Tradememe

Too Big to Fail, Or Too Dumb to Survive?

All we have to do is to compare the situation of the world's financial system before and after the bankruptcy of Lehman. And we will get an idea of the risks that these mammoth financial institutions pose to the economy. Are we ready to take the gamble and let them fail ? There is no going back once it's done.

AIG's Blackmail Note

This problem started a long time ago when companies were allowed to grow so big that their failure could cause a systemic problem. Now, it's too late. We need to make sure the company survives and then it can be broken into smaller units that would no longer be a systemic risk to the economy.

The Bane of Broken Balance Sheets

One consequence of the crisis is that we will have fewer speculators or traders and more investors. And that would be a good thing for the overall economy. In the meantime, we will have to go through the pain of the transition period.

Rethinking Subsidized Finance

"I have no problem with subsidizing private capital formation, even with ceding much of the upside to entrepreneurial investors while taxpayers absorb much of the downside when things go wrong."

This kind of thinking is what created the whole mess in the first place. Have you ever heard of moral hazard ?

Bailouts Support Survival of the Weakest

Those endless bailouts are turning the US economy into a zombie economy. If the disease does not kill the market, the cure will surely finish the job.

Why Capping Pay Is Likely to Work

Right now in the finance industry, I doubt there are many top managers who would sneer at a 500K salary. But in a few years, when the economy is running full speed, the salary cap will be blown away. At this point, I hope a new compensation structure that will favor more longterm objectives will be put in place.

How Wall Street Keeps Dooming Itself

When people live and work in ivory towers, this is what happened. They are detached from reality.