jamalah:

@Katsumoto

You will not fully understand sanusi without a full psycho analysis of his persona.

I have been studying sanusi for a long time and over the years i have come to the conclusion that he is an inconsistent and confused person.

He is moulded in the image of a very few liberal northerners like Nasiru Elrufai, Dangiwa Umar and may be the late Bala Usman of ABU Zaria. Comfortable in wearing western suits and confident in the command of the English language. And of course able to go against some norms in the north, like his wife accompanying him to the senate hearing etc.

But by and large he is still gripped by the image of Islamic activism of which he was an active member in the late 80s Whose aim was to establish sharia rule in Nigeria by violent means if necessary. It is this crusading zeal and mindset that he brought to the CBN. His so called fearlessness stems from this and of course his royal arrogance that makes him to regard everybody as a bloody commoner.

jamalah for president 2015
I mean it, because I have not met many Nairalanders as smart of you. I mean Igbo, Hausa, Yoruba, Edo, Tiv, Ijaw, whatever, you're the smartest. Your analysis of events is simply out of this World.
Good job, Sir

fROM THE cOLUMBIA uNIVERSITY

Read this:

http://cgt.columbia.edu/files/papers/CGT_Macroeconomic_UncertaintyFV.pdf

Quote from: manny4life on Today at 09:39:06 PM

I know u're not asking me but I if u may let me diffuse some of the thought on here. Risk Management isn't only special when dealing with banks but in all forms of business even manufacturing. The questions isn't about risk; business as part of their operations assume risk, question is how much risk? In addition to that, how to mitigate such greater risk. When banks loan money to you for mortgages, their money is tied up in that mortgage hence they have equity on that mortgage, what collapsed the banking  and mortgage wasn't because banks gave loans to people who cannot afford it, but simply those mortgages were used to back up other securities transaction (this is a lil complex).

When recession hit, people were laid off and as a reason couldn't pay mortgage, banks were tied up and could not fulfill their securities contract, that's how the housing bubble broke. IMO Risk Management is the least thing on the mind of a CBN governor, Risk management isn'ta macroeconomic factor the gov should be worried about. If the banks fell, CBN bails them out, but instead Sanusi did something entirely.
Risk management in banking is actually special. Banks use so much leverage and they are exposed to so may types of risks that are difficult to insure that insurance companies that happily insure most of the assets of a manufacturing companies dare not insure the largest assets held by banks - loans

If risks should be the last thing on the mind of a central bank governor, why do they worry about systemic risk, why do you have stringent regulations for banks, why do they prescribe capital adequacy for banks, why did they talk about asset price bubbles, why have they removed banking regulation from FSA and brought it under BoE, why did Greenspan speak of irrational exuberance?

Banks take monumental risks and their collapse can lead to contagion. Any governor that does not worry about risk management is sitting on a time bomb

@Betathings
You have said it all in a way I never could have since I am no economist. Thanks for this.

I don't see how risk management is macroeconomics or even microeconomics?

Well, let me be more clear. I've seen value-at-risk and understand the concept and math behind it. But if the rest of risk management looks similar to this, it isn't really economics.

It is a tool for banks to understand the riskiness of assets. But not pure micro or macro like I studied in high school.

ebogentle:

@Manny4life
Thanks for your posts. I understood everything you said. Nothing was complex there. But again it begs the question. Why would any sane institution use "essentially bad debts" to back other securities and thus heating up the system. Maybe it is because they ignored the warnings of the risk managers or they did not have one.
So you are of the opinion that CBN should just bail the banks out and mind its own business as to why the banks are failing? That seems to me like a model designed to fail since it rewards excesses and escessive risk without question.

I wouldn't say they were bad debts because, I mean this mortgage were still appearing on their balance sheet as asset but not as current assets. Suffice to say that, at the point when they entered into these securities contracts such as derivatives (futures, options and swaps), they entered when the economy was good. They entered on the obligation that you the mortgage holder will fulfill your part of the mortgage contract. Due to the reason on how these are traded, the SEC did not live up to its expectation to oversee strong oversight, traders were defrauding investors and that's what left the bank ope and sore. Anyone wanting me to delve into this more further, I will be more than happy to.


