Five comments on Patrick Jenkins “Failure to learn lessons of 2008 caused LDI pension blow-up”
Five comments on Patrick Jenkins “Failure to learn lessons of 2008 caused LDI pension blow-up”. Not sent by a letter to the Financial Times.
“There’s no such thing as risk-free”
Especially if you take into account that e.g., major bank crises always result from the build-up of dangerously excessive exposures with assets perceived or decreed by regulators as especially safe.
“Ultra-low interest rates have obscure side-effects”
Indeed, especially when those ultra-low interest rates are the result of manipulations. The current risk-free rate has nothing to do with the risk-free rate before risk weighted bank capital requirements and QEs.
“A leveraged bet — to ‘juice’ otherwise low returns”
“Assets assigned the lowest risk, for which bank capital requirements were therefore nonexistent or low, were what had the most political support: sovereign credits & home mortgages...A ‘leverage ratio’ discouraged holdings of low-return government securities” Paul Volcker
“In the UK, the government wants to make it easier for pension funds and life insurers to invest in riskier assets”
And it should be done, but only by removing the artificialities that have pension funds, life insurers and banks investing excessively in “safe” assets.
“Amateurish governance is dangerous. One of the lessons of bank failures in 2007-8 was that expertise matters”
And I could make many more similar comments.
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