They would lobby to reduce the amount of capital they have to reserve for an emergency, and to lower the fees charged for mortgage insurance so they could compete on price. If another crisis hits, lower capital reserves and lower fees would make them far more vulnerable to going bankrupt, leaving the taxpayer to bail them out.
Category: Risk Management
Too Big To Succeed
Put mathematically, the complexity now grows non-linearly. This means, as banks get larger, the ability to risk-manage the assets grows much smaller and more uncertain, ultimately endangering the viability of the business.
The Importance Of Excel
This is why the JPMorgan VaR model is the rule, not the exception: manual data entry, manual copy-and-paste, and formula errors. This is another important reason why you should pause whenever you hear that banks’ quantitative experts are smarter than Einstein, or that sophisticated risk management technology can protect banks from blowing up. At the end of the day, it’s all software. While all software breaks occasionally, Excel spreadsheets break all the time. But they don’t tell you when they break: they just give you the wrong number.
Abnormal Capitalist 