Bailing out the Thieves

A.K.A. Bringing in the Sheaves (the lyrics can be found here).

Over the last few months, myself and countless others have been providing commentary on the GFC and all the inter-related issues.

One topic that is certain to polarise people at your next dinner gathering is the issue of bank bailouts. Trust me - it's better than religion and politics right now!

One school says we can't afford to let the system crash. That is fair. Thomas L. Friedman makes this point in his article This Is Not a Test. This Is Not a Test: "You need to let failed companies, or homeowners, go bankrupt, unlock their dead capital and reapply it to thriving entities. That is how the dot-com bust ended, and out of that carnage emerged a whole new set of companies. The problem with this crisis is that A.I.G., Citigroup and General Motors — and your neighbor’s subprime mortgage — are not Dogfood.com. You let the market clear them away, and we could all be wiped out with them. Therefore, the president has to find a way to punish bad financial actors without setting off another Lehman Brothers domino effect."

To further drill-down on this issue, checkout Time's great commentary on How AIG Became Too Big to Fail.

Another school says we shouldn't reward fat cats and criminals for having gamed the system. That is also fair.

Clearly, any actions the authorities apply to move this thing forward needs to cater to both schools of thinking.

Looking at the SEC website, I hope the short list of charges for bankers and brokers is merely the start.

A good start was the news of Bernard Madoff's guilty plea on March 13th. As usual, Jon provides us interesting commentary (about 2min 20secs into the video below):


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posted by Lee Gale @ 5:54 AM,

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