So, Lehman brothers has filed for bankruptcy. Merrill Lynch has just been bought by Bank of America. Two huge, HUGE financial institutions have basically gone under. Lehman was, if i’m not mistaken, the 4th largest investment firm in the US. Now, it essentially does not exist. Merrill Lynch, again, a gigantic financial firm with renowned brokerage services, belongs to BoA.
Lots of people have rightly had a go at Bush for bailing out Bear Stearns (by arranging a deal for JP Morgan Chase to buy them), in what’s called a ‘too-big-to-fail’ policy, where the Govt. helps out a failing bank by supplying some additional capital to another bank to take them over.
Anyway, last week we also say mortgage giants Freddie Mac and Fannie Mae (!?) being bailed out by the Govt thanks to taxpayer dollars. Ofcourse, foreclosures aren’t falling, because fuck the people who got screwed over thanks to ridiculously greedy financiers!
Couple of things here.
First, for those who seem to think that their taxpayer dollars are going to waste in foreign-aid, how do you feel about your money being used to bail out corporations who decided to take a couple of risks too many? How do you feel about your money being used to bail out irresponsible lending?
Second, where’s that old Hayekian political economy? Aren’t exponents of free market capitalism supposed to let these firms die because of their irresponsibilities? Isn’t that what capitalism is? Let the market decide. The market decided to fuck these people off! The boards of Fannie Mae and Freddie Mac handed themselves shitloads of bonuses for success! Must’ve been posthumous awards…
So the world suffers thanks to a mortgage crises whose proprietors were greedy bastards. Lots of people lose their homes, and now lots lose their jobs. What happens to the executives though, especially of a firm like Lehman which is royally fucked now?
Probably nothing. I have limited sympathy for them, though I doubt it’ll matter; they probably have enough money to live lavishly for two additional lifetimes.
Taxpayers paying for the stupidity of lenders. Taxpayers paying to save lenders, not those who are now without houses.
Free market capitalism. You can’t have it both ways.