Kenneth C. Griffin Quotes

Credit ratings and risk weightings must undergo a thorough process of review and revision. No security or instrument on the planet should have a zero risk weighting.

A financial institution has the task of taking risks, and if it's a well run institution - say, Goldman Sachs - it tries to cover the potential losses to itself, but only to itself.

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.

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?

There is no evidence that more regulation makes things better. The most highly regulated industry in America is commercial banking, and that didn't save those institutions from making terrible decisions.

The financial crisis of 2008 was not caused by investment banks betting against the housing market in 2007. It was caused by the fact that too few investors - including all of the big investment banks - bet too heavily on the housing market in the years before 2007.

In the future, financial firms of any type whose failure would pose a systemic risk must accept especially close regulatory scrutiny of their risk-taking.

We don't have sales trading, brokerage, capital lending - any of those kinds of things that got some of the Wall Street firms a little bit in trouble.

It's hard to tell which assets will be toxic. The best way to ensure that only shareholders and banks feel it is have adequate capital.

The financial crisis is a stark reminder that transparency and disclosure are essential in today's marketplace.

If there had been a Financial Product Safety Commission in place 10 years ago, the current financial crisis would have been averted.

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.

The Commission concludes that the banking supervisors failed to adequately and proactively identify and police the weaknesses of the banks and thrifts or their poor corporate governance and risk management, often maintaining satisfactory ratings on institutions until just before their collapse. This failure was caused by many factors, including beliefs that regulation was unduly burdensome, that financial institutions were capable of self-regulation, and that regulators should not interfere with activities reported as profitable.

Federal and state rules required or encouraged financial firms and some institutional investors to make investments based on the ratings of credit rating agencies, leading to undue reliance on those ratings. However, the rating agencies were not adequately regulated by the Securities and Exchange Commission or any other regulator to ensure the quality and accuracy of their ratings. Moody’s, the Commission’s case study in this area, relied on flawed and outdated models to issue erroneous ratings on mortgage-related securities, failed to perform meaningful due diligence on the assets underlying the securities, and continued to rely on those models even after it became obvious that the models were wrong.

Raising minimum capital requirements [for banks] is expensive. But it is safe.

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 want banks to take some risk, but intelligent risk.

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.

I was secretary of the Treasury when the credit bubble burst, so I think it's fair to say that I know a little bit about risk, assessing outcomes, and problem-solving.

My day job, running a fund management company, means I know that I and my team can't afford not to read every word of every document about assets or markets we propose to invest in, and to be absolutely clear we are complying with all the legal and regulatory requirements involved.

I support the Volcker rule, but there needs to be proper definitions around the Volcker rule so that banks can understand exactly what they can do and what they can't do, and that they can provide the necessary function of liquidity in customer markets.

Risk management systems and controls may discourage or limit certain revenue-generating opportunities. Failure to ensure the independence of these functions from the revenue generators and risk takers has been shown to be dangerous, and this is something for which the board is accountable.

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].

Indeed, better risk management may be the only truly necessary element of success in banking.

Keeping the risk management plan up to date can transform it from a door stop into a vital project management tool. Remember: what you don't know can kill your project.