Comments on: A Brief Status Report on the Economy http://www.bob-mcteer-blog.com/a-brief-status-report-on-the-economy/ Bob McTeer's Blog Tue, 06 Jan 2009 06:38:26 +0000 http://wordpress.org/?v=2.6.2 By: Kris http://www.bob-mcteer-blog.com/a-brief-status-report-on-the-economy/#comment-6847 Kris Thu, 31 Jul 2008 22:07:13 +0000 http://www.bob-mcteer-blog.com/a-brief-status-report-on-the-economy/#comment-6847 I worry on what's being left behind after this "bailout", and tend to agree with economist Peter Linneman that we may be falling back to a world of the non-economic separation of banking and non-banking activities. Another Glass-Steagall isn't all that appealing. I worry on what’s being left behind after this “bailout”, and tend to agree with economist Peter Linneman that we may be falling back to a world of the non-economic separation of banking and non-banking activities. Another Glass-Steagall isn’t all that appealing.

]]> By: Nemo http://www.bob-mcteer-blog.com/a-brief-status-report-on-the-economy/#comment-6837 Nemo Wed, 30 Jul 2008 16:38:10 +0000 http://www.bob-mcteer-blog.com/a-brief-status-report-on-the-economy/#comment-6837 "First, it wasn't technically a bailout." Of course it was a bail-out. "The managers and owners and many employees of Bear lost virtually everything." First, virtually everything is not everything. Second, Bear's counterparties and creditors lost *nothing*; not a single dime. If a private company is so big and badly run that it requires placing my taxpayer dollars at risk, should not its bondholders share at least part of the burden with me? "Second, the idea behind moral hazard is not to reward risky behavior lest you encourage more of it in the future. I don't think Bear's risky behavior was rewarded in this case." OK, suppose we ignore the hundreds of millions in salary and bonuses delivered to Bear's leadership during the bubble. What about the risky behavior of Bear's creditors and counterparties? We now live in a world where the debt of every major bank and investment bank, not to mention Fannie Mae and Freddie Mac, is implicitly guaranteed by the U.S. taxpayer. How much more immoral and hazardous can you get? “First, it wasn’t technically a bailout.”

Of course it was a bail-out.

“The managers and owners and many employees of Bear lost virtually everything.”

First, virtually everything is not everything. Second, Bear’s counterparties and creditors lost *nothing*; not a single dime. If a private company is so big and badly run that it requires placing my taxpayer dollars at risk, should not its bondholders share at least part of the burden with me?

“Second, the idea behind moral hazard is not to reward risky behavior lest you encourage more of it in the future. I don’t think Bear’s risky behavior was rewarded in this case.”

OK, suppose we ignore the hundreds of millions in salary and bonuses delivered to Bear’s leadership during the bubble. What about the risky behavior of Bear’s creditors and counterparties?

We now live in a world where the debt of every major bank and investment bank, not to mention Fannie Mae and Freddie Mac, is implicitly guaranteed by the U.S. taxpayer. How much more immoral and hazardous can you get?

]]>