I don’t believe we are all greedy, and results I’ve read in behavioral economics (namely the experiments outlined in the book “Predictably Irrational”[sup]*[/sup]) seem to suggest this, under normal conditions. I believe that certain setups may breed a culture of greed, and that we, as a society, may tolerate this, if the net benefit to the rest of us is warranted. But it is tolerance, not acceptance, and we reserve the right to change our minds.
Perhaps. To suggest that bailing out a company with taxpayer dollars means we have no options open to us but to hand over money as if we were held hostage is also a dangerous road to walk down.
I agree. I believe making CEO pay less conspicuous and more tightly regulating bank behavior will accomplish this quite naturally. In fact, I wish I remember where I read it, but the author or authors showed that making CEO compensation public caused compensation to skyrocket, rather than to control it, as was expected. And honestly, I’m not sure you can put that genie back in the bottle, anyway.
*[sub]Unfortunately I think the author was largely too overreaching in most of the conclusions he drew for what I suppose was an easily-digestable popularization. Nevertheless, the studies spoke well enough for themselves, and not all conclusions were so sloppy.[/sub]
I think people lose site of the fact that AIG has already been fined close to $2 billion dollars plus the executives getting the bonus have recovered over a trillion dollars so I don’t think it’s fair to say that tax payers have paid the bonus. I’m worried that other companies will lose the people needed in the short term to fix the problem. AIG still needs to recover another 1.7 trillion and if Congress pitchforks this because of public anger then we stand to loose the money poured into AIG. I’m angry too but I want the Cassono’s of the world taken down, not the mess they left behind. I personally have no way of knowing if a million dollar bonus is a lot of money compared to the job involved but I do know that it was calculated by a committee specifically charged with the task. What Congress did by trying to tax it was a publicity stunt at best.
I think we’re in agreement that better oversight is needed in business (auditing standards) as well as better government oversight on insurance standards. The whole problem in this situation was a lack of principle offset to cover risk. That’s where all the profit came from to pay the huge salaries. As people in the business have pointed out, it’s not an exact science. Sometimes your projections make money, sometimes they lose money. However, I personally feel that the housing bubble was guaranteed to happen at some point and the risk was calculable. Bells should have gone off almost from the get-go from both the insurance industry, the accounting firms that audited them, and the government agencies that regulate them.
The cross-section of replies in this thread alone reveals the lack of the single most important element in the entire financial bailout, no, not regulation, but the transparency of the regulation. Do we need more regulation? Yup, but what does regulation mean if only a handful of people understand it and no body sees or know what’s being regulated?
It’s not enough to say that the wall streeters used default swaps like the Parimutuel window at Pimlico and through their own desire, nay, outright lust for easy money with very little to no work other than crafting the derivatives and selling them to some sucker managed to start the dominoes a-fallin.
Once the truth is uncovered, people need to know what the people who are hired by the people we elect to keep watch on this kind of outright fu@kery are allowing to go on. Failure to regulate CDS are a problem, failing to let Joe Six Pack know that his financial future is resting on this pile of soggy paper is the reason this will never truly be fixed.
We will never learn the lessons our fathers and grandfathers taught us because everything in their worlds took FOREVER to get done and we wanna be rich TODAY! Ironically though, the things they built manage to stick around a long time because they were built on something real, as opposed to this mound of papier mache and dreams we call an economy.
Imagine your father, a factory worker or your grandfather a plumber striving to build his business or grow in the company just so he could buy a $100,000 car and leave your mother or grandma for a 23 year old stripper. It’s all bullshit. We’ve decided to ignore what we know works and chase after the lies these men tell. It’s way past time to deconstruct this mess and start again.
You’re making it sound like everyone at AIG and Lehman brothers were out to pillage the land. This is a case of poor regulation, and a couple of computer-based wonderfucks doing a LOT of damage. I have no idea if Cassano wanted to rape my ass (like Madoff did) but I do know it was ultimately underfunded because the 10,000 year financial scenario was more like a 25 year risk. That should have been easy to calculate soon into the venture. It’s a simple matter of accounting review to identify bad loans made by business A and weigh it against the money backing up the risk from insurance company B. Both businesses were out of control. Enter HUD who is dumping Fanny Mae backed crappy loans on banks supported by the FDIC and you’ve got a complete set of government and private sector assmonkeys creating havoc.
It’s not as bad as all that, but it’s a severe case, perhaps the most severe case of unregulated recklessness that Wall Street has ever seen. I doubt Joey had designs on your hindquarters, but he was certianly over-concerned with his own interests. At a million dollars a month, that mutt should have been doling out fiftys and handjobs in the company cafeteria. The only thing we’ve learned here is that there is no once-in-a-lifetime scenario and that any and everything is possible. Sure, it should have been easy to calculate, if someone would have given it a second thought, but like you say, they were and in my opinion still are out of control. All of that underscores my point that not only regulation but transparency is necessary.
AIG had no CFO for at least 6 months before what they were doing came out. They had no Risk Assessment Officer . Who is responsible for that? The Financial Products division had bosses . What did they do? The margins were 30 to 1 and more. What does it require to figure out that was dangerous? AIG upper management enjoyed great profits and bonuses along with the Financial Products Division. They did not oversee their divisions. They did not do their jobs.
Just to nitpick, the net was designed originally as a survivable network for defense, but universities were using it long before the military, as far as I can tell. I used it in 1974, when there were a few universities and industries on it. This was before the actual Internet.
Not to mention that some things like the USB were defined by consortia of companies working together, and others were defined by IEEE standards bodies, which are non-profit.
I don’t think open means what Magiver seems to think it means.
That’s what I was referring to. My commercial use of computers started with the IBM Display Writer and my first PC was an IBM clone running DOS. Every new piece of software or hardware was an adventure.
Today’s computers are a marvel of standardization. When I said the “likes of Bill Gates” I wasn’t laying it all at his feet.
Open but imposed standardization occurs when there is a de facto monopoly (even if not a legal one.) Examples are IBM mainframes, the original IBM PC, and yes Windows. Whether or not others are allowed in is a business decision. I’m not sure Gates is any less greedy than Jobs. But an awful lot of standardization is done by standards bodies or pre-competitive consortia. In IEEE standards, you specifically represent yourself and not your company, though no one forgets where you come from. Anyhow, an awful lot of the good stuff you mention comes from places where greed and profit play no role.
You can’t standardize something unless it’s exists. Edison didn’t invent the lightbulb, he invented the industry behind it (yes Westinghouse won out with A/C). The desire to succeed (and reap the rewards) has driven the bulk of technological advancement.
Or your grandfather who was part of the cause for the Great Depression. Or who ran booze for Capone. Spare us the Golden Age BS. Greed’s been around as long as man has, and it will always be thus.
You want to change things? Make sure it doesn’t happen again? Then you’re gonna have to change people, and that is pretty close to impossible. Only solution I can think of is to somehow make sure the gains of acting in a way that benefits people outweighs the gains from acting like financial pirates. Sure, you could depend on virtue or morality guiding them, but that’s not something I’d want to bet my life savings on. Would you?
There’s a difference between golden age bullshit and timeless principles that ought to guide these malcontents. Because the morality and principles are defunct in the minds and hearts of these greedy shits, then must come the regulation that needs ultimately to tie them down, restrict what they can do and how they can do it and through that regulation create a stable, gradual growth instead of the rocketship rise followed by the meteoric fall ad nauseum.
I’m hardly a fan of AIG, but Mike Taibbi has not exactly had a reputation for pristine journalism. He seems to be following somewhat in Hunter S. Thompson’s footsteps. Doesn’t mean that the conclusions of the article are wrong.