I am of the opinion that CBN should bail these banks out, at the same time regulate them NOT make decisions for them.For instance, before you push money into the system,you have to check what is the inflation rate, keep in mind you have to adjust -/+ 1 error rate, now that you have inflation rate say 16%, what is unemployment rate say 8%, and you have $100billion in circulation, keep in mind that if you gonna bail out banks with $3billion, that is LOAN t the banks that will be paid back, however, $3billion is 3% of the money in circulation putting inflation at about 19% but what happens to unemployment, that spirals automatically to 11% as well. Therefore, this bring me to my point, CBN shouldn't make decisions for them, if he wanted to bail them, that should be as a last resort, but he did not let them recapitalize instead he printed more money into circulation.

ola olabiy:

Inflation is macroeconomics and does constitute risk to any economy. Thus, the risk associated with it does have to be managed.

In fact, all aspects of macroeconomics have elelments of risk.
I mean ALL!

Ogbeni,

You are just being pedantic at the moment jo. Bernanke, who used Milton Friedman and Anna Schwartz work on the great depression as a basis for many works and books did not be-labour the importance of risk management. A beg make I hear word.  
How many books did Bernanke or any other economist write on risk management in macro-economics?

ekt_bear:

I don't see how risk management is macroeconomics or even microeconomics?

Well, let me be more clear. I've seen value-at-risk and understand the concept and math behind it. But if the rest of risk management looks similar to this, it isn't really economics.

It is a tool for banks to understand the riskiness of assets. But not pure micro or macro like I studied in high school.

You are almost correct. Some are just trying to make it more important that it really is. Its like lecturing a bank teller on how to count money. Its a given.

Risk management is a MAJOR oversight of any central bank
pROVE ME WRONG AND I WILL LET YOU KNOW

Katsumoto:

Ogbeni,

You are just being pedantic at the moment jo. Bernanke, who used Milton Friedman and Anna Schwartz work on the great depression as a basis for many works and books did not be-labour the importance of risk management. A beg make I hear word.
How many books did Bernanke or any other economist write on risk management in macro-economics?

You are almost correct. Some are just trying to make it more important that it really is. Its like lecturing a bank teller on how to count money. Its a given.

Every aspect of macroeconomics is full of risk, mate

@Manny4life and @Katsumoto.
I will say no more from here since economics is not my forte. However I am learning a lot so please keep dem posts coming. ciao!!

ola olabiy:

Risk management is a MAJOR oversight of any central bank
pROVE ME WRONG AND I WILL LET YOU KNOW

I don't want to keep gragging this point; so I will ask a pertinent question.

Is SLS an expert on macro-economic Risk Management? Do you think Risk Management in a Bank is the same as Risk Management in a Central Bank?

ola olabiy:


Every aspect of macroeconomics is full of risk, mate

Risk is in everything but you are making it more important than it really is.  

If you know how to manage risk in a factory, can you manage risk in a school?

ola olabiy:

Inflation is macroeconomics and does constitute risk to any economy. Thus, the risk associated with it does have to be managed.

In fact, all aspects of macroeconomics have elelments of risk.
I mean ALL!

Seriously? Ok start naming them please.

BetaThings:

Risk management in banking is actually special. Banks use so much leverage and they are exposed to so may types of risks that are difficult to insure that insurance companies that happily insure most of the assets of a manufacturing companies dare not insure the largest assets held by banks - loans

If risks should be the last thing on the mind of a central bank governor, why do they worry about systemic risk, why do you have stringent regulations for banks, why do they prescribe capital adequacy for banks, why did they talk about asset price bubbles, why have they removed banking regulation from FSA and brought it under BoE, why did Greenspan speak of irrational exuberance?

Banks take monumental risks and their collapse can lead to contagion. Any governor that does not worry about risk management is sitting on a time bomb

Look you guys are getting me all WRONG. I wasn't talking about the banks, like I said risk isn't special to banks, risk is nothing but assuming decisions, period. When regulations were designed for banks, RISK did NOT top their priority. While Risk is important, it's decision based approach that determine how much risk you assume. Besides, like I said and still maintain, Risk isn't a so-special factor in a business be it banking or whatever. I think a banking CEO will look more into his Cash-flow, than he will look at risk.

ola olabiy:


Every aspect of macroeconomics is full of risk, mate

Start naming what aspects in economics is full of risk? Is it inflation? Unemployment? Price control? Trade? Which is it and please give concepts and how it affect it because I really want to know.

ebogentle:

@Manny4life and @Katsumoto.
I will say no more from here since economics is not my forte. However I am learning a lot so please keep dem posts coming. ciao!!

