Bank failure in Singapore- is PM Lee is sleeping with the enemy?

Singapore's concept of averting bank bankruptcy- sleeping with the enemy.
PM Lee says that he cannot regulate banks; time to put your $$$ in portions of $50k in different Singapore banks?

Saw the following news report about PM Lee saying that he cannot really tell the difference between retail banking and investment banking functions that some banks operate: 'Regulating tightly 'not always feasible'' [ST, 08Oct2012] : e.g. your savings earning 0.1% interest p.a. could be (mis)used by some banks to bet on extremely risky 'investments'- futures/ derivatives/ CFD/ CDO/ CDS etc etc, with potential benefits (banker's bonuses) but equally high downsides: see 'Rogue trader costs UBS $2 billion' [CNN, 19Sept2011] which losses cannot help but be translated into share holder losses, (SG inc. not being spared): 'Singapore Inc. Facing $7.4 Billion UBS Loss Tops Chain of Soured Bank Bets' [Bloomberg, 27Sept2011].

According to PM Lee Hsien Loong, "financial markets have variegated into all kinds of sophisticated activities, products, derivatives, investment activities, trading - and the (commercial banks) are also in these... It's very hard to draw a line,... if all the banks threaten to die at the same time, governments cannot help but go and rescue them" (as they did in 2008 and 2009).

So whilst the SG govt seems very eager to help foreigners (and ostensibly foreign tax evaders) whose funds are stashed in Singapore banks via the very act of using the Singapore reserves to bail out Singapore registered banks, my suggestion would be for humble Singaporeans to better to put your $$$ in $50k lots into different SG banks in case PM Lee's generous plan to bail out banks fail to materialize (the greed of some bankers cannot be underestimated).

This is because it seems from my reading of the SDIC web page that whilst S$200k in one bank would only be insured to the amount of S$50k, it's silent about the $200k being placed into 4 banks in the equal amts of $50k each; (nothing seems to state to the converse that $200k in lots of 50k in 4 different banks would be accepted as if it were $50k in each bank owned by four independent and separate persons).

Perhaps this is what the SG govt, in its shallow minded approach to the separation of retail banking from investment banks, is expecting Singaporeans to discover and do; perhaps the SG govt is indeed preparing to use its reserves to bail out banks en-masse.

And since the PA, a statutory / civil service board, already overfilled with coat-tail PAP MPs and wanna be MPs who have lost general elections but titled 'advisers to grassroots' cannot seem much intent upon the protection of Singaporeans and SG reserves through the establishment of clear and distinct rules regarding the conduct of retail banks (the safest) as opposed to the conduct of investment banks (the riskiest), my only solution left towards benefiting society, is for each Singaporean to divide their life savings into lots of $50k into each local bank in SG so that just in case the SG govt is unable to bail out banks in a bank domino situation such as the Lehman crisis of 2008 (to prevent foreigners investing in investment banks (/ the mishmash) from needlessly benefiting)- at least SGporeans have more than just S$50K of life savings left to spend out of all that they had originally saved.

Really, I cannot see why retail banks and investment banks cannot be separated. Lawyers and medical practitioners are licensed in Singapore and trusted by Singaporeans insofar that they are properly regulated, even Western and Chinese medical practitioners each have separate and distinct licensing bodies. Why can't an 'A class' license for retail banks be awarded, with an equally 'A class' insurance back-up scheme? International banks who seek such an A class certification shall be expected to conform to equally stringent capital requirements and rules, and all banks deposits subsumed under such scheme shall strictly reside locally. The properties of Genting Singapore I understand reside locally, and are separate and are not interchangeable with its parent group 'Genting international'. Just as some Singaporeans don't mind savings bank accounts earning interest of under 1%, these savings accounts too need to be protected against the higher risk operations of the average investment/ venture capitalist bank. Even for international banks in Singapore, its investment arm might fail but certainly not its retail arm. Too bad if retail banks, in view of lower profit margins can only occupy the outskirts of the city or charge fees like the CPF for over-the-counter transactions in excess of a prescribed frequency or even sans interest- what is most important is that the funds remain safe, and thus absent the need for national reserves to be used to bail out the bank- $80million in losses to a venture capitalist with a $100million investment budget speculating on a novel enterprise is totally different from the loss in life savings of $100k in the savings book account of an unmarried laborer, saved to fund his twilight years.

But for the US Fed printing USD to bail out its ailing banks resulting in dilution of strength of the USD how else would the inflation in price of gold be explained (see 2nd pict below)? Isn't it the ever rising national debt of nations that has caused faith in currency to wane with consequent inflation reigning its ugly head in commodities and services ranging from corn to healthcare to gold? If the funds of the average American had not been illicitly invested by banks the likes of BOA and Citibank through the lack of segregation, why would these bailouts have been necessary in the very first place?

