What happens, when bankers start looting? in daylight.. and, none is held accountable.. probably, another Great Depression.
There are more and more articles dissecting the fallout of the Lehman Brothers and the life after the shocker.
Series of bank failures, collapse of stock market, historic job losses, deficit state budgets, mounting jobless claims, rising foreclosures.. just a few among the long list of impact on the economy.
The greed of bankers and lack of moral ethics even in times of deep recession have been condemned in numerous instances. Merill Lynch giving away millions in staff bonuses, when the bank was requesting billions in bailout from the government.
How did it go unnoticed? Why didn't the economic experts predict it? Probably, not all of them. But, some did. Economists George Akerlof and Paul Romer questioned the system of running banks and the bankers' mentality in the 1990s.
The article "The Looting of America’s Coffers" from New York Times presents a great indepth into lessons learnt and lessons to learn to avoid another great recession. Following are the key excerpts from the article:
The above excerpts and title are from the original article here at NYTimes. Recommended read.
There are more and more articles dissecting the fallout of the Lehman Brothers and the life after the shocker.
Series of bank failures, collapse of stock market, historic job losses, deficit state budgets, mounting jobless claims, rising foreclosures.. just a few among the long list of impact on the economy.
The greed of bankers and lack of moral ethics even in times of deep recession have been condemned in numerous instances. Merill Lynch giving away millions in staff bonuses, when the bank was requesting billions in bailout from the government.
How did it go unnoticed? Why didn't the economic experts predict it? Probably, not all of them. But, some did. Economists George Akerlof and Paul Romer questioned the system of running banks and the bankers' mentality in the 1990s.
The article "The Looting of America’s Coffers" from New York Times presents a great indepth into lessons learnt and lessons to learn to avoid another great recession. Following are the key excerpts from the article:
Promised bailouts mean that anyone lending money to Wall Street — ranging from small-time savers like you and me to the Chinese government — doesn’t have to worry about losing that money. The United States Treasury (which, in the end, is also you and me) will cover the losses.
The knowledge among lenders that their money will ultimately be returned, no matter what, clearly brings a terrible downside. It keeps the lenders from asking tough questions about how their money is being used.
When people are protected from the consequences of risky behavior, they behave in a pretty risky fashion. Bankers can make long-shot investments, knowing that they will keep the profits if they succeed, while the taxpayers will cover the losses.
Merrill Lynch’s losses from the last two years wiped out its profits from the previous decade.
Banks borrowed money from lenders around the world. The bankers then kept a big chunk of that money for themselves, calling it “management fees” or “performance bonuses.” Once the investments were exposed as hopeless, the lenders — ordinary savers, foreign countries, other banks, you name it — were repaid with government bailouts. In effect, the bankers had siphoned off this bailout money in advance, years before the government had spent it.
The federal government needs the power and the will to take over a firm as soon as its potential losses exceed its assets. Anything short of that is an invitation to loot.
The above excerpts and title are from the original article here at NYTimes. Recommended read.
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