"moral hazard" - what's to stop other crappy investment firms, or any bank, from taking unreasonable

[Postman]

risks when it is WE THE PEOPLE who will cover their ass when they go belly up?

Socialize the risk, privatize the profit.

Free Market my ass.




http://en.wikipedia.org/wiki/Moral_hazard

[dysfunctional press]

1. RE-regulation.

when they take OUR money, there MUST be RE-regulation tied to it.

between the savings-&-loan thefts, and this alone...isn't it FUCKING OBVIOUS?

instead of attacking each other, our potential nominees should be using this opportunity to hamstring john mccain over his keating 5 dealings...

and CALLING FOR RE-REGULATION of the banking/financial industry.

[Captain Angry]

2. We haven't covered anybody yet.

The Fed, which is not the government or our taxes, has done the bailouts so far.

Moral hazard is indeed a problem. Directors and executives in some firms have allowed poor decisions to be made, and they've destroyed a few companies in the process.

This happened during the dot-com runup of the markets. Directors thought it could only go up. No reason to cut costs or control spending. No reason to ensure reinvestment in research and their people. So when the free money stopped flowing into the dotcoms, a lot of them folded. And some of them had great ideas, but bad managers killed those dreams.

[Postman]

5. Maybe you should read this....

http://en.wikipedia.org/wiki/Savings_and_Loan_crisis

I think our tax dollars were used for this bail-out

[Captain Angry]

7. Right, but that was a long time ago.

I meant the current administration hasn't bailed anybody out.

Yet.

It has happened in the past, it can happen again.

My point is that for all the screaming, we haven't done it yet. The Federal Reserve is not the government, and they've been the source of the liquidity injections and loans.

[Postman]

8. The Federal Reserve, when used as a lender of last resort to bail-out crooks

IS using our tax dollars for the bail-out. That makes it "the gov't" as far as I'm concerned. And at that point it really doesn't matter because we're getting the short end of the stick regardless....

I've read Creature From Jekyll Island too...

[Captain Angry]

9. Which tax dollars are they using?

They have an interest rate that they charge on loans in that last resort lending that is 1% higher than the loans banks make to each other.

It's the same pool of money, generated from the purchase and sale of T-bills, which do not affect taxes.

[htuttle]

3. If any corporation -- bank, auto manufacturer, energy company -- is "too big to fail"...

...then it ought to be nationalized for national security reasons!

[salin]

4. And what do we (who owe the debt for the bail out) get?

Nothing. If it was a single bank/financial institution, we could tell ourselves it was the cost of keeping stability, and preventing ordinary folks from losing their savings. But signs suggest that this is not a single event, and there will be others, the debt that we owe the govt will increase, but we (average folks) will receive no benefit ... and in the end we will all owe another 10K to 20K as our share of the national debt.

I never thought I would suggest this, but if we are footing the bill, perhaps it is time for short-term nationalization of the banks/financial institutions that tax dollars bail out. Let the profits flow in to offset some of the national debt. It doesn't have to be a long time solution - but if we absorb the cost and the risk, than we (universally) should also benefit from the massive expenditures.

I know, in the bush era, this is counter intuitive. How many examples are there of how Bushco has turned fed agencies into agents for corporations and against the interest of taxpayers?

[Postman]

6. I say NATIONALIZE all of them.

We're only here to take the risk but not share in the profit?

[ruiner4u]

10. We had a national bank once...

Andrew Jackson worked to shut it down for various reasons, two of which were "the rich would get richer", amd "it exposed the government to control by foreign interests".

Ironic isn't it that we need nationalized banking regulation to get away from that...


The great early minds that formed this country must be rolling in their graves for what our government has become.

[Art_from_Ark]

12. Jackson also wanted to shut down the Bank of the US because

it wasn't free and easy with loaning money to his constituency, which included land speculators. So Jackson shuts down the Bank, unsecured loans are given away like candy, then Jackson calls for payment in specie (gold and silver), rather than the now worthless scrip in which many if not most of the loans were made. The result? The Panic of 1837, America's first Great Depression.

[elleng]

11. They've already done it;

that's why fed did what it did, I think, so others would think they might have a chance to survive.

As to 'free market,' TOTAL freedom is not possible, because people think it means they may do ANYTHING, when it really means they may do what is REASONABLE. 'Free speech' does NOT mean we may shout 'fire' in a crowded theater.