Blythe Masters Quotes

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.

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.

I'm afraid sometimes certain individual cases of defaults are unavoidable. What we should do is to step up monitoring, properly handle relevant matters, and ensure there is no regional and systemic financial risk.

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.

You cannot have fairness unless you have transparency…We don’t know that is going on inside those boxes … we could have a meltdown [in the entire economy].

Operational risk is the risk of loss resulting from bank operational failures, such as rogue traders, fraudulent sales practices, and cyber risks. Operational risk capital is money or assets that banks have to hold to shield the economy from the consequences of these kinds of failures.

While the move to central clearing has made the system safer, we need to make sure that the central counterparties have the resources and risk-management practices to withstand plausible but severe shocks.

Derivatives are like sex. It's not who we're sleeping with, it's who they're sleeping with that's the problem.

I think that's something that investment banks have worried about for a long time and are continuing to worry about, but it's not an easy solution when you have lots of people betting the company's money, how do you really allocate those risks? How do you make sure that the people that take the risks are feeling the risks in an appropriate kind of fashion?

The bonus for bankers fragilizes the system. Someone has the upside at the expense of others.

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

Everyone failed to appreciate that our sophisticated, hypermodern, highly hedged, derivative-based financial system—how ultimately fragile it really was.

Global banking’s current structure generates an unjust distribution of risks, where losses are socialized.

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.

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

Bringing back something akin to Glass-Steagall would clearly help limit risk in the system. And that's a very good and worthy goal. Letting banks sell securities and insurance products and services allowed them to grow too big too fast and fueled a culture that put profit and pay over prudence.

When you lose control of risk at a financial institution, you do a variety of unfortunate credit extensions or purchases - and all of a sudden, you've blown up your business.

Proprietary trading does not belong in banks with FDIC insurance.

Large credit guarantees also impede optimal allocation of financial resources and increase moral hazard.

We don't want to bank all our risk on a small collection of big companies. We don't want to lose 20 percent of our business if one big account goes away.

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

Edelman maintains a very conservative balance sheet. We do small acquisitions. This helps me sleep well at night.

When you take smaller gambles, no one particular deal can be big enough to have a material adverse effect on the company.

The overwhelming majority of new mortgages are issued with government backing in a highly concentrated securitization market. That leaves us with both potential taxpayer liability and systemic risk.

We must learn the lessons of the 2008 crash: no company should be able to become too big to fail.