I'll not be linking any specific stories, anyone following the news since the weekend will have heard a lot about companies like Morgan Stanley,Lehman Brothers and AIG insurers facing financial difficulties in the last few days.
In two of the three cases the US Federal Reserve (or subsiduaries of) had purchased large swathes of the least profitable parts of these companies and also issued many billions in treasury loans to the wider banking community.
Given that these companies make their money by investing in risk, do you feel it is right that the risk is then removed when it goes wrong ?
Or to switch the argument around on its head. Should the US government seek to remove the risk for these companies at the cost of applying it to tax payer funds instead ?
My personal opinion is that accountability has been lost here. All these companies pay huge dividends to their executives when they are successful. Yet when the risk bites back there is no accountability. Investors funds are lost and executives walk away with little risk to themselves or their own solvency. There is the argument that many executives are financially tied to the companies they work for, but this most likely only accounts for a small proportion of the rewards they receive.
Post your thoughts.
In two of the three cases the US Federal Reserve (or subsiduaries of) had purchased large swathes of the least profitable parts of these companies and also issued many billions in treasury loans to the wider banking community.
Given that these companies make their money by investing in risk, do you feel it is right that the risk is then removed when it goes wrong ?
Or to switch the argument around on its head. Should the US government seek to remove the risk for these companies at the cost of applying it to tax payer funds instead ?
My personal opinion is that accountability has been lost here. All these companies pay huge dividends to their executives when they are successful. Yet when the risk bites back there is no accountability. Investors funds are lost and executives walk away with little risk to themselves or their own solvency. There is the argument that many executives are financially tied to the companies they work for, but this most likely only accounts for a small proportion of the rewards they receive.
Post your thoughts.
