John Kay and the Halifax

A BBC podcast about the Halifax Building Society is well worth a listen. You can find it at

http://www.bbc.co.uk/worldservice/programmes/business_daily.shtml for Thursday October 2nd.

John Kay, (www.johnkay.com) who was a director of Halifax at the time of privatisation, makes the astute observation that financial engineering is a zero sum game. If you added up the value of all the CDOs and credit derivatives (look 'em up in Wikipedia), they should have come to no more than the value of the underlying securities. Did any of the auditors blythly putting their names to the accounts of financial institutions ever do a ballpark check? Did the accounting standard setters? It would have been revealing and have cast some doubt on the reliability of market values.