Ben Gilbert: preference

Transcript context

…Yeah, but we also had, I’m going to say less, maybe a third of the leverage of the big investment banks and a lot more liquidity. So in 2006, I started to stockpile liquidity, and looking at the situation, I was quite worried. You may not remember this, but the leverage, because of accounting rules and Basel III, Basel I, investment banks, particularly the big investment banks, went from 12 times leverage to 35 times leverage. And it was go, go. The CMOs, the bridge loans, the whole thing. In 2007, the bridge book of Wall Street was $450 billion. Today it’s $40 billion. J.P. Morgan can handle the whole $40 billion today though we’re not the $40 billion today, and they were much more leveraged deals. A lot of them fell apart, collapsed. Of course, and that was before you had the collapse in the mortgage mortgage, which really took down a lot of these banks. But you did have the same incentives and you had the same access to information that a lot of these other folks did, but you didn’t blow up. What explains this? Because usually, behavior follows incentives. Well, first of all, if you work for me, I would tell you I don’t care what the incentive is. Don’t do the wrong thing. Don’t do the wrong thing to the client. If you’re the client, how would you want to be treated? I had gotten rid of, I mentioned that one risk thing. There were multiple risk things like that. They were being paid to take the risk.…

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