Copyright © 2008, by ONION, INC
Tuesday, March 25, 2008
"We knew we were selling time bombs..."
What were they thinking? Selling mortgages to people with just enough income to cover the first five months of annual interest payments, repackaging those mortgages into bonds and selling them off to investors. Of course that bubble was going to burst some day! But why did it happen, and at such a large scale? Because of money, of course... As the people working in credit derivatives were rewarded according to the number of sold packages, they were encouraged to sell as much of the junk as possible.
I'm going to avoid getting too technical here, but the whole world was being fooled by the cartel of bulge bracket Investment Banks, who were constantly selling these rotten products to each other in order to keep the momentum going. And then it burst...
Why then, would tax payers need to bail out these banks and its bankers for messing it all up? Bernanke should have just let Bear Stearns file for bankruptcy. By selling their Madison Avenue office BS would probably be worth more than what JPM is paying now. And to start out with a clean slate, you first need to...well...clean your slate.
When the markets have a slight hickup the bankers are the first to let us all know the market will 'sort things out' and all will be just dandy. How about we test the market and let the market sort them out this time.
Bailing out these banks will not solve the problem. The banks should feel the pain to such an extent that their own survival will depend on their own internal culture. It's pretty obvious the bankers spoiled by the fat bonuses the past few years will just need time to find a new product they can sell easily in order to cover the costs of their summer home in the Hamptons. It is very strange that a banker theoretically has an unlimited bonus if all goes well, but if everything goes wrong the bank takes the losses and not the banker. Therefore the whole reward system should be revised drastically enforced by the e.g. the SEC (US) and the FSA (UK) in order to ensure all banks involved in this crisis adhere to the new system. If they think they can behave like spoiled little kids they apparently need some good parenting.
It is important to keep in mind I am talking about Investment Banks here who handle money of large institutions and millionaire private clients, and not regular Commercial Banks with 'average Joe's' money in retail accounts. The regulations covering I-Banks are nowhere near as stringent as those for Commercial Banks. Commercial Banks should be treated like public utilities in times of crises in order to safeguard people's money. I-Banks however, somehow have all the room to speculate with all the money in their coffers and still get saved by the Fed. Not really a fair situation if you ask me.
Oh by the way, anyone interested in a Bear Stearns employee card or a BS cafeteria card? You can have it for the price of one BS share..........
I'm going to avoid getting too technical here, but the whole world was being fooled by the cartel of bulge bracket Investment Banks, who were constantly selling these rotten products to each other in order to keep the momentum going. And then it burst...
Why then, would tax payers need to bail out these banks and its bankers for messing it all up? Bernanke should have just let Bear Stearns file for bankruptcy. By selling their Madison Avenue office BS would probably be worth more than what JPM is paying now. And to start out with a clean slate, you first need to...well...clean your slate.
When the markets have a slight hickup the bankers are the first to let us all know the market will 'sort things out' and all will be just dandy. How about we test the market and let the market sort them out this time.
Bailing out these banks will not solve the problem. The banks should feel the pain to such an extent that their own survival will depend on their own internal culture. It's pretty obvious the bankers spoiled by the fat bonuses the past few years will just need time to find a new product they can sell easily in order to cover the costs of their summer home in the Hamptons. It is very strange that a banker theoretically has an unlimited bonus if all goes well, but if everything goes wrong the bank takes the losses and not the banker. Therefore the whole reward system should be revised drastically enforced by the e.g. the SEC (US) and the FSA (UK) in order to ensure all banks involved in this crisis adhere to the new system. If they think they can behave like spoiled little kids they apparently need some good parenting.
It is important to keep in mind I am talking about Investment Banks here who handle money of large institutions and millionaire private clients, and not regular Commercial Banks with 'average Joe's' money in retail accounts. The regulations covering I-Banks are nowhere near as stringent as those for Commercial Banks. Commercial Banks should be treated like public utilities in times of crises in order to safeguard people's money. I-Banks however, somehow have all the room to speculate with all the money in their coffers and still get saved by the Fed. Not really a fair situation if you ask me.
Oh by the way, anyone interested in a Bear Stearns employee card or a BS cafeteria card? You can have it for the price of one BS share..........
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