Dear Charlie...
What do you think of this... and it's effect on Agriculture!
That big loss... late last week on the CBOT... was to a large extent... banks wanting their margin money... or profits from positions.. back in the banks...
And we want to get rid of CGC Bonding... at a time like this?
No end in sight for market woes, Bank of Canada chief says
Carney talks about turbulence on a turbulent day
Thursday, March 13, 2008
CBC News http://www.cbc.ca/money/story/2008/03/13/carney-speech.html?ref=rss
In his first speech to a Bay Street crowd since he took command of Canada's central bank, Mark Carney said Thursday there is more pain in store for financial markets in the wake of a U.S. junk lending disaster.
"More than seven months on, the end is not yet in sight," the Bank of Canada governor said, "although it is safe to say that we have reached the end of the beginning of this turmoil."
His subject — on a day when oil reached new highs, gold hit $1,000 US an ounce and giant investment funds teetered near collapse — was "addressing financial market turbulence."
"What began in securities linked to U.S. subprime mortgages has spread to a broad range of structured assets, conventional credit markets, and, to a lesser extent, equities. As a consequence, some of the world's largest financial institutions have recorded substantial losses, the cost of borrowing has increased and the availability of credit has decreased."
Although this was not news to his audience, Carney also had uncomplimentary things to say about overly complex securities, overconfident lenders, credulous rating agencies and overpaid executives.
"Many financial institutions have pay structures that reward short-term results and encourage potentially excessive risk taking," he said.
"Investors should take the lead in demanding compensation structures that are more aligned with their interests."
The venue was the Toronto Board of Trade's downtown premises at King and Bay streets, a return to old stomping grounds for Carney.
He was a Goldman Sachs investment banker in Toronto before he moved to Ottawa to become a deputy governor of the Bank of Canada in 2003 and an associate deputy finance minister in 2004. He was designated the bank's next governor last fall and took over Feb. 1 on the retirement of David Dodge.
In the speech, Carney said the bank will try to soften blows to the "real economy" but will arrange no bailouts for losing players in the financial markets.
'Difficult process'
"I do not mean to downplay the current financial turbulence — it has clearly begun to affect the U.S. economy and, to a lesser extent, ours as well," he said.
"At the Bank of Canada, we will continue to monitor these effects, while aiming neither to favour particular market segments nor to insulate market participants from the consequences of their decisions.
"Those consequences will continue to reveal themselves in the weeks and months ahead. This will remain a difficult process."
After the speech, he declined to comment on the woes of Carlyle Capital, a London-based fund that said it expected creditors to seize its remaining assets after it missed margin calls on its $21.7-billion US portfolio of mortgage-backed bonds.
'There will be defaults'
"There will be defaults and there will be losses and that's part of the market," Carney said.
In the speech, he talked of a market in which some players didn't understand the risks they took.
"In this model, the borrower often became separated from the end investor by several transactions as credit risk was repackaged, tiered, securitized, and distributed.… Risk had not disappeared, it had merely been redistributed, and that distribution was often not final.
"The current market disruptions represent, in part, the painful process of finding out where that risk ultimately lies."
While the spree lasted, however, people were willing to buy "medium-term, illiquid, hard-to-value assets … funded by short-term money market securities at yields only marginally higher than those offered by the most liquid, transparent, risk-free securities" and with "the lack of transparency and inadequate disclosure that characterizes many highly structured financial products," he said.
'A breakdown in trust'
On credit ratings, he named no names but spoke of a "breakdown of trust in credit-rating agencies, which has amplified the stresses in financial markets."
All of the major U.S. and Canadian agencies have had their share of embarrassments as securities rated highly safe went bad.
One problem, Carney said, was that lenders relied on ratings instead of doing their homework.
"The fall from grace of the rating agencies has had a significant impact because rating agencies had grown more powerful than anyone intended," he said.
"Indeed, many investors seem to have performed little or no in-house credit analysis of their investments; in other words, they substituted a subscription to a ratings publication for analysis and due diligence."