Hey it's cool, please feel free to ask anything, no one is here to shut u down.

naijaking1:

jamalah for president 2015
I mean it, because I have not met many Nairalanders as smart of you. I mean Igbo, Hausa, Yoruba, Edo, Tiv, Ijaw, whatever, you're the smartest. Your analysis of events is simply out of this World.
Good job, Sir

You had better be sure of who you are praising. Jamalah is obsessed with Sanusi and he is ready to lie to back it up. I noticed that a long time ago
We all know that when Shamsudeen was Finance Minister Remi Babalola (from Oyo State) was Minister of State. But Jamalah has turned Babalola into a Kano indigene

jamalah:

What most pple fail to understand about the appointment of Sanusi Lamido Sanusi is that it was deeply mired in the dynamics or intrigues that plagued the Yaradua government.
He comes from kano where Yaradua derived his biggest support and was the most experienced banker in the state having reached the top echelon at First bank. Already two kano men were in charge of the finance ministry: the minister of finance and the minister of state for finance  which was unprecedented in Nigeria's political history for both to come from the same state. Why not add another kano man to pocket the exchequer. So to be frank the initial appointment was to populate the Yaradua's government with his kano backers.

Katsumoto:

I don't want to keep gragging this point; so I will ask a pertinent question.

Is SLS an expert on macro-economic Risk Management? Do you think Risk Management in a Bank is the same as Risk Management in a Central Bank?

Risk is in everything but you are making it more important than it really is.  

If you know how to manage risk in a factory, can you manage risk in a school?

So, where did others before him get their experience in macroeconomics.

I can see you don't intend to talk about risk management again.
A CBN governor is meant to be in control of micro and macro environment of it.
And, risk mgt is a major aspect.
Prove me wrong or I will quote others sources

If you know how to manage risk in a factory, can you manage risk in a school?

@Katsumoto Please ask this question again but restrict it to financial risk only.

@manny4life
I guess what some of us are saying is that if the recent past has taught us anything, it is that risk should become more important than it currently is. I wont stretch as far as to say the most important. But certainly more important that it is now.

Recession, economic downturn


^^^Mannylife

^^gdp, etc

What you guys don't know is that what banks do have major effects on macroeconomic performance of any economy.

So do you think retail/investment banks are not involved?

manny4life:

Look you guys are getting me all WRONG. I wasn't talking about the banks, like I said risk isn't special to banks, risk is nothing but assuming decisions, period. When regulations were designed for banks, RISK did NOT top their priority. While Risk is important, it's decision based approach that determine how much risk you assume. Besides, like I said and still maintain, Risk isn't a so-special factor in a business be it banking or whatever. I think a banking CEO will look more into his Cash-flow, than he will look at risk.

I still maintain that risk management is special in banking. Banks are heavily exposed to risks. All those models used to price those exotic products are targeted at quantification of risks. That is why they have more PhDs in physics on Wall Street than elsewhere these days
Which industry is exposed to risks that insurance companies cannot insure? Only banks.  and I am not even sure that the insurance companies even really understand these risks. Otherwise AIG would not have been fallen by amongst others its CDS.

A banking CEO looks narrowly at nominal cashflow at his own peril. He must have a statement of risk adjusted cashflow and VAR

ola olabiy:

^^gdp, etc

ola olabiy:

Recession, economic downturn


^^^Mannylife

Dude what school again did you study this your economics from? Since when did recession and economic downturn become macroeconomic components? Now let me teach you Macro 101, recession is NOT a macroeconomic component, macroeconomic components like price control, inflation and unemployment leads to recession and economic downturn.

ebogentle:

@Katsumoto Please ask this question again but restrict it to financial risk only.

@manny4life
I guess what some of us are saying is that if the recent past has taught us anything, it is that risk should become more important than it currently is. I wont stretch as far as to say the most important. But certainly more important that it is now.

Hey I agree with you but most financiers or investors think differently on a curved pattern; like I've always maintained, risk nothing but based on decision approach, just like MS Excel, plug in different "what-if" scenarios and boom it will generate result to determine what your risk is if certain events occurs.Most advanced risk models use the same but advanced appraoch but the same concept.

So, marks out of 10, where 1 is poor and 10 is good.


- Inflation rate (2009:11.1%, 2011: 13%)

- Foreign Exchange Management USD/Naira (2009: N147, 2011: N156)

- Capital formation (No data) But anecdotal evidence suggests this has worsened as banks balance sheets have taken a beating.  Next year's daily cash limit is expected to cause some concerns.

manny4life:


Dude what school again did you study this your economics from? Since when did recession and economic downturn become macroeconomic components? Now let me teach you Macro 101, recession is NOT a macroeconomic component, macroeconomic components like price control, inflation and unemployment leads to recession and economic downturn.

Egbami oooo

Kats please help your mate.

