ShmoopTube

Where Monty Python meets your 10th grade teacher.

Search Thousands of Shmoop Videos

Finance: What is Reg G? 5 Views


Share It!


Description:

What is reg G? No, it's not an up-and-coming rap star...though we know what our rapper name is now. Hit play to find out.

Language:
English Language

Transcript

00:00

Finance a la shmoop what is reg G? wasn't he one of the Archies friends and

00:09

maybe that was Reggie..... okay so reg G or Regulation G is all

00:14

about disclosure largely as it relates to relationships that banks holding [Dollar notes appear]

00:19

companies and savings and loans have with NGOs or nongovernmental

00:24

organizations or institutions well the key driver of reg G revolves [Man picks up folder of reg G]

00:28

around the opacity of bank filings as they relate to risk and exposure in

00:33

volatile times the obvious backdrop here was the mortgage crisis of 08/09

00:37

with a goal of having that you know never happen again part of the issue was

00:42

that a number of the banking terms were so complex that there wasn't a [Stack of banking term documents appear]

00:46

pre-existing GAAP or generally accepted accounting principle measure for a way to even

00:52

talk about things so complex as banking derivatives risk what does that mean?

00:57

well Bank A is hedging its mortgage exposure because it believes that

01:00

housing starts are a good proxy for the health of the economy so they get an

01:04

investment bank to create a liquid index against which they can be short or long

01:08

with leverage and with derivatives believing that these hedges will in fact [Hedges attach to frankenstein monster]

01:13

give them life under dire situations like that mortgage crisis well in fact

01:17

many of these hedges became so complex and relied on non-GAAP terms like EBITDA

01:23

which is not a GAAP term where clever accountants can more or less make up [Accountaint appears at yummy fudge inc]

01:27

whatever they want the numbers to be such that Regulation G now put the

01:32

burden of clear disclosure on the affecting bank or institution and that's

01:36

a big deal because even the experts even the top top experts when the banking

01:41

crisis you know hit the fan well even they couldn't explain the derivatives [Banking expert throws paper away]

01:45

behind the theoretical hedges the banks were using and while this country almost

01:50

went bankrupt in the process all right so the basic idea is that if there was

01:53

ever a problem the judge about to put management in jail didn't need a PhD in [Certificate of accounting PhD torn up]

01:59

accounting to figure out or be able to trace the logic of whatever filings were

02:03

made and whatever derivative and hedging and all the other crapola that the banks

02:08

did to hide that they were trying to find clever accounting ways to make

02:11

money rather than the old-fashioned way of just selling

02:13

good mortgages to honest people who actually pay off the debts they promise

02:18

to pay so when you think reg G think gee whiz I actually understand what the hell [Reggie discussing Reg G]

02:23

these banks are talking about

Up Next

GED Social Studies 1.1 Civics and Government
39794 Views

GED Social Studies 1.1 Civics and Government

Related Videos

Fake News
11938 Views

How do you tell fake news from real news?

Finance: What is Bankruptcy?
260 Views

What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...

Finance: What is a Dividend?
1777 Views

What's a dividend? At will, the board of directors can pay a dividend on common stock. Usually, that payout is some percentage less than 100 of ear...

Finance: How Are Risks and Rewards Related?
589 Views

How are risk and reward related? Take more risk, expect more reward. A lottery ticket might be worth a billion dollars, but if the odds are one in...