Blythe Masters Quotes

I've been telling anyone willing to listen that banks have a tendency to sit on time bombs while convincing themselves that they are conservative and nonvolatile.

The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deemed these events "unlikely."

A bank needs models to measure risk. The problem, however, is that any one bank can measure its risk, but it also has to know what the risk taken by other banks in the system happens to be at any particular moment.

Do we have to regulate derivatives? Yes, we do. 'Cause when I did this in my investments, frankly, no one knew who could pay who. But derivatives have an important place in our economy.

The fundamental problem with banks is what it's always been: they're in the business of banking, and banking, whether plain vanilla or incredibly sophisticated, is inherently risky.

Bailing out every bank that fails makes the system riskier, not safer.

What's so seductive about the efficient markets hypothesis is that it applies nine years out of ten. A lot of the time it works. But when it stops working, you blow up.

It is impossible to understand the financial health of big financial institutions and their potential impact on the market. They don't even understand it themselves.

If Freddie Mac is unable to raise capital, it could spark a political and financial crisis.

If you think too-big-to-fail banks are not worthy of investment because of their impossible-to-read balance sheets, well then, don't buy them.

If nobody can sell mortgage-backed securities based on trillions of dollars of unpayable instruments, there's a lot less risk in the overall system.

Fannie Mae may have conformed to the rules but the rules didn’t conform to reality. A major bank or financial institution could meet every single regulatory requirement yet still be at the risk of collapse.

Banks are employing risky derivatives strategies to goose up returns….the interbank market could freeze up, and one could well have a full blown financial crisis.

Unregulated derivatives like credit default swaps threaten our regulated markets, or indeed our economy without any Federal agency knowing about it.

We have institutions that have been allowed to become too big to fail because we had all kinds of flaws in our financial infrastructure, in the whole way over-the-counter derivatives work.

Don't act like a bank unless you are a bank. That was a really big lesson learned from 2008.

Complexity and interconnectedness matter as much as size in assessing risk in banking.

The financial crisis revealed important weaknesses in many areas of our financial system.

You cannot have the financial system crippled because of lack of decision making and lack of quality people.

With government deregulation and the triumph of financial liberalization, the dangers of systemic risks, the possibility of a financial tsunami, sharply increased.

Risk managers and investment bankers and actually, all kinds of investors took on more risk than they expected. So there was a failure of risk management. There was a failure to recognize how much risk there was in some of these securities that people bought.

In engineering, people have a big margin of safety. But in the financial world, people don't give a damn about safety. They let it balloon and balloon and balloon. It's aided by false accounting.

I do believe CDSs [credit default swaps] have been miscast, much as poor workmen tend to blame their tools.

To be sure, the provision of liquidity alone can by no means solve the problems of credit risk and credit losses; but it can reduce liquidity premiums, help restore the confidence of investors, and thus promote stability.

Many of us like to think of financial economics as a science, but complex events like the financial crisis suggest that this conceit may be more wishful thinking than reality.