One large financial institution after another closed down, the US government spent an unprecedented trillion dollars to save lives, and central banks also made unprecedented efforts to rescue the market in Qi Xin. The investor's heart fluctuates with the violent fluctuation of the stock index.
What caused this crisis? What lessons should China's developing capital market learn from it? A few days ago, our reporter interviewed Qi Bin, director of the Research Center of China Securities Regulatory Commission.
Qi Bin said that the radical transformation of American investment banking business model, excessively free supervision and development model of American financial market and excessively "cheap" credit were the three "icebergs" that led to the financial crisis on Wall Street. He believes that we should carefully study the enlightenment brought by the Wall Street crisis and draw lessons from it, but we should also fully consider China's national conditions and see that the development mode and stage of China's capital market are different from Wall Street. The development of China's capital market should prudently promote financial innovation, strengthen risk control mechanism and take the road of sustainable development.
"Three icebergs under the sea"
Qi Bin believes that the outbreak of the subprime mortgage crisis in the United States is just an "ice floe on the sea", which is the direct cause of the financial crisis on Wall Street. The root of the Wall Street financial crisis comes from three "icebergs" hidden underwater, and its earliest formation can be traced back to the 1990s in a sense.
First of all, the business model of American investment banks has changed greatly in the past decade. Excessive speculation and leverage have led investment banks to a point of no return. Traditionally, investment banks, which mainly earn commission income and have low capital requirements, have invested heavily in the subprime mortgage market and complex products under the temptation of high profits and the pressure of fierce competition, and investment banks have quietly become hedge funds chasing high risks. For example, in recent years, Goldman Sachs' direct equity investment and other investments accounted for about 80% of its total revenue. Under the pressure of competition, other investment banks are also undergoing similar transformation. In a large number of financial derivatives transactions, investment banks have made considerable profits. For example, the average annual return on net assets of Goldman Sachs and Morgan Stanley in recent ten years has reached about 20%, which is much higher than that of commercial banks 12%- 13%. But at the same time, these investment banks also borrowed a lot of money. "If the money is not enough," the leverage ratio has been raised again and again, thus accumulating huge risks. When Lehman Brothers declared bankruptcy protection, its debt was as high as $613 billion, and its debt-to-equity ratio was 6 130: 260. Before Merrill Lynch was acquired, its asset-liability ratio exceeded 20 times.
The high leverage ratio makes the operational risk of investment banks rise continuously. Although investment banks actively participate, they have not fully controlled the risk. On the one hand, due to the high leverage ratio, once the investment has problems, its losses will far exceed the capital; On the other hand, high leverage makes these investment banks demand higher liquidity. When the market is relatively loose, they can still fill the funding gap through money market financing. Once its financial situation deteriorates, rating companies will lower their ratings and raise financing costs, which may lead to the failure of investment banks to maintain liquidity through financing, and Bear Stearns will fall. Similarly, the downgrade of Lehman Brothers by rating companies is also an important factor in its complete collapse.
1998, a hedge fund of Long-term Capital Management Company (LTCM) fell, causing an uproar in the financial market. Now so many investment banks are actually engaged in the business of hedge funds in disguise, but they lack corresponding risk control measures, and the potential risks can be imagined.
Second, the development model of excessive liberalization of the US financial market went to extremes, with excessive proliferation of derivatives and long-term absence of supervision until the system collapsed. The former chairman of Morgan Stanley Asia once said that among all the financial markets in the world, the financial markets in Tokyo and new york may be two extremes. Tokyo market is the least innovative securities market in the world, while new york market is the most dynamic market in the world. He said that the reason for the great difference between the two markets may be small, that is, the two markets have different definitions of securities. In the Tokyo market, securities are defined as "stocks or bonds"-that is, stocks or bonds. If the financial products are not stocks or bonds, it may take up to two years for the government to approve the listing. And new york is the other extreme, that is "anything under the sun"-anything under the sun, as long as you can think, "packed in the morning, can be sold in the afternoon". Therefore, there are many kinds of financial derivatives and securitization products in the United States, and financial institutions continue to create a variety of dazzling and complex products. Through OTC, there is no need for demonstration and supervision, as long as there is a counterparty to buy, you can clinch a deal. Of course, most of these counterparties are also financial institutions. This model greatly enriches financial products, but sometimes it is easy to go too far, leading to excessive proliferation of financial derivatives such as asset securitization products. "Once the systemic risk appears, the crisis will come quickly."
Third, since the 1990s, the American credit system has become more and more "cheap", which has not only overdrawn the future, but also planted a "time bomb". This can be seen from applying for a credit card. In the early 1990s, it took China students about half a year to get their first credit card after they came to the United States. But by the end of 1990s, a China student who had just arrived in the United States would receive several credit cards within a week, and even a credit card company took the initiative to handle it for him as soon as the plane landed at the airport. Since the 1990s, Americans' habit of overdrawing future consumption has become more and more rampant, and the interest on overdraft is as high as 17%. In order to pursue this high profit, credit card companies frantically look for the next customer, and even take the initiative to mail credit cards to people without credit records. At the same time, the profit of 17% also makes credit card companies bear a large proportion of bad debts, so a large number of credit card companies are also negligent in controlling various risks in the use of credit cards, and problems are easily written off as bad debts. But if one day the high profit of 17% cannot be sustained, the risk will come.
