Looting

[mickeyd]

Interesting NYT article about Romer and Akerlof and their insightful writing sixteen years ago.

Quote:

Some A.I.G. employees, to take one example, had to have understood what their credit derivative division in London was doing. But more innocent optimism probably played a role, too. The human mind has a tremendous ability to rationalize, and the possibility of making millions of dollars invites some hard-core rationalization. Either way, the bottom line is the same: given an incentive to loot, Wall Street did so. “If you think of the financial system as a whole,” Mr. Romer said, “it actually has an incentive to trigger the rare occasions in which tens or hundreds of billions of dollars come flowing out of the Treasury.” Unfortunately, we can’t very well stop the flow of that money now. The bankers have already walked away with their profits (though many more of them deserve a subpoena to a Congressional hearing room). Allowing A.I.G. to collapse, out of spite, could cause a financial shock bigger than the one that followed the collapse of Lehman Brothers. Modern economies can’t function without credit, which means the financial system needs to be bailed out.

http://www.nytimes.com/2009/03/11/bu...ardt.html?_r=1

[Dennis]

Good One Mickey.. As soon as I heard the bad news comming out about AIG? I immediatley got on line Shorted it by -50% , with a stop sell . Little did I know it would fall so far... would have Doubled it..and broke my Piggy bank to raise More $ for that one..

Got to put the Uptick rule back in and bring back the Marshal Act..
Co.'s are Scrambling as we speak to Merge, Buy out eachother before any more Regs. Get instituted to Keep Businesses form getting Too Big to fail.. Don't Blame them

[Gone4Good]

For the most part "Looting" happens on an individual scale. The mortgage broker makes a shoddy loan knowing he is going to sell it to an investment bank. The trader doubles down on a bad trade because he needs a big win to have any shot at getting paid this year.

Certainly there were enough incentives to create a systemic problem. But I think the article goes too far in suggesting that "Wall Street" ran entire companies under the assumption that they'd be able to put their losses to Uncle Sam. I don't think that's the way things actually happened.