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Originally Posted by
g3abc (17Oct2012)
According to PM Lee, since it is unknown how many banks intermix the
funds in low risk fixed deposit and ordinary savings accounts with funds
used in leveraged operations of their investment banking arms (to get
high returns and bonuses that follow)- there is a tendency for banks to
create bubbles in various parts of the economy that which will burst
from time to time (e.g. the sub-prime crisis (Lehman 2008-9) was caused
by the demand by investment banks for
high interest paying investment vehicles called CDOs
which some investment banks created and sold whilst many hedge funds
and other investments banks traded and owned)- unfortunately the immense
complexity of the product allowed too many loopholes in valuation
resulting in industry wide delusion that CDOs were actually viable
investment vehicles (even the respective rating agencies- Fitch,
S&P, Moody's were totally fooled).