Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: accountclosed who wrote (41385)	12/30/1998 10:32:00 AM
From: Jess Beltz	Read Replies (2) \| Respond to of 132070

Antoine, I am not exactly sure on legislation pertaining to loans being secured or not, but there is plenty of legislation with respect to what categories of loans banks can participate in. There are also economic incentives that are legislatively generated. The Basle Accords for example risk weight different loan categories, and a bank's capital standard is thereby a function of the kinds of assets they hold. More and more, also, banks have to maintain certain legislatively derived assets-at-risk measures using variants of a model derived by J.P. Morgan & Co. There is indeed quite a bit of legislation proscribing what banks can do. The perception that they can simply loan to whomever they want is a myth. In fact, i am indeed relatively certain that there will soon be legislation that either outright prohibits commercial banks from extending any kind of credit to hedge funds or others associated with the industry, or such positions will carry a very high risk-weight coefficient in the capital standard calculation, making them a very expensive (with respect to shareholder equity participation.) Once it comes down to a small participation in hedge funds versus a much larger participation in treasuries (with their guaranteed payoff) per dollar of equity, hedge fund participation will appear considerably less profitable. jess.