The occurrence of subprime mortgage is largely related to "cheap" credit. During the Greenspan period, the Federal Reserve kept lowering interest rates, and a large amount of funds poured into the real estate market, pushing up housing prices. The continuous prosperity of the real estate market makes many banks in the United States too optimistic about the real estate market, and the loan conditions are constantly relaxed, so that residents who have no or bad credit records can also apply for loans. These low-quality loans are packaged and sold around the world through the developed financial derivatives market in the United States. However, complicated financial derivatives and a long sales chain make it impossible for investors to see the quality of loans. At the same time, risks can be dispersed, but they cannot be eliminated. When the United States enters the interest rate hike cycle and the real estate market bubble bursts, these risks will be detonated like a buried time bomb.
Deeply reflect on the lessons of the Wall Street crisis.
"This crisis will not be the last financial crisis on Wall Street. This kind of crisis keeps happening on Wall Street. It has happened many times in history, and this time it just happened again. " Qi Bin believes that in the history of the development of Wall Street, there have been hundreds of crises, big and small. In a sense, the history of financial market development is a process of constant crisis and constant revision, but this crisis is the latest one, and in the eyes of many people, its coverage and influence are unprecedented.
He said that we should deeply analyze the causes and lessons of the Wall Street crisis, and provide useful reference for the developing China capital market.
First of all, it is necessary to deeply analyze the defects of the operation mode of American investment banks. In recent years, investment banks have begun to change from the traditional business model of serving and earning commissions to the business model of capital trading, and a large number of derivatives trading and hedge funds in high-risk areas have become hedge funds in disguise. However, in this process, risk control has not kept up in time, leading to its predicament.
The excessive emphasis on short-term return incentive mechanism by Wall Street financial institutions is also one of the reasons leading to the crisis. The salary and incentive mechanism of senior executives in financial institutions are not linked to the risk management and long-term performance of the institutions, which leads to a high "moral hazard" and makes the management more inclined to be short-term. In order to meet the needs of pursuing profits, investment banks constantly design complex products, so that it is difficult for them to judge the risks of these products themselves and control the risks.
In addition, the crisis exposed the problem of insufficient capital of investment banks and the defects of their operating models. In the future, will universal banks become the only "owners" of investment banks? Will independent investment banks have room for development? If so, how to modify the existing investment banking business model, and is it necessary to put forward stricter requirements for investment banking capital? Should we consider divesting high-risk investment business to an independent subsidiary? "Goldman Sachs and Morgan Stanley's application to become bank financial holding companies does not mean the end of investment banking business, but more likely the transformation of investment banking management mode and the revision of radical style in the past period. Commercial banks and investment banks can learn from each other's management model. " But at the same time, how can investment banks that have been merged or transformed into commercial banks effectively monitor risks? How to coordinate the cultural conflict with commercial banks? These problems still need our in-depth study.
Second, American monetary policy since 1990s has aroused many people's reflection. Since 1990s, there have been several major crises in the American financial market. The Federal Reserve has injected capital and cut interest rates several times. At that time, it may be a last resort, but it may be an excessive overdraft for the future, temporarily covering up the problem, and finally when the problem is exposed, it becomes out of control. Of course, as we all know, balance is difficult to grasp.
Third, how to effectively supervise financial innovation deserves our reflection. This crisis shows that there are some problems in promoting securitization products on a large scale before the risks are fully exposed, which is not in line with the principle of prudent supervision. Globalization and mixed finance have also increased the difficulty of supervision. How to strengthen the supervision department's subjective judgment and discretion on innovative products, at the same time ensure the scientific nature of this discretion and prevent possible moral hazard? How to establish an effective financial supervision system to adapt to the ever-changing financial market? All these require us to think further.
Fourth, the international financial market is increasingly closely linked, and how to prevent or effectively block the transmission of financial risks needs in-depth study. This crisis shows that with the increasing integration of international financial markets, financial risks spread more rapidly and widely in different sub-markets and global markets. How to have more effective early warning measures for large-scale systemic financial risks? How to effectively block the transmission of financial risks? How to establish a coordination mechanism between regulators in different countries? These are worthy of our further study.
Dialectical view of wall street crisis
The crisis of Wall Street has also caused extensive discussion in China, which will play a very positive role in promoting the more scientific development of the capital market. However, the storm in developed markets has also brought us many doubts. The advantages and disadvantages of virtual economy, the risks and rewards of financial innovation, and the choice of capital market development model have all become the focus of discussion.