Shame on the PAP for placing Singapore's national reserves at the doorstep of greedy investment bankers and shamelessly advocating that the whole world do the same. Shame on PM Lee, he sleeps with the enemy.

The people of Singapore have much to worry.
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Picts:

PM Lee suggesting that bank regulation is impossible and bankers are above the law:


The price of gold rising as the USD dilutes itself (10yrs till Feb2012):

[pict source]

TODAY newspaper SDIC advert 16Oct2012, pg5; trying hard to shore up confidence in Singapore banks:


Army of ruling party Politicians as grassroots advisers in the Peoples Association who ostensibly concur with the wisdom of repeated bank bailouts [pictsource]:


Anti bank bailout protests around the world:
[pict source]

[pict source]

... to be continued, but
Watch for preview: consequent of the printing of excess $$$ to fund recurrent bank bailouts... :
Hyperinflation Nation Part 1/3 - YouTube
Rest of the videos: [link]

bic_cherry said:

Singapore's concept of averting bank bankruptcy- sleeping with the enemy.
PM Lee says that he cannot regulate banks; time to put your $$$ in portions of $50k in different Singapore banks?

Saw the following news report about PM Lee saying that he cannot really tell the difference between retail banking and investment banking functions that some banks operate: 'Regulating tightly 'not always feasible'' [ST, 08Oct2012] :...

Click to expand...

Full report appended:

News: The Straits Times - 8 October 2012
Regulating tightly 'not always feasible'
by Elgin Toh
THE desire to regulate banks more tightly in the aftermath of the global financial crisis is understandable but not always practicable, Prime Minister Lee Hsien Loong said last night.
The pressure in the West to separate commercial banking from investment banking, for example, might in reality be impossible, he argued. The latter is "intrinsic to the financial system", he said.
In his response to a question on bank regulation at a dialogue session with Kiwi businessmen last night, Mr Lee weighed in on a debate raging in developed nations, especially ones where taxpayers' money have been used to bail out banks, to the outrage of many.
One argument is that a wall should be built between the safer commercial banking functions - that mainly involve taking deposits and giving out loans - and the more risky sort that hedge funds and investment banks engage in - which Mr Lee said sometimes amounted to "gambling".
The viability of commercial banks is then effectively guaranteed by the government to prevent any possible meltdown of the whole financial system. The latter, however, must be allowed to fail if they make the wrong bets.
Mr Lee expressed his scepticism with this argument yesterday, pointing out that "financial markets have variegated into all kinds of sophisticated activities, products, derivatives, investment activities, trading - and the (commercial banks) are also in these".
"It's very hard to draw a line," he said.
Furthermore, "if all the banks threaten to die at the same time, governments cannot help but go and rescue them", as they did in 2008 and 2009.
The Singapore Government's approach was therefore to accept that mishaps were in the nature of the capitalist system, and to build up the nation's reserves instead, in anticipation of such events.
In the 2008 crisis, said Mr Lee, Singapore could do the "right thing" and protect jobs by helping employers with Central Provident Fund payments because the reserves were there. Singapore was also fortunate that the storm passed relatively quickly, he said.
"Next time, better make sure we have got ammunition and powder dry, ready for a crisis."
http://www.pmo.gov.sg/content/pmosi...ober/regulating_tightlynotalwaysfeasible.html

Which Bank is stronger - CIMB or Maybank ?
Thanks

Why keep money in banks?

Is converting part of your savings into psychical gold and keeping it at home a good idea?

How the CDO Monster almost swallowed America and about the virtue of gold.

How the CDO Monster almost swallowed America and about the virtue of gold.

g3abc (17Oct2012) said:

Re Thread: Bank failure in Singapore- is PM Lee is sleeping with the enemy?
Which Bank is stronger - CIMB or Maybank ?
Thanks

Click to expand...

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).

