Posted by
Ed Martin on Friday, September 19, 2008 10:28:19 PM
Now that the Federal Reserve has opted to put the American taxpayer on the line to stabilize the failing American International Group in an attempt to calm the global meltdown of the investment banking sector, we had better all focus on the factors that have contributed to this latest economic challenge.
Greed is something that has been with us throughout the ages. The more we have the more we want. This is not new and certainly not something to be blamed on Bush or Clinton or anyone else. It’s human nature manifested at all levels form welfare cheats to investment bankers in suits and hedge fund managers.
Sometimes in the simplistic we find the greatest wisdom. One does not build a house without first having a sound foundation. This applies in business as well and small business people understand fiscal responsibility in ways that perhaps the eager and self pumped generation of MBA’s do not. But it is the eager egotists who seem to secure these positions on Wall Street and it makes one question why we don’t listen more to the wisdom of the elders, not to absolve them from tendencies of greed for they too can be compromised.
Does anybody care about the greater good anymore? Imagine if you could buy thirty dollars worth of goods for every dollar you earned. What a bonanza you would have and think of all the job you could create by just buying things. On Wall Street the norm for the leveraging of hard assets is 30 to 1. Lehman Brothers had actually cut their leveraging rate to about 25 to 1.
The MBA geniuses have figured out how to make money from thin air, buying paper, backed by paper that is backed by paper and more paper. The paper trail is sickening and extremely challenging for any regulator to understand especially when you have dinner reservation at the Palm encroaching.
This current wave of market correction was triggered by the mortgage crises triggered by people buying homes they had no business buying given their assets and income, lenders making it possible for them to do it, the use of those mortgages to collateralize other purchases by the lenders, those purchases being used to leverage others, and of course somebody to insure this house of cards.
Mortgage brokers, real estate agents, bankers, investment houses all made a killing. They paid taxes and everyone was happy. Grab the Moet its time for a party.
Well, today we have a hangover and unfortunately we have no one to blame but ourselves. So perhaps it is fitting that the American taxpayer will now own AIG.