I submit to you that there is no answer to the quiz. It is not possible for a human to know whether Bank of America made money or lost money last quarter.
.. A bank’s earnings are a quantum event; they are entirely probabilistic, and the answer you get depends on who’s doing the observing. You make some guesses with some degree of statistical likelihood, and then you apply one of a half-dozen accounting regimes to the guesses, and you get a number, and then you’re like, ooh, look at this number, it’s so numeric.
Before the Advice, Check Out the Adviser
Say you sit down with a broker — one who isn’t legally required to act as a fiduciary — and the broker has access to a dozen mutual funds, all of which are deemed “suitable” for a particular customer. The broker can recommend the most expensive fund, even if it makes him more money at the consumer’s expense and isn’t preferable in any other way, Professor Laby said.
.. Advisers’ pay can provide clues about whether their interests may be mismatched with consumers’.
.. IF consumers really want to put prospective advisers to the test, they could try a direct approach: Ask them to sign an oath stating they will act as fiduciaries, like the one recently created by the Committee for the Fiduciary Standard, an advocacy group. Andrew Stoltmann, a securities lawyer in Chicago, said such an oath would be binding in an arbitration proceeding, which is how a vast majority of customer disputes are settled. “If the adviser refused to sign it, then the investor should run for the hills,” he said.
Six Years Later, We’re Still Litigating the Bailouts. Here’s What We Know.
The obvious question, asked many times now, is why the Fed did not insist that those banks take “haircuts” on what they were owed given A.I.G.’s near-bankruptcy and government bailout. That would certainly seem like the fair course.
But the policy makers’ answer is also becoming clear: To demand haircuts from the banks would have defeated the point. The entire goal of the bailout was to avoid a default and the unpredictable ripple effects it would create. Yet to get the banks to agree to haircuts, they would need to threaten the very thing they were looking to avoid — to send one of the world’s largest insurance companies into the same kind of disorderly bankruptcy that had already enveloped Lehman Brothers.
Revisiting the Lehman Brothers Bailout That Never Was
A group of bankers summoned to the Fed by Mr. Paulson, who was hoping they would mount a private rescue, did not accept Lehman’s $50 billion valuation for its real estate and could not decide whether Lehman was solvent. But potential private rescuers had a motive to lowball Lehman’s value. Fed officials involved in the valuation stressed that the Fed could hold distressed assets for much longer than private parties, allowing time for those assets to recover in value. Also, because the Fed sets monetary policy, it exerts enormous influence over the assets’ ultimate value.
“There can’t be any reasonable doubt that had the Fed rescued Lehman, that very act would have pushed up the value of its assets,” Mr. Blinder said.