The Blame Game

Initially when i read Jaywalk's post where Tan Kin Lian blames everyone including MAS, i felt uneasy and troubled. I was not prepared to blog without research or finding out details. But after reading today's newspaper article featuring Dr Money where he touch on structured products, i decided to go ahead. Do not hesitate to correct me if im wrong.

It was widely reported where Lehman Brothers are still selling Minibonds one month before filing for bankrupty. Does anyone foresee that Lehman Brothers was one of the banks to go under?

Dr Money stated that the products were sold in mid-2007 and was given a good credit rating by S&P. And where are we now? Oct 2008!! That's like 15 months ago. And Mr Tan Kin Lian stated in his blog, "Blame MAS for not vetting stringently the products before allowing for release into the market."

Forgive me, but i have some burning questions waiting to be answered.

1. Did MAS foresee that Lehman Brothers is going to be in trouble in 2007?
2. Does Singapore banks, financial companies or sales personnel know Lehman is going to be bankrupt in 2008 at that time?

If MAS, local banks, financial companies and sales personnel knows about it, and still sells it to investors, then yes, i believe that MAS have neglect its duty.

My jaws dropped when i saw reports where investors put in their life-long savings into it. I think the sales people must have say these magic words, "Uncle/auntie, you should invest more, you get more in return. Besides, if you invest more, you get a free laptop/LCD HD TV."

These products are not low-risk, low-returns. It's high-risk, high-returns. You could lose 100% of the principal sum for the worst case or earn interest more than fixed deposits interest rates. In order to earn more commission, sales people go for the more complex products to sell in order to hit their sales targets. I wonder does the sales people teach people not to put all their eggs in one basket. Perhaps both the company's and the sales people's integrity were to questioned?

In conclusion, i take a quote from Jaywalk's post: If want to blame, blame yourself also. But if i have to blame, i will lay my fingers on US banks.

By the way, Dr Money have break down the details of structured products to layman terms. But even as a student, i have to re-read in order to understand even in layman terms. I wonder how the investors are able to understand the complex terms of the products.