What could possibly go wrong?
To ensure we’re all clear about the banking sector having learned its lessons, the Financial Times yesterday noted that Peter Hancock (a prime mover in the invention of credit derivatives) is to join AIG….one of the many institutions which suffered from his little brainchild.
His job at AIG is going to be ‘the overseeing of risk’, an onerous task but one that I’d imagine involves largely looking in the mirror. For those of you who don’t have ‘packaged toxic debt’ etched painfully onto your brain using a rusty garden fork, Hancock was one of the MOTUs (Masters of the Universe) who pioneered the concept of taking radioactive loans, and folding them lightly into a mélange of Russian cowboys loans and African government loans….along with a few tasty morsels of not too bad at all debt. The whole then became a ‘derivative’, pretty much in the same way that Homo sapiens is a derivative of the jackal.
Although originally designed as a way to spread risk, after a while it became clear even to those packaging them that there wasn’t much meat in the Scouse: some of the spuds going in there were yelling ‘please kill me before I default again’. So Hancock and his chums came up with the Credit Default Swap – a game of Polish roulette played with other banks, in which all the gun-chambers had bullets in.
Hancock made his name at JP Morgan, the original source in 1991 of the very CDs and CDSs that bankrupted nigh on every bank in the world – except of course Morgan the Pirate.
He’s going to pull down $7.5 million a year, and is being groomed as the eventual CEO of AIG. Until then, he’ll just be the SOB in charge of auditing risk. Having absorbed this news, I shall sleep soundly in my bed tonight.
One thing you really can be pleased about is that Hancock’s unique skills are unlikely to screw up your pension, because being only 51 it’s not really his bag. No, there are other folks busy ensuring that your pension will be worth one 1923 German Mark before too long.
You may find this hard to grasp, but pension funds and other unrelated clowns have been pouring our retirement money into the commercial property sector. You may say “And what better place for it?” and I might reply “How long have you got?”
It has long been the job of pension companies to ride into town just as the James Boys have finished all the Beer and shot the sheriff. During the boom of 2006 in commercials, a cool £1.7 billion was thrust upon those selling the action. So in the light of the internet’s incursions into retail (and none of the banks having any money to fund so much as a leveraged buy-out) the pension industry whacked £3.2 billion in there during the last quarter of 2009 alone.
Anyone got a few million guilders for a tulip? Very nice tulip. Much sought-after.
Copyright John Ward
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