Charlie Munger Quotes

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.

I think people have to be very careful with new ideas [in fiancé and economics]. What you need to worry about is when you have something that’s a really good idea, but you get too much of it too fast, like over-the-counter derivatives.

No matter how the financial system is set up, no matter what the economic system is, as long as you have people, you're going to have financial crises; you're going to have bubbles that manifest themselves in the financial system.

An investor who proposes to ignore near-term market fluctuations needs greater resources for safety and must not operate on so large a scale, if at all, with borrowed money.

The beauty of a financial institution is that there are a lot of ways to go to hell in a bucket. You can push credit too far, do a dumb acquisition, leverage yourself excessively - it's not just derivatives [that can bring about your downfall].

A lot of our respected financial institutions are just casinos in drag.

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

And people really behaved in a fraudulent way or something, we'll go back and find the culprits later on. But that really isn't the problem we have. I mean that's where it came from, though. We leveraged up and if you have a 20 percent fall in value of a $20 trillion asset, that's $4 trillion. And when $4 trillion lands - losses land in the wrong part of this economy, it can gum up the whole place.

The reality is that the institutional framework in which Wall Street operates is fundamentally inappropriate, and it inevitably generates violent fluctuations of the market.

Preventing liquidation of an unbalanced market will leave you in tears.

As we try to make the financial system safer, we must inevitably confront the problem of moral hazard.

You shouldn't be trying to create a system where no bank fails, but you should be creating one that catches a bank and allows it to fail without impacting the financial markets.

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.

What I think about derivatives is if every institution that owns or trades them is properly margined and marked to market, including end-users, including every institution, including sovereigns and multilateral institutions, then the system would be safe - if people were margined the way customers of investment banks are margined.

The financial system is drifting back to business as usual a bit to quickly …. We are starting to see risky behavior of the sort that people were scared of after the crises

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.

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.

Limiting the destructive risk-taking by large financial firms and banks which are 'too big to fail' is needed.

It's almost 10 years since the 2008 crisis, but we all still remember the consequences of ignoring threats to the public finances.

I spent my whole career thinking about risk, markets, infrastructure, and regulation. I had seen the financial crisis unfold, and I had seen the credit derivatives market get operationally ahead of itself, which resulted in systemic risk counterparty exposures. I began to believe that distributed ledgers had the capability to tackle that problem.

The world of derivatives is full of holes that very few people are really aware of. It's like hydrogen and oxygen sitting on the corner waiting for a little flame.

I think it's been, you know, kind of like a tragic play to this point. But at this point, I think it's clear, and will be clear to the majority of the Congress. I think it's clear to the American people that there is only one countervailing force to a world where financial institutions are trying to sell instruments every day and where credit has dried up, and that's the United States Treasury.

Investment banking has, in recent years, resembled a casino, and the massive scale of gambling losses has dragged down traditional activities as banks try to rebuild their balance sheets.