TD,
It appears Yamaichi got itself into trouble with some "contractual obligations" that you and I would probably call derivitives. To what extent the bigger players have similar "obligations" is at this time unknown. Here there seems only to be concern that the security companies are not as open, Japanese are using phrase "transparent," as they should be. This may prompt a sell-off tomorrow in brokerage firms. To what extent this will spill over into industry and other services is unknown but none of my friends seem outwardly concerned. It may provide a temporary buying opportunity.
Anyway, land prices here were outrageous, at one time Tokyo City was worth more than Canada. Many took out loans based on that valuation. With the recession and the colapse of land values, the banks found themselves with worthless loans. Probably not unpredictable, but not wholey their fault either.
Brokerage houses have also come under pressure. Yamaichi based some long term contracts on high percentage points. It would have been OK if the markets had continued to climb, but when it crashed they found themselves with contracts obligating them to pay 8% or more on money they had borrowed from corporations. With revenues falling off due to lack of securities sales, obligations to some corporate clients to make up any and all losses, and high interest rates on borrowed money they could not repay, Yamaichi found itself between a rock and a hard place. |
