rams a test for sub prime, page-17

commodorecontrarian,

I could go on ad nauseum about the various issues I have with Basel II, but at the end of the day, it all boils down to: banks get lower real-world reserving requirements, in exchange for more computer and statistical modelling.

I personally believe that existing reserve requirements (which have been chipped away over a couple of decades of good times, as the risk of "outlier" events diminished in peoples' minds) are way too low. Over the coming months, as the major banks around the world are forced to bring more and more conduit and other assets back on-balance sheet, we'll see if I'm right.

If there are central bank funded bail-outs of financial institutions, reserves will have been proven to be already too low and reducing them further would be farcial.

[BTW, I didn't say that I necessarily think that the XCP market will be working again in 6 months. I said that, if RHG lasts that long, it will have weathered the storm. I'd be somewhat surprised if the XCP market is still in full freeze mode in 6 months (that's depression territory), however I'd doubt it will be business as usual. Those investors testing the waters will still be very selective in 6 months, IMO. My point was that RHG has many challenges to overcome during the next 180 days which could prove far more decisive than the focus in some recent posts on this somewhat distant milestone.]