Sunday, December 20, 2009

OK, let me get this straight...

Taming the Fat Cats, NY Times December 19,2009

President Obama is upset (now this is a helpful emotion for a president) the way America's VORACIOUS bankers leveraged hundreds of billions in taxpayer bailouts to line their pockets.

He is UPSET? Has he tried stamping his feet? Throwing a temper tantrum?

Gosh, just what America needs a president that shows how much he cares by being UPSET.

OK, let me get this straight. First, the Fed keeps interest rates very low, exacerbating the real estate bubble. Then it passes the community lending bill that forces banks to lend to high risk home buyers. Then it mismanages the Macs who are at the epicenter of the the financial collapse.

Then, when the banks get caught playing the game defined by the Fed and Congress and their agencies... when the music stops they get bailed out.

IMHO the free markets only work when we are disciplined by reality. Congress has insulated them from reality and now it bails them out because they are too big to fail. Really? They should allow reality to meet out the punishment they deserve for not paying attention to systemic risks.

Now that the Feds set up the crash, created perverse incentives for the banks, regulated the banks into bad lending practices (for the social good of course), failed to regulate their own housing agencies, then they shovel billions of dollars at the banks....

President Obama is upset at how the banks are handling the money?

Maybe the solution is HOLDING HIS BREATH until they lend they way he wants them to. Oh...wait...isn't this how they got into the problem...by bad lending practices encourage by the Feds?

I know some of my readers will be agitated, claiming this whole financial mess was created by greedy capitalists...but I would argue that this could only happen on this scale when the Feds provide massive incentives.

This article concludes that the government needs to align banking compensation with performance. How about we just don't bail them out?

Curbing the bankers appetite for risk as suggested should apply FIRST to the government and its agencies. The huge debt, the mismanaged entitlement programs, the social programs that fail year after year.

After reading my own blog I realize that "I" am upset. Yes, I am really upset. Me and President Obama are VERY UPSET.

We are both going to hold our breath, stamp our feet until bankers stops making money from the billions we gave them.

in reference to: Editorial - Taming the Fat Cats - NYTimes.com (view on Google Sidewiki)

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