Tuesday, September 23, 2008

Who's to blame

Well being human is to blame. I started as a stockbroker in the 1970's. Then there were stockbrokers, who acted as agents, and also as investment bankers, essentially raising money for corporations. Other than for the brief of moments, these firms didn't risk its capital. That slowly morphed into the highly-leveraged institutions of the recent past. The concept of "placing bets" as, I think, Goldman or maybe Solomon Bros. started to do a couple decades ago for competitive purposes really was in my view the start to today's "crisis". But adding private equity and the government pretty well blurred the regulatory framework. Regulation -- and lawmaking in general -- became a series of knee-jerk reactions with campain contributions and elections being foremost in politicians' minds, rather than actually solving problems. And we are here today. With any luck, the $800 billion "bailout" will lead to reducing the size, scope and cost of government. It isn't the free enterprise system or capitalism at fault; it's the reaction by politicians and the media to useful, and healthy contractions. You can't have gain without pain from time-to-time. If everyone knew that, individuals would borrow less, save for a "rainy day" and breeze through the ups and downs of life. Good luck that!

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