What is the difference between recession and economic downturn?

I am shocked

BetaThings:

I still maintain that risk management is special in banking. Banks are heavily exposed to risks. All those models used to price those exotic products are targeted at quantification of risks. That is why they have more PhDs in physics on Wall Street than elsewhere these days
Which industry is exposed to risks that insurance companies cannot insure? Only banks.  and I am not even sure that the insurance companies even really understand these risks. Otherwise AIG would not have been fallen by amongst others its CDS.

A banking CEO looks narrowly at nominal cashflow at his own peril. He must have a statement of risk adjusted cashflow and VAR

Well people have different thoughts and opinions; IMO, banks are not heavily exposed to risk not if they decide to assume one. A bank is not obliged or obligated to trade investment, they are not forced to do the thing they do because it's decision based, You're right Wall Street "investment banks" have Quants, not an average Wachovia retail or commercial banking. Again, AIG just like other companies engaged in series of untangled business, just because AIG did does not mean other insurers did as well. Well I guess people have different opinionated thoughts about risk. Other banks that did not go under is not because they had the best quant, but because they did not want to assume any risk at all.

Just to help you, Mannylife

Read this:

http://www.colombialink.com/01_INDEX/index_finanzas_eng/recession.html

Sanusi has done creditably well,period.

ebogentle:

I guess what some of us are saying is that if the recent past has taught us anything, it is that risk should become more important than it currently is. I wont stretch as far as to say the most important. But certainly more important that it is now.

Actually my point. In the past years, whenever central bankers gathered it was to talk about price stability and eulogise deregulation. They are no longer so sanguine about market forces. Financial stability has become a major issue to them
Anybody writing about central banking now would have much to say about the topic

A central bank gov is supposed to consider price stability as his primary focus, but financial system collapse can make nonsense of that focus

And even in Nigeria, the CBN has always added developmental functions to its role
Somebody is saying that what is Sanusi dong with Commodities Exchange, but nobody asked how we came about SEC which was also midwived by the CBN as part of its developmental functions

May be you don't know that recession - if not well managed, leads to depreession which is worse than inflation or deflation  

ola olabiy:

Egbami oooo

Kats please help your mate.

What is the difference between recession and economic downturn?

I am shocked

Dude, STOP making a fool of yourself, I'm quoting just like you put it out there. An economy goes through four different cycles; boom, recession, slump and recovery. A downturn can be described as from the sloping down of the boom stage towards the upward of recovery even during recovery, there's still slow economic activity.

Interesting! Very Interesting thread!

I will keep quiet for now, and learn more 1st.

Keep it up guys.

manny4life:


Dude, STOP making a fool of yourself, I'm quoting just like you put it out there. An economy goes through four different cycles; boom, recession, slump and recovery. A downturn can be described as from the sloping down of the boom stage towards the upward of recovery even during recovery, there's still slow economic activity.

I shouldn't make a fool of myself? Well, let me ignore that. But, don't go down that lane again, okay?


That is not the best way to wriggle yourself out of a clear mistake. You simply goofed!

BetaThings:

Actually my point. In the past years, whenever central bankers gathered it was to talk about price stability and eulogise deregulation. They are no longer so sanguine about market forces. Financial stability has become a major issue to them
Anybody writing about central banking now would have much to say about the topic

A central bank gov is supposed to consider price stability as his primary focus, but financial system collapse can make nonsense of that focus

And even in Nigeria, the CBN has always added developmental functions to its role
Somebody is saying that what is Sanusi dong with Commodities Exchange, but nobody asked how we came about SEC which was also midwived by the CBN as part of its developmental functions

This is my concern, why does Nigeria have to always do things differently?

manny4life:


Well people have different thoughts and opinions; IMO, banks are not heavily exposed to risk not if they decide to assume one. A bank is not obliged or obligated to trade investment, they are not forced to do the thing they do because it's decision based, You're right Wall Street "investment banks" have Quants, not an average Wachovia retail or commercial banking. Again, AIG just like other companies engaged in series of untangled business, just because AIG did does not mean other insurers did as well. Well I guess people have different opinionated thoughts about risk. Other banks that did not go under is not because they had the best quant, but because they did not want to assume any risk at all.

Banks take deposits and lend. Even if they do not do things that expose them to market risk, the simple activity of lending engaged in by Wachovia still exposes it to credit risk. Given the size of their balance sheets, it is a huge risk. Besides the interest rate risk can sum up to a tidy sum given the mismatch between assets and liabilities when applied to highly leveraged balance sheet