AAAs proved more dangerous than “junk”

Of course real disasters are more prone to be found in sectors perceived as less risky than those thought as more risky, if only because when entering the latter we are all more careful.

Having said that though reading Michael Milken, who was known as the Junk Bond King, telling the world now that “investors will lose more money on AAA credits than on any other rating category”, is a wonderful reminder of how little we really know about risk and cosmic order, and it should hopefully help to humble some regulators.

As for me, in the title of his article “Prosperity rests on human and social capital”, October 5 I would have loved for Milken to also have included in the title “and the willingness to take risks”; so as to help make clear that we are running risks when allowing our bank regulators to impose special taxes on perceived risk.

Does Observer know the difference?

Sir referring a bit unnecessarily sourly to a man who is supposed to have made his peace with society Observer, Spetember 19, comments on some observations made by Michael Milken on real estate loans but that demonstrates that Observer might not really be so clear about what this subprime mortgage business is all about. Perhaps I could help clarify.

We have some borrowers who qualify as less than top of the heap and have been known as “subprime”. Now to these subprime borrowers you can actually extend very prime quality mortgages but and what has really happened is that you can also be extremely sloppy doing that, and of course it is important to be able to tell the difference. My suggestion is although it becomes a bit lengthy we should really have to refer to our current problem sector as those “subprimely” awarded mortgages to subprime borrowers.