A giant conspiracy then developed, even fooling the conspirators, government regulators and the investors themselves:
As I understand, a toxic mix of factors what created the now defunct CDO monster:

1. The Chairman of FED had apparently lowered interest rates to~ 1% after the dot com crisis of 2000 but had not raised rates despite a recovering economy- thus the desperation by USD70Trillion worth of wealth seeking higher returns. "CPM correspondents argued that a 'Giant Pool of Money' (represented by $70 trillion in worldwide fixed income investments)"[link].
2. The competition between rating agencies to give good ratings to all CDO creators in order to enjoy continued patronage of their rubber stamping rating services- thus the stamping of practically all CDO as AAA+++ ultra safe investment vehicles- investors fooled by the ultra safe investment labels the CDO creators 'bought' from rating agencies were then sold like hotcakes to investors including the 'Singapore Government Staff Credit Cooperative Society' as was the case of the Pinnacle notes saga occurring between Aug2006 and Dec2008.
3. The en masse rubber stamping by rating agencies, greed blinded investment bankers, lazy hedge fund managers and other fooled investors; low interest rates thanks to irresponsible FED printing $$$, the almost total blind eye by the SEC, all contributed individually to the massive housing bubble that built up in the USA up till 2008- which began bursting by October 2007 where "approximately 16% of subprime adjustable rate mortgages (ARM) were either 90-days delinquent or the lender had begun foreclosure proceedings, roughly triple the rate of 2005"[source]
4. The tidal wave of foreclosures simply wiped out the value of CDOs, which premised upon homeowners regularly paying installments and guaranteed by the value of the property itself as collateral. With homeowners unable to pay and a glut of property now worth much less, CDOs were now considered toxic debt- worthless as a book asset- many banks which invested their depositors savings in these risky assets were thus on the verge of bankruptcy as the values of these convoluted assets plummeted overnight; nobody wanted to buy them and CDOs were shunned like plague.
5. Facing the propensity of massive bank-runs and economic collapse, the US government had no choice but to bail out the banks by either taking over the toxic debt at inflated prices, or else replenishing the banks reserves with the purchase of preference shares or other preferred stock from the ailing bank (all this funded by taxpayer reserves, newly printed currency, or government debt, or all of the above).

According to PM Lee HL in the report as appended above [Regulating tightly 'not always feasible'] , he is unable to regulate banks as their complexity befuddles him. As a politician, PM Lee seems to think that he should let banks do what they want, the reserves of Singapore it seems, have by his admission, been earmarked for use as banker's golden parachutes.

Whether CIMB or Maybank is the safer/ stronger, according to the logic of PM Lee HL doesn't matter because as mentioned, the Singapore Deposit Insurance Cooperation (SDIC) to return at least S$50K of Singaporean's life savings saved in banks locally. Where either the retail arm or the investment arm of a bank fails in Singapore, better still if "if all the banks threaten to die at the same time, governments cannot help but go and rescue them', (as they did in 2008 and 2009)" says Prime Minister Lee Hsien Loong.

The US govt borrowed/ printed USD4.76Trillion (high water mark at USD13.87Trillion) to bail out banks and companies affected by the Lehman crisis of 2008-9 and the USD is still depreciating by the day; PM Lee HL plans to do the same, my take is that whether or not one places his money in a bank in Singapore, with PM Lee being so tarry with bankers, every Singaporean has much to worry.

neddy said:

Why keep money in banks?

Click to expand...

Rhetoric qn: to gain access to electronic banking: ATMs, credit cards, NETS?
Because keeping cash in the bank is safer than keeping it under the pillow just in case you are burgled at home or in public?
But guess the benefit ends there because as the [Chart: comex gold vs USD index, 10yr end 2/2012] shows, the USD is a constantly depreciating investment whilst gold compared to the USD is an appreciating one.

Television said:

Is converting part of your savings into psychical gold and keeping it at home a good idea?

Click to expand...

Keep at home is okay provided it DOES NOT get stolen.
Keep in mind that there is now no official value of gold in that its value is now dependent on sentiment: just like a Rolex watch, a Vincent van Gogh Painting, a residential property or even equity on the stock market.
The gold standard of currency exchange, on the wane since 1931, was totally dissolved by US President Richard Nixon in 1971. So like the painting, watch or or fine wine that you have, I do not have to by law accept it as payment in financial transactions; incidentally however, up till 1971, the US government promised to exchange just USD35 for one ounce of gold in its reserves (see: Bretton Woods System), but Present R Nixon broke the agreement so now the only way to obtain gold is on the world commodities market at which it is currently being traded at USD1748.50 for just one ounce of gold [kitco gold price]: almost 50X the price it was once worth in 1971.

About my take on gold kept in your home safe: it is about the only valuable item which would retain some value even in times of hyperinflation since for AFAIK, for up to 4500years: is has been a commodity of value: aka money.
Paintings, fine wine, jewellery and watches are all too bulky to carry in case U want to leave in a hurry and lesser appreciated by all: a pure gold bar on the other hand, as I understand, can in fact be cut with scissors and sold in parts by weight- you wouldn't be able to do the same with a painting or a bottle of wine.

Only gold can out run the CDO monster if I'd want my opinion to date.

Just my 2c,
Have fun living and God bless.
B.C.
PS: I'm no financial expert nor analyst, just a hobbyist economist from home.