Moral Hazard & Risky Precedents

Excellent discussion from PBS News Hour, on Moral Hazard:
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Bailout of Mortgage Firms Could Set Risky Precedent  (Transcript)
July 18, 2008

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What's been said:

Discussions found on the web:
  1. Arthur commented on Jul 19

    This Solomon fellow has always done great stuff.
    Lately I keep wondering what the “new” America will look like.

    Will average Americans, for example, become models of thrift, building up nest eggs of conservatively invested spendola? (I’d like to think so but I suspect they’ve forgotten how and why to do this.)

    Will American business rise again to tower over or at least stand shoulder to shoulder with the BRICs etc? Will the innovative American spirit, coupled with those deep pools of capital, rise up again and build real wealth through steady hard work and honest investing for the long-term? Or will this absurd get-rich-quick bubble-seeking mentality, aided by “innovative” financing, characterize the sunset years of the US?

    Seems to me many of the rich in America confuse their good fortune with evidence of their intelligence which in turn morphs into an unattractive “I deserve all this, I’m different and special” attitude. The less well-to-do slave at jobs with little hope of moving up and are told to “just keep going to the mall and all will be well”. I wouldn’t necessarily call this arrangement immoral but it looks pretty hazardous to me.

  2. BG commented on Jul 19

    As anyone here already knows, the entire financial industry has morphed into something completely different from what WORKED in years past.

    I know inflation in the 70s was higher than what we would have preferred; but, I remember back then when people had jobs that were good enough to get them up in the morning and take a shot at the American dream.

    I remember a time when America was the unquestioned powerhouse of the world and everybody knew it.

    I remember a time when you could INVEST in a stock and have a fair chance at actually making a profit with a longterm hold strategy.

    I remember a time when a 6-year kid could get 6.25% in a Passbook account at the neighborhood bank where his father and his grandfather both banked and knew the local bankers and relied on their honesty to pull them thru the tough times.

    I remember a time when the United States actually made stuff and was for the most part self-reliant and needed very little from others and expected as much.

    I remember a time when people paid cash for the things they bought. If they didn’t have the money, they SAVED until they got it.

    I remember a time when a person’s word was his bond. Many deals were made between people on the word of those people and in many cases nothing was ever written down. Honesty among men was their creed.

    I remember a time when politicians actually did what was believed to be for the good of the COUNTRY and all its citizens and not a special interest group.

    I remember when CEOs were paid commensurate with the employees and was held accountable for his stewardship of the company, employees, investors and the embetterment of the Country.

    I remember a time when the Federal Reserve would go for years without fiddling with interest rates and gimmicks trying to modulate/micro-manage the economy allowing investors and CEOs of those companies to actually make longterm decisions that stood a chance of holding up.

    What do we do now? WE DEBATE. TALK TALK TALK. We spend all of our time and effort trying to fuck the other guy and to win our silly little debate even if we know we are dead wrong in our heart.

    So again, I ask “what do we do”? NOTHING of any significance!

    MORAL HAZARD? Where do you want to start?

    A lot of this goes back to the fact that you can not legislate MORALITY of which we no longer have any. Just “Do the right thing” no longer works. What we are seeing is evidence of a moral decline in this Country. Moral Hazard is a multi-faceted problem of which only one aspect of it IS financial. The others are just as bad in the long term.

  3. John Thompson commented on Jul 19

    Shipping out millions of jobs the last 30 years is the reason. You are forced to financially “innovate” bubbles to maintain order.

    What we need is Gore’s plan, Amory Lovin’s plan and to GREEN the economy with new jobs.

    At least that way we can pay off the lazy moral hazarders debt that allowed this. At least give us that guys. And don’t hire cheap foreign nationals to rebuild the infrastructure or we really are toast.

  4. Jeff commented on Jul 19

    BG, wow, nicely put. So true. Now I think I’ll go jump off a bridge.

  5. Greg0658 commented on Jul 19

    don’t Jeff

    I saw alot of research in that segment (live, sorry Larry) from TBP

    do you know why the pen is mightier than the sword … because people get tired of fighting

  6. Ritchie commented on Jul 19

    “I remember a time when…”

    Ah, the good old days…

    If only we really remembered them well.

  7. Greg0658 commented on Jul 19

    ps Jeff –
    but if time is not on your side
    don’t take anyone with you in the trunk – like em’s song
    don’t decide someone else’s ultimate fate

  8. Francois commented on Jul 19

    Is it any wonder that the neocon zealots wanted, and STILL want to starve PBS?

    Where else can you see good reporting like that in the so-called MSM?

    This sure beat Jerry Bowyer and Fix news, doesn’t it?

  9. Jeff commented on Jul 19

    But a smiling, unctuous Jerry (is there any kind of Bowyer?) was just on Kudlow asserting everything’s fine as long as Obama isn’t elected president. I feel better already. Thanks Jerry.

  10. RN commented on Jul 19

    I’m genuinely worried.

    Have you heard anyone, ANYONE, come up with a credible-sounding solution(s) that will bring America back to what BG remembers it to be? I’ve heard a lot of great descriptions of how we got here, but nothing convincing from any corner about how we get back.

    I see our external financing slowing, bringing long-term higher interest rates and higher imported good (read oil) prices and higher mortgage rates, pushing housing prices and bank solvency even further down.

    I don’t see anything good happening until our consumer debt’s largely wrung out and our export sector has retooled to compete globally, and then grown substantially as a percentage of GDP.

    I can’t see that happening for at least a decade.

    Please, please – somebody convince me that I’m wrong.

  11. BG commented on Jul 20

    Sadly, I suspect things in this Country will improve once the standard of living here is on par or below that enjoyed by the rest of the world.

    The reason all of our jobs left was because we were at a steep economic disadvantage and corporate America chose to take the easy way out rather than innovate.

    Once we are the low cost provider, our situation (maybe, I hope) will start to improve.

    I read somewhere on this site about the Chinese driving a shiny new car and the Americans riding a shiny new bicycle. There is some truth to that statement.

    Lastly, even when we do innovate…once we get the bugs out of the design, we still send it off-shore to mass produce.

    Until the rest of the world catches up with the US, it looks to me like we are just stuck. Now saddled with (probably) more debt than the rest of the world combined, our fate is pretty much sealed.

  12. BG commented on Jul 20

    Speaking of innovation, if the US could perfect an electric car via hydrogen or some super battery, it would change the history of the world!

    Think about it. It really would. The Middle East would turn back into sand almost over night and avert potentially another World War over access to oil.

    Stopping the outflow of money from this Country for oil would quickly restore, the strength, vitality and pride in this Country so badly needed.

    We currently are being strangled to death. Remember the small guy choking the giant. It’s time for this Country to get serious about our OWN National Energy Policy – one that doesn’t rely on anyone else.

  13. Greg0658 commented on Jul 20

    God must not like us for giving us a couple oilmen over a greenie. (thats tongue in cheek)

    God is a Spirit – Mother-Earth rules

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