To further explore what experience and lessons the subprime mortgage crisis in the United States can provide us, we need to deeply understand the differences between Wall Street and China's capital markets-the differences in development stages and development models. Qi Bin said that the crisis provided us with an opportunity to observe and reflect on the development mode and direction of the financial market. He believes that "to accurately interpret the subprime mortgage crisis, we need to carefully compare the similarities and differences between the financial markets of China and the United States. It is irresponsible not to seriously study and learn from the lessons of the Wall Street crisis, and it is also very dangerous to misread the crisis on Wall Street. "
In the development stage, the American market has developed for more than 200 years, and in some fields, such as some traditional investment banking businesses, it has reached a certain saturation period, and the development speed has obviously slowed down. At the same time, we should also see that although the crisis has dealt a great blow to its financial system, the American market is still a relatively developed market. The financial products in the American market are highly complex and even flooded in recent years. However, China's capital market is still in the initial stage of emerging and transition, and the national economy still has great demand for the services provided by the capital market. At the same time, China's economic transformation and the construction of independent innovation economic system also need the effective support of the capital market. From the perspective of financial products, we are also in the early stage of development. The situation of the two is very different. Therefore, we can't stop developing because of the crisis in the American financial market. While studying and drawing lessons from the American market, we will unswervingly push forward the reform and development of the capital market and take the road of steady and sustainable development. We can't stop because the American market made a mistake, which will make us miss the opportunity. The competition in the world financial market is very fierce and cruel, and we must have a very clear understanding of it.
From the perspective of development model, the development model of American financial market is basically a bottom-up and self-evolving model. There is a big adjustment near 1929. When the American capital market sprouted more than 200 years ago, it was completely laissez-faire and the government did not interfere. Before 100, there was no legal requirement for information disclosure of listed companies, and there was no securities regulatory agency in 134. 1929 when the stock market crashed, the government did not intervene, so it made amendments, set up a regulatory agency, and formulated laws and regulations on securities trading and supervision, trying to find a balance between the government and the market. Subsequently, this process has been repeated and swayed. In recent years, for example, after 1998 American Long-term Capital Company led to the collapse of the American market, many people called for the supervision of hedge funds, but so far, American regulators have not done so. Generally speaking, the United States is very strong in opposing government intervention. I believe that after this crisis, the call for strengthening the supervision of hedge funds will rise again. And we are a top-down development model. From the early stage of market development, the government and market forces have been jointly promoting the development of the market. It should be said that there is neither absolute freedom nor absolute supervision, and the healthy development of financial markets needs to find a balance between them.
After this crisis, the United States will inevitably return to the middle point from excessive liberalization. In the development of China's capital market, simplifying administrative examination and approval, strengthening supervision and promoting market-oriented reform have long been the general direction and theme. In the past 30 years, great changes have taken place in China's economy and society. According to the comments of western economists, "in human history, the living standards of so many people have never been greatly improved in such a short time." It is precisely because of the market-oriented reform in the economic field that China's economy has become the most beautiful scenery in the world. The same is true of the development law of the capital market, but the process of this market-oriented reform is also a gradual process, which requires us to grasp the rhythm and constantly find a reasonable balance between the government and market forces, so as to promote the development of China's capital market more effectively. The crisis in the United States provides a classic case of going too far. Liberalization is rampant and the whole society has paid a high price for it, which is very warning and helpful to us.
At the same time, this crisis has once again proved that the development of virtual economy will have disastrous consequences if it is divorced from the actual needs of the development of real economy. The original intention of financial innovations such as asset securitization is to split, package, price and trade these loans in the securitization market to spread risks. However, due to the complexity of financial derivatives, the long sales chain and the pressure of blindly pursuing high profits and competition, all financial institutions involved in these processes have neglected the necessary risk control. In addition, more and more financial institutions participate in the creation, trading and speculation of complex financial derivatives purely for the pursuit of high profits, which makes these businesses become pure money games, making the market transactions of many complex products, especially financial derivatives, far from the original intention of diversifying financial market risks and the needs of the development of the real economy, and the final arrival of the financial crisis becomes inevitable.
However, although the development of virtual economy has appeared a situation of "the sword is biased", we cannot deny the important role of virtual economy in promoting the development of real economy. History has repeatedly proved that the capital market plays an important role in promoting the economic development of all countries, and it is still the strategic commanding height of global competition.
"What is the real Wall Street? In fact, Wall Street not only refers to its' entity' meaning and its representation of the financial market, but also refers to a group of professionals in the financial services industry in the United States, with about 300,000 people. If all these people retreat every night, Wall Street will be just an empty city. " He said that due to the large-scale turmoil on Wall Street, a large number of well-trained financial professionals lost their jobs, and some financial talents on Wall Street, especially China students, may be used by financial institutions in China, making China's capital market gain a favorable position in the international competition for financial talents.
Qi Bin said that in today's era of globalization, international competition is becoming increasingly fierce. China's capital market should be based on the world, and the most fundamental thing is to constantly improve its competitiveness. Therefore, we should continue to strengthen the construction of basic system, accelerate the pace of reform and development of China's capital market, and promote the healthy and sustainable development of the capital market.