Will Burnings at the FDIC Reawaken America?
Warning (not an apology), this post is a rant about an article I read about the FDIC.
Nothing surprises me anymore. I am numb; when really I should be startled every time I read more about the lack of judgement by our so-called business and political leaders. Today I read on Calculated Risk that during the good times, the FDIC in the US which insures depositors against banking defaults as well as monitoring lending procedures, failed to collect insurance premiums from their member banks during the good years between 1996-2006.
The original article if you need a rude awakening is here: WTF!
Who are these people that have only straight line thinking? Has our education system failed them so much that they can only connect the dots of a straight line? Nobody seems to save for a rainy day anymore? Certainly not the leaders of our once revered corporations like FRE, FNM, or AIG. These money pit corportations are like the black holes in the brains of some of our fearless leaders.
I'm railing against the lack of prudence, the moral hazard, the selfish me-first attitude, and the dirth of common sense in our American (Canadian) Idol society. While the populace seems to be numbed by their reality TV, I am numbed by the lack of rebellion. I'm convinced that if this were the 18th century, the pitchforks and burnings would have already destabilized society, but instead we can't even muster an indictment. Madoff and Stanford are really no different than Thain or Lewis (of Merrill and BAC); they are symptoms of our addiction to short term gains.
Is this the Wild West or is it Capitalism gone Wild? So far neither I, nor the markets have found any redeeming policies from the Obama or previous administration. The problems may by complex, but perhaps the solutions for a sustainable recovery will begin with the first indictments. Oh and a guilty plea, tomorrow by Madoff doesn't count! Thain, Madoff, and Stanford need to be punished, just like GM needs to die. This would at least begin the process of rebuilding confidence in our system.
And while we're at it, can we find some smarter people to run the FDIC please!
posted by Des @ 3/11/2009 10:18:00 PM
1 Comments:
Very eloquently written; couldn't agree more. If I can distill the whole credit crunch down to just two words, it would be "moral hazard". Why would the banks pay FDIC insurance premiums if there were no repercussions for not doing so? Why would the bank execs cut their bonuses if there were no strings attached to the bailout money? Why would the ratings agencies try to actually do their research on the CDOs and CDSs when the banks are paying them to rate them investment grade?
They've gamed the system to make all the money they can squeeze, with some inside help from Rubin and Paulson of course.
As each and every bailout package has been faulty and/or insufficient, I am coming around to the belief that we have to let capitalism take its course and let the banks fail in order to clear out the moral hazard and reform the system. If the same guys are in leadership positions, then they will find another instrument/tool to defraud the system, and we'll be in the same mess (prob just in time for my retirement). The culture has to go, the compensation schemes have to change, etc.
Until we see this drastic but necessary step, which admittedly is very unlikely given the political willpower needed to let banks fail, I think we're headed for another Japan-like situation. Years of dropping markets, or at best trading sideways. How can you tell when the market has bottomed? When the gov't starts making some tough decisions.
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