actually take, by regulatory influence
3. Exit government bank ownership and insurance commitments through asset sales and debt management techniques.

Its "Figure 4. Incentive structure, influences and outcomes" shows main channels of influence. It is an insightful summary.

Some concepts that I think worthwhile to learn about and explore further:
Theory of the second best :
if market failures are present then reforms to improve pieces of the system (as opposed to reforming the global interactions between regulatory, tax, remuneration and other governance factors, etc.) may not help and indeed may make things worse.

Basel I and Basel II : to match capital regulation with the riskiness of bank lending
Capital rules : pro-cyclical
end result: not able to avert financial crisis.

OECD - The Current Financial Crisis – Causes and Policy Issues (1)

Found an article "The Current Financial Crisis – Causes and Policy Issues" in (OECD)’s website.

Some highlights from the article on causes of the current financial crisis:

Current financial crisis as being caused at two levels:
1. by global macro liquidity policies
2. by a very poor regulatory framework

Global macro liquidity policies that causes global liquidity distortion,s,
including interest rates at 1 per cent in the United States and 0 per cent
in Japan, China's fixed exchange rate, the Sovereign Wealth Funds.

The poor regulatory framework, far from acting as a second line of defence, actually contributed to the crisis in important ways.

Area: mortgage securitisation and off-balance sheet activity

Year of causality: 2004
Things happening in 2004:
1. The Bush Administration ‘American Dream’ zero equity mortgage proposals

2. The Office of Federal Housing Enterprise Oversight (OFHEO) imposed greater capital
requirements and balance sheet controls on Fannie Mae and Freddie Mac,

3. The Basel II accord on international bank regulation was published and opened an arbitrage opportunity for banks that caused them to accelerate off-balance-sheet activity

4. SEC agreed to allow investment banks (IB’s) voluntarily to benefit from regulation changes to manage their risk using capital calculations under the ‘consolidated supervised entities program’; from 15:1 debt to net equity ratio to allowing them to increase their leverage ratio towards 40:1 in some cases.

On Investment Banks:

• Banks created their own Fannie and Freddie lookalikes: SIVs and CDOs.
• They move their business model towards equity culture (focus on share price growth, earnings expansion, becoming "growth stocks") and based on securitisation. Compensation evolves to bonuses based on up-front revenue generation, options, employee share participation schemes.

On Basel II:

• Basel II makes mortgages more attractive (capital weight given to mortgages fell from 50 per cent to 35 per cent, makes greater concentration in low-capital-weighted mortgages improves the overall bank return ).
• Portfolio invariance (riskiness of an asset like a mortgage is independent of how much of the asset you add to your portfolio) becomes an arbitrage opportunity. To illustrate its points, some case studies are used: Citi, Northern Rock and UBS.

A great read on what happens on these companies.
There is also a corporate governance comparison.

Financial Times presentation on financial crisis

Financial Times’ website has few interactive presentation showing timeline of financial institutions affected in The Financial Crisis and governments’ intervention.

Bank Street:
link
I think this is creative ! It shows someone walking through Bank Street, showing sequences of financial institutions having problems and their outcomes.

Governments’ intervention:
link

We can actually select types of governments’ intervention:
liquidity and lending guarantees,
interest rate moves,
bank deposit guarantees,
bank recapitalisation
asset purchase,
short selling crackdown.

Cool !