What do you think of this... and it's effect on Agriculture!
That big loss... late last week on the CBOT... was to a large extent... banks wanting their margin money... or profits from positions.. back in the banks...
And we want to get rid of CGC Bonding... at a time like this?
No end in sight for market woes, Bank of Canada chief says
Carney talks about turbulence on a turbulent day
Thursday, March 13, 2008
CBC News http://www.cbc.ca/money/story/2008/03/13/carney-speech.html?ref=rss
In his first speech to a Bay Street crowd since he took command of Canada's central bank, Mark Carney said Thursday there is more pain in store for financial markets in the wake of a U.S. junk lending disaster.
"More than seven months on, the end is not yet in sight," the Bank of Canada governor said, "although it is safe to say that we have reached the end of the beginning of this turmoil."
His subject — on a day when oil reached new highs, gold hit $1,000 US an ounce and giant investment funds teetered near collapse — was "addressing financial market turbulence."
"What began in securities linked to U.S. subprime mortgages has spread to a broad range of structured assets, conventional credit markets, and, to a lesser extent, equities. As a consequence, some of the world's largest financial institutions have recorded substantial losses, the cost of borrowing has increased and the availability of credit has decreased."
Although this was not news to his audience, Carney also had uncomplimentary things to say about overly complex securities, overconfident lenders, credulous rating agencies and overpaid executives.
"Many financial institutions have pay structures that reward short-term results and encourage potentially excessive risk taking," he said.
"Investors should take the lead in demanding compensation structures that are more aligned with their interests."
The venue was the Toronto Board of Trade's downtown premises at King and Bay streets, a return to old stomping grounds for Carney.
He was a Goldman Sachs investment banker in Toronto before he moved to Ottawa to become a deputy governor of the Bank of Canada in 2003 and an associate deputy finance minister in 2004. He was designated the bank's next governor last fall and took over Feb. 1 on the retirement of David Dodge.
In the speech, Carney said the bank will try to soften blows to the "real economy" but will arrange no bailouts for losing players in the financial markets.
'Difficult process'
"I do not mean to downplay the current financial turbulence — it has clearly begun to affect the U.S. economy and, to a lesser extent, ours as well," he said.
"At the Bank of Canada, we will continue to monitor these effects, while aiming neither to favour particular market segments nor to insulate market participants from the consequences of their decisions.
"Those consequences will continue to reveal themselves in the weeks and months ahead. This will remain a difficult process."
After the speech, he declined to comment on the woes of Carlyle Capital, a London-based fund that said it expected creditors to seize its remaining assets after it missed margin calls on its $21.7-billion US portfolio of mortgage-backed bonds.
'There will be defaults'
"There will be defaults and there will be losses and that's part of the market," Carney said.
In the speech, he talked of a market in which some players didn't understand the risks they took.
"In this model, the borrower often became separated from the end investor by several transactions as credit risk was repackaged, tiered, securitized, and distributed.… Risk had not disappeared, it had merely been redistributed, and that distribution was often not final.
"The current market disruptions represent, in part, the painful process of finding out where that risk ultimately lies."
While the spree lasted, however, people were willing to buy "medium-term, illiquid, hard-to-value assets … funded by short-term money market securities at yields only marginally higher than those offered by the most liquid, transparent, risk-free securities" and with "the lack of transparency and inadequate disclosure that characterizes many highly structured financial products," he said.
'A breakdown in trust'
On credit ratings, he named no names but spoke of a "breakdown of trust in credit-rating agencies, which has amplified the stresses in financial markets."
All of the major U.S. and Canadian agencies have had their share of embarrassments as securities rated highly safe went bad.
One problem, Carney said, was that lenders relied on ratings instead of doing their homework.
"The fall from grace of the rating agencies has had a significant impact because rating agencies had grown more powerful than anyone intended," he said.
"Indeed, many investors seem to have performed little or no in-house credit analysis of their investments; in other words, they substituted a subscription to a ratings publication for analysis and due diligence."
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