Global Financial Crisis - subprime loans

Dear Mr Tan,

Thank you for your effort in seeking justifications for innocent investors.

While investigations do help, much could have been done to prevent this crisis from happening which started in the United States last year. At the onset, many financial institutions had been trying to cover up their losses for their exposure in the sub-prime credits and loans. The Japanese used to cover up their losses by sweeping them under the carpet. However, the Westerners cover up (or pass on) their losses (and risks) by "auditing" their books, and/or repackaged their risks and exposures into "High Yield Notes" or "Funds" to be sold to retail investors globally via local financial institutions.

Incidentally, the very people who packaged such products, so-called "investment bankers" or "funds managers" knew the risks of such products are extremely high, and also that defaults in payment by those very Sub-Prime borrowers were also high, are the same group of people who are not only "highly" educated - academically, but also people who think they are smarter than the man-in-the-street.

Long before this financial crisis erupted, as a financial trader, I had been advising people from taking risks which they are unfamiliar with. Relationship managers in banks - just how much do they know about those financial products which they had been selling to their customers? Even portfolio managers and fund managers do not know precisely how such funds are packaged! While insurance may be quite an outright product, investment-linked products and other financial investment products can never be thoroughly understood by the average fund manager or relationship manager, let alone the average investor. Such products are normally sold by relationship managers basing on their on quota(s) (not forgetting their monetary rewards) and fine tuned (in sales presentation) to suit the need of their customers.

Hence, I feel that MAS should also be fully responsible for its failure to ensure that these investment products were thoroughly "safe" enough to be marketed by financial institutions here, let alone sold by inexperience relationship managers. In addition, bankers should also be held accountable.

This is not going to be an easy crisis, but it will be one that is going to force all central bankers to clear up the whole financial system, globally. And it is going to take at least the next 5 to 10 years for it to be over. Lowering interest rates is not going to help at all since most of the financial institutions had been trying to cover up their exposures since the eruption of the Sub-Prime Crisis last August.

MT