Today is not the day to worry about the fine lines of copyright.
Today is the day to spread appropriate opinion.
John Gapper in the FT has one of the best columns I've read today. Try this:
We are now, unquestionably, in the worst financial crisis since 1929. We do not know how many more banks and institutions will fail - Washington Mutual, the US counterpart of HBOS, is under severe pressure - but Bear Stearns, Fannie Mae and Freddie Mac, Lehman and AIG are plenty.
There are lots of people and institutions to blame for that, from regulators to mortgage brokers to, let us admit it, all of us who decided to speculate on house prices.
But AIG takes the biscuit. Here was a huge multinational insurance group with a reputation for solid underwriting and risk management that decided to diversify from insuring risks it knew well - car crashes and fires - to covering derivatives it did not understand.
Of course, it thought it understood them. In presentations to investors this year, it emphasised how thoroughly its AIG Financial Products arm assessed the risks of insuring CDOs. It ran all the data and decided that, in the worst case, it risked losing $2.4bn on the portfolio.
Well, $24bn of write-downs later - a mere 10 times its maximum estimate - the company has burned through its equity, spread financial chaos to all corners of the earth and humiliated the US Treasury. The job of insurance companies is to guard others against catastrophes, not cause them.
The word "irresponsible" does not begin to describe AIG's behaviour. Like Bear, Lehman and others, it saw a way to get in on the growing action in mortgage-backed derivatives. Its bankers were soon earning huge fees for themselves and AIG by piling up unimaginable risks.
Call me a spoilsport, but I do not believe that AIG or any other capital markets institution should be allowed to play like that with my money (I am a US taxpayer) in future.
If this means going back to basics, and redesigning the global regulatory system so that a renegade insurance company is denied the chance to blow up the world's banks again, so be it. Regulation cannot solve everything but enough is enough.
I could not agree more.
Nor could I agree more with the title of his post: This greed was irresponsible. He's right.
When the FT is saying it, believe it: this change will happen.
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Richard,
This greed was irresponsible
The market agrees as well. Irrational or not, why do you think these firms are being punished?
Georges
These people have not been published (Lehman excepted)
The shareholders they also conned have been
That’s quite different
But you don’t get that, do you?
Richard
Richard,
Are you saying AIG is not being punished? The firm is going to be broken-up.
Are you saying Bear Stearns was not punished? They disappeared.
Are you saying Merrill was not punished? They disappeared.
Are you saying Morgan Stanley and Goldman Sachs are not being punished?
Please do illuminate on how a prudent shareholder is conned. Forced to buy? Forced to hold? Forced to not sell? Those shareholders who do not do their due diligence at each step, so what.
Georges
Your comment shows you really are stupid enough to think that all involved in these organizations had perfect information and insight into what they were doing.
But they didn’t. Only in your fantasy can that have been the case.
So, as ver, you come to the wrong conclusion based on teh wrong assumptions, and by ignoring the facts.
Some of us live in the real world.
Innocent shareholders will suffer in all the above companies. That is a travesty of justice.
Those who had access to information, namely bondholders are being almost universally bailed out at cost to society. That is also a travesty of justice, even if a necessary one.
Those who made the bad decisions are not being punished
That’s the reality.
Richard
Richard,
There is no “perfect information” on any side of a deal. That is why there is something called “risk”. In some cases risk is large, in some cases it is small.
Those individuals who lose out due to lack of due diligence, so be it. Those who lose out even with due diligence, that is called risk.
Financial markets are not sure-fire winners. Again, something called “risk”.
I am appalled that anyone is being bailed out with governmental (ie. taxpayer) funds. Markets succeed, markets fail. Both individuals and companies need to deal with the consequences of their actions. Period, end of story.
As for the usual society clap-trap, it is just that.
Your callous indifference to the plight of ordinary people in the face of deliberate misinformation reveals the emotional as well as the intellectual bankruptcy of your position.