Sunday, September 13, 2009

I'LL BE GONE

I'll  Be Gone
photo via Bits and Pieces

So... are we going to get fried again?

Speaking of the post-bailout situation in a lead article in today's NY Times, critics of Wall Street's ways are warning

... that the system has grown riskier since last fall. The extensive government support that began after Lehman collapsed will lead investors to assume that governments will always prevent major banks from collapsing, he said.

So investors will lend money to the financial industry on easy terms. In turn, financial institutions will use that cheap money to make risky loans and trades. The banks will keep the profits when their bets pay off, while taxpayers will swallow the losses when the bets go bad and threaten the system.

Economists call the phenomenon moral hazard. Bankers have a different term: I.B.G. The phrase implies that by the time a deal goes sour, “I’ll be gone,” after having received a sizable bonus.

The New Republic assesses the global situation: The Next Financial Crisis It's coming -- and we just made it worse.

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