Isn’t it ironic that the banking industry is now the least risky to be in?
With the way things are going, including another ten hundred gazillion in “bailout” money, being in the banking industry seems pretty attractive right now. You make out like a bandit when times are good, have zero incentive to mitigate risk and can “bank” on being saved when such a strategy comes to it’s natural conclusion.
There used to be a concept in our society, and especially in commerce, called “risk”. If you think about it, risk has been an underlying driver of progress in society. Planting crops, living in groups, discovering new parts of the world, buying insurance and lending money are are the result of risk mitigation. When you take that away, as we seem to be as a result of the ongoing “bailout”, there’s no punishment for bad decisions or poor risk management.
…a bit of philosophizing there, but it’s something that I’ve been thinking about for a while now, and is the #1 problem I have with the policy we’re taking right now with regard to these “bailouts”.
I live in the Washington Heights neighborhood of Milwaukee, WI with my wife Jen, our daughter Emerson, and sons Carter and Colton.
Dan, I agree with you 100%. Capitalism and the free market HAVE to have risk. It’s the ying to reward’s yang. If these giant company owners/leaders can make bad decisions and run that company into the ground then get “rewarded” with bailout money, what incentive do they have to, after the money is given to them, run their business better? The answer is NONE! These companies need to succeed or fail on their own. Can we help growth or mitigate failures? In some cases yes, but in very small doses (certainly not the dollars we’ve been throwing around this past year).
Another huge problem(s) I have with these bailouts are: What dollar amount in sales, revenue (you pick the indicator) is needed to be “eligible” to get bailout money? Who determines that dollar amount, and how much do you get? Is the small business owner and his/her employees going to get a couple hundred thousand dollars of bailout money in this tough economy? No, they’re not going to be deemed “worthy” enough. Are the families that are losing their houses going to get their mortgage paid for because they were fiscally irresponsible (just like GM, AIG etc were)? No, and they shouldn’t, but neither should the irresponsible businesses. It’s a travesty and one that should be corrected by letting the market do what is does best – correct itself. If the government thinks they can correct this by throwing money at it, all you’re doing is giving the drunk that pissed his life away with bad decisions, more money to buy alcohol, and make MORE bad decisions.
Awesome, on this we can agree.
I wonder though, if your tune will be the same when the President handing these out has a “D” after his name.