Category Archives: Financial Markets and Institutions

Cooking the books

AT&T didn’t consider that World Com could be cooking the books and undertook an expensive and debilitating strategy to compete with fiction. Many investors didn’t consider that Tech Stocks were being pumped up by greedy investment banker’s. Etc. Etc. Etc.

Where are you believing books that are cooked? Is it possible that something you believe isn’t true and your being manipulated? Think hard…this is important.

A savings account like a bond

Think of a savings account like a bond. One loans money to a bank (essentially a bond) and they get paid interest. The interest rate reflects the risk of not getting repaid. There is no risk with a bank unless the entire country collapses, but with corporate – including junk bonds – there is risk and the interest rates reflect that. The banks are getting a free pass on paying the proper amount of interest given the risk they are taking as the government is subsidizing them with insurance. The underlying problem is that the FDIC insurance corp. doesn’t collect in premiums from banks what it should to cover the losses. Therefore it’s taxpayers that are left with the risk.