Wow, this could be very, very ugly. Years ago, I discussed the subprime situation with some CXOs from a couple of the biggest banks in the US, and they knew then that the day of reckoning would come. They used words like “suicidal” to describe the banks who brought this mess upon us, and were convinced that even banks like Wells Fargo would go under within 18 months. But as the saying goes, the markets can remain irrational longer than you can remain solvent. So I marveled at their resolve to stay far away from the mess, tighten their belts, and ride it out until judgement was meted out on the wicked. It’s been longer than 18 months, now, and their patience hasn’t yet been rewarded — but by now everyone with half a brain can see that the high-flying wicked are collapsing into ruin.
This is why I am shocked at the proposed bail-out plan. Umair says:
In fact, it’s you and me that the banks are offloading their moral hazard/junk onto. Who pays? You and me – the taxpayers. Unbelievably, we’re bailing out the banks, and essentially retroactively paying the Street’s bonuses.
He should specify that he’s only talking about the suicidal banks, since not all of the banks were dirty. And while it is indeed bad that these jerks will not only escape prison, but will further rape the economy; this gets to the other point. This bailout essentially penalizes anyone who rode this out and stood to benefit in a big way when the carnage hit. All of that righteousness was for nought, and in fact is being punished.