OK, having owned up to my own sense of economic bewilderment and yet a gut feeling that congress made the right decision when it denied a $700 billion bailout, I’ve found an article that makes sense to me. (Click here). It clearly advocates bankruptcy over bailout. I think it’s right because it’s an honest acknowledgement of the consequences of greed. Yep, we all bear the brunt of the pain – but at least we get the chance to start over and build a more realistic and equitable economic base that is prepared to wear the cut and thrust of free market economies from a more compassionate point of view.
None of this is new or unexpected. Have a read of Micah and Amos and some of the other minor prophets in the Hebrew Scriptures. The same dynamics are being addressed. There is also a solution – but how many would find it palatable?
Wondering Pilgrim 
I’m in the poor house now
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The problem facing governments hoping to stop the rot is that there appears to be no one in the financial system on whom they can rely for honest opinions or actions. None of the regulators – executives, auditors, lawyers, bankers et al – charged with overseeing the proper operation of the financial system has stood up and blown the whistle. Never a peep was heard from any of them; they were all happily pigging it in the trough, blinded by the arrogant perception that they were the supermen of a system that would continue delivering growth at exponential rates indefinitely, and secure in the knowledge that no effective challenge could be mounted to their . Anybody who has tried folding a sheet of paper in half, over and over again, will know how quickly it becomes too thick to fold. That happens regardless of the size of the sheet at the start of the experiment.
Government (read taxpayer-funded) bail-outs simply leaves in charge the same executives who have failed, to a spectacular degree, to manage properly, together with the rest of the professionals who appear to have been completely ineffective as watchdogs of the interests of the general public.
Corporate law has enabled companies / business enterprises to be structured in such a way that a few people exercise control over enormous amounts of wealth, and that control is entrenched – legally – in such a way that those in power can never be challenged successfully or meaningfully, despite the voting rights of shareholders. Minority shareholders are effectively powerless, no matter how they might group together or protest.
The voting rights of managed funds and pension funds, which hold billions in contributions invested on behalf of working people, are exercised by a few managers of those funds. So again, the shareholders who contribute the massive capital employed do not have an effective say in the manner in which their money is used.
Knowing that they are sitting pretty, the relatively few people in control do as they please with breathtaking arrogance – including voting themselves excessive remuneration and benefits, and speculating recklessly with the money entrusted to their institutions.
Contributions to pension funds and managed funds have accumulated exponentially, to the extent that there are few genuine opportunities to invest, without undue risk, in stocks that will deliver income and capital growth at the rates which have prevailed over the past two decades.
But the managers of the finance houses have failed to be honest and give investors that message. Some “bright sparks” came up with the idea of CDO’s, then had the brainwave that if a percentage of the value of CDO’s was to be underwritten, that transformed a bundle of very high -risk loans into premium grade securities. This scam worked until the insurer, AIG, could not meet claims arising on defaulting loans. AIG’s collapse undermined the financial system of the Western world, in the same way as pulling the bottom card out from underneath a house of cards. No matter how tall the house of cards, the lot come tumbling down in a heap – not a single card escapes.
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Thanks O Cynic, you’ve put it all in a way I can understand. Of course, congress has coughed up the $700 billion since the original post and time has marched on 😦
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