tag:blogger.com,1999:blog-2144856674271066060.post7183208585846022404..comments2023-10-18T01:51:47.968-07:00Comments on The Remmers Report: Another Bad Call By Our BanksJerry K. Remmershttp://www.blogger.com/profile/06431399785911786408noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-2144856674271066060.post-14018336015298200292009-04-27T10:43:00.000-07:002009-04-27T10:43:00.000-07:00I think your comments on ARS's as stated in your b...I think your comments on ARS's as stated in your blog are a bit facile. While one could take serious issue with my comment here that the downside of ARS's was not fully contemplated by those selling them (certainly including WFB), I maintain that this is overall an accurate portrayal. If there was naivete or a blind eye at work, it cut across all sectors, including those in the financial sector such as myself. We have more than a few customers who purchased ARS's for their higher yielding return than comparable forms of short-term, near cash-equivalent, liquid assets such as simple money market funds. Most all ARS's re-price every seven days and until the recent downturn, did so like clockwork. When we analyzed our customers sources of liquid assets, we always counted ARS's as safe and, indeed, very liquid, because that was our experience. We didn't care how our customers came to own them, either through our investment division or another bank's. The demise of this market, about which, by the way, you are completely silent, caught everyone unawares. I don't offer this as an excuse. I'm sure that customers who bought these short-term instruments from WFB got sales pitches about their safety. I don't believe there was any false advertising or fraudulent intent. Rather, I really believe everyone including us just got caught up in the mood of the market that any and everything had a market, at some price. I doubt if anyone contemplated no market at any price, which is essentially what happened here. <br /><br />I guess what concerns me is the distancing of all financial institutions selling these instruments, including WFB, from any responsibility for the repercussions. On the one hand, buyers of any financial instrument should operate in the context of buyer beware. The ONLY truly safe investment, at least until the end of the world as we know it, are federally FDIC guaranteed deposits now up to $250,000. People forget this, because they delude themselves. On the other hand, it seems almost cynical that banks selling ARS's responded to the current debacle by either denial (initially) or by offering low interest rate loans for up to 90% of the face value of the ARS's. The good news here is that by doing so the banks are suggesting that the market will return for ARS's and that when that happens the borrowers will receive their original proceeds to repay these loans and, one would hope, get some back value for interest lost (doubtful). As a final comment, let's not get all worked up about an instrument that largely was limited to more sophisticated investors. The notion that ARS's were typical retail financial products purchased by ordinary bank customers is nonsense. And by the way, TARP has nothing to do with ARS's.ljrnoreply@blogger.com