Quote of the Day: How Banks Lose Money

This is a classic:

"I don’t know why the banks had to find new ways to lose money when the old ones were working so well."

-Wells Fargo CEO John Stumpf, as quoted by
Warren Buffett      



Thanks, Eric!

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  1. Eric Davis commented on Jan 3


    As quoted by Eric, Quoting Buffett, Quoting Stumpf.

    How the hell can banks lose money with a 9:1 Reserve ratio….. With a 5% return that is damn near 50% ROI….(or would that be ROOPI(Return on other peoples investment)
    And here we are fighting out 3% on the SP500, with 2.5% inflation(snark)

  2. Neal commented on Jan 3

    No-one thinks that it’s a new way of losing money, only that it’s a new way of making money.

    Two sides of the coin.

    Risk is not dead, unlike certain reports…

  3. The Financial Philosopher commented on Jan 3

    My former employer was owned by a regional bank. Our favorite saying was, “Banks make money in spite of themselves…”


  4. Ross commented on Jan 3

    I once worked with a very senior loan officer whose claim to fame was that he never made a bad loan. We always joked that it was because he never took a a risk.

    But that was in banking stone age when your commercial customers were required to clean up/pay off working capital loans by the end of the year. They could then borrow the following year. Funny looking back how much everything has changed. Banking is a simple business if you keep it personal.

  5. MOB commented on Jan 3

    “And the test will not be whether the stock market likes it today or tomorrow. The test will be where the company is in 10 or 20 years.”

    An idea so crazy it just might work.

  6. cinefoz commented on Jan 3

    In a perverted way, I feel good about this. On many occasions, I ran into uppity young managers who thought they were infallible because they could manipulate management and intimidate co-workers. I enjoyed it when they were caught being crap artists and when their idiocy cost big money or big embarrassment. Ahhhhh.

  7. hghg commented on Jan 3

    How could Richard Bove at Punk Ziegal upgrade State Street to a buy no one knows the market value of or the leverage involved in State Streets $29 billion worth of off balance sheet conduits?

    Why does not anyone know how much of the conduits are invested with money borrowed from the ABCP market?

    If market value is unknown, how can ratings agencies quantify the chances and implications of the conduit assets coming onto State Streets books?

    Has State Street disclosed the counterparties who insured the conduits mortgage and asset backed investments?

    Is ACA capital holdings, a monoline bond insurer on its way to bankruptcy with a CCC rating involved? How about MBIA or Ambac?

    What percentage of the ABCP backing the conduits do State Street affiliates own?

    Did State Street pressure funds in its domain to own its conduit ABCP?

    If consolidating the conduits on their balance sheet would require losses to be recognized, how would State Streets capital needs be effected?

    Why would not State Street disclose the current market value of the portfolios?

    How could investors in State Streets commercial paper know the market value or counterparty risk in the underlying securities if no one else does?

  8. Innocent Bystander commented on Jan 3

    I used to work at a large bank in Chicago, when the managment changed, and wanted to appear agressive. One day the President of the Bank, didn’t understand why the currency traders were not making more money like their competitors. He charged into the floor where they were located and personally bought yen, sold the dollar, bought the pound sterling, sold loonies, bought, sold, bought, sold. In 45 minutes of frenzied trading he lost over $100K. Just brilliant. He later was shitcanned but went onto a bigger job.

  9. CDizzle commented on Jan 3

    Good comments, all. I have worked for 2 of the largest 10 banks in the US over the last few years. If my market (top 25 MSA) is representative, there has been a collective (perceived and/or real) loss of accountability where loan decisioning is involved. The centralization (regional banking, for sure) of revenue, FTE and risk management decisioning has resulted in “culture” being dictated in an ever-changing, knee-jerk environment where stock analysts are the equivalent of parents waiting up for junior tapping the floor.

    The government will let the homebuilders declare bankruptcy; the banks will get bailed out, presumably.

  10. Trevor Cook commented on Jan 4

    On the day NAB blamed US subprime crisis for mortgage rate rise

    The Big Picture | Quote of the Day: How Banks Lose Money. I don’t know why the banks had to find new ways to lose money when the old ones were working so well. -Wells Fargo CEO John Stumpf, as quoted by Warren BuffettNews.com.au – A spokeswoman for NAB…

  11. Michael Peter commented on Jan 10

    I love that quote…:

    “…I don’t know why the banks had to find new ways to lose money when the old ones were working so well. ”

    Thank you very much :-)

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