Privatizing PROFITS, Socializing LOSSES

Privatizing PROFITS, Socializing LOSSES
by Haj Seyd Mammad
20-Sep-2008
 

Bill Moyers speaks to two well-versed voices — NEW YORK TIMES business and financial columnists Gretchen Morgenson and Floyd Norris — to discuss who wins and who loses in the financial turmoil. Their conversation ranges from the mortgages to derivative, the SEC to the Glass-Steagall Act.

Gretchen Morgenson is assistant business and financial editor and a columnist at the NEW YORK TIMES. She has covered the world financial markets for the Times since May 1998 and won the Pulitzer Prize in 2002 for her "trenchant and incisive" coverage of Wall Street.

Floyd Norris is the chief financial correspondent of THE NEW YORK TIMES and writes a weekly column for the financial section. He was named to that post in September 1999, after spending a more than a year as a member of The Editorial Board of The TIMES. He joined the paper in October 1988 as a financial columnist, a position he held until he joined the Editorial Board in May 1998.

Very Informative. Hope you find it interesting:

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Mehdi Mazloom

Right

by Mehdi Mazloom on Sat Sep 20, 2008 04:04 PM PDT

Both of you gentleman are right on the money. I would further call it "moral bankruptcy". When banks and investment houses use other people's money to lend to people - knowing well, they will not be able to repay that loan back. These criminals in Wall Street's sole incentive was to generate the commission paid to them at the time when the loan was made - not when is paid in full. So who cares if the loan is not paid. they already got their fees and spent it on new boat or Rolex watches..

The irony is, the same political and party which advocates the belihood "free market" mantra, and "get the government of people's back", are the same one who's failed policy of borrow and spend keep the government watch them like hawks.


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Perfect Title

by Ali Sefati (not verified) on Sat Sep 20, 2008 02:26 PM PDT

Exactly what I was thinking!!! When these companies make their billions, it is their CEOs and CFOs that take those 7 or 8 figure bonuses home! When they lose, they default on Government.

Where are the stupid small government right wingers who always believe small government and privatization of corporations works! I really want to hear their cases here!

This country is enemy of itself and if it keeps going this way it will make Alqaeda's job much easier.


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A Classic Case of 'Moral Hazard'

by Michael_Manley (not verified) on Sat Sep 20, 2008 11:18 AM PDT

From Wikaepedia:

"Financial bail-outs of lending institutions by governments, central banks or other institutions can encourage risky lending in the future, if those that take the risks come to believe that they will not have to carry the full burden of losses.

Lending institutions need to take risks by making loans, and usually the most risky loans have the potential for making the highest return. A 'Moral Hazard' arises if lending institutions believe that they can make risky loans that will pay handsomely if the investment turns out well but they will not have to fully pay for losses if the investment turns out badly.

Taxpayers, depositors, and other creditors have often had to shoulder at least part of the burden of risky financial decisions made by lending institutions.

Some believe that mortgage standards became lax because of a 'Moral Hazard'—in which each link in the mortgage chain collected profits while believing it was passing on risk—and that this substantially contributed to the 2007-2008 subprime mortgage financial crisis. Brokers, who were not lending their own money, pushed risk onto the lenders. Lenders, who sold mortgages soon after underwriting them, pushed risk onto investors. Investment banks bought mortgages and chopped up mortgage-backed securities into slices, some riskier than others. Investors bought securities and hedged against the risk of default and prepayment, pushing those risks further along."

And, Unfortunately, The Story Continues :) -!


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