Word: banking
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...Street's plunge. Japan's Nikkei Index fell 4.1% on Sept. 30; after declining in early trading, stocks in China and Hong Kong eked out small gains. "The reaction was not as bad as I had feared," says Dariusz Kowalcyzk, chief investment strategist of CFC Seymour, a boutique investment bank in Hong Kong...
...because of bad judgment about what to invest in? Can I get bailed out when my portfolio tanks? It's a variant on the old saw (often attributed to J. Paul Getty, although I'm sure somebody must have said something like it before him): "If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem." Leveraged financial institutions (banks, investment banks, hedge funds) make investments with lots of borrowed money, so when their portfolios tank they can quickly get into a situation where they can no longer...
...there's a decent chance you haven't even felt it. Why, you may be asking yourself, does everyone think there's such a big a problem when you're still being offered credit cards in the mail and 0% financing at the car dealership? Maybe you used to bank with Washington Mutual or Wachovia and overnight you've become a Chase or Wells Fargo customer, but if your money's still there, why does the rest matter...
...here too, Spain's regulators have encouraged sensible behavior. For years, banks have been required to put aside cash to cover expected future losses, not actual ones. The Bank of Spain "thought that in the good times it makes sense to build a cushion for the bad times," says Ramirez. So while Spain enters a downturn "a significant portion of the potential deterioration [for banks] will be covered by these provisions." There are no guarantees, of course, for Santander or anyone else, in today's parlous international environment. But for now, at least, Spain offers a lesson in prudence through...
...That's not all bad, especially now that most of the endangered financial institutions are commercial banks. The Federal Government has clearly defined that authorities take them over, merge them out of existence or shut them down - whereas it had to make things up as it went along with investment banks Bear Stearns and Lehman Brothers and insurer AIG. That's why the demise of giant banks Washington Mutual and Wachovia, arranged over the past week by the FDIC, occurred in a far more orderly fashion than the non-bank meltdowns...