What I wished the government would do is resolve the banking and AIG issues with great speed.
The outcry over the AIG bonus fiasco has been healthy – public pressure is being applied.
And don’t discount public pressure – it got Barack Obama elected president of the United States.
While I personally wished that the government had never sought to bailout anyone, and while I continue to be outraged that on the one hand a financial institution can accept bailouts and on the other hand squander the money in bonuses, apparently given out not for good performance, but poor performance (good performance and there would be no need of bailouts), what I really think needs to be done is resolve the issue.
And from what I am reading and hearing from so many now who are knowledgeable in the financial field is that all the banks, no matter how big they are, and the international financial entity that is AIG need to be essentially allowed to go bankrupt (and let’s don’t get lost in the terminology – bankruptcy in this case may be a generic term).
Definitely any old leadership needs to be let go and not allowed to come back!
And contractual obligations (beyond debts) are often abrogated in bankruptcy.
The important thing for the national and, more importantly, world markets is that the government makes it clear that the bad debts will be settled. This will forestall a panic and collapse of the world-wide financial system.
I think that the actions already taken by Mr. Obama and his administration are having much positive effect.
And while the stock market is a major economic indicator, we always have to remember it is a giant gambling casino whose participants operate on everything from gut reaction of the moment to scientific formulas, to rumors, to all kinds of shenanigans such as short selling or touting something to run its value up and then selling it out. What I am saying is that it represents more of an artificial construct than reality many times.
At any rate, once the markets are assured that bad debts will be honored (and maybe not even for 100 cents on the dollar, but some type of settlement), and once everyone knows what the rules are moving forward, people all over the world have a desire to make money, and things should move ahead.
Unfortunately, While Mr. Obama has much power here in the USA, he can only urge that the other nations cooperate. But we need to move ahead full speed with or without the rest of the world.
American in fact needs to reassert its leadership. If we do, the world will likely follow.
As mad as I am about the AIG fiasco (see my previous blogs), I think moving forward and restoring old rules of conduct in the markets and implementing new safeguards is more important than chasing after people to enact revenge or to put on political show trials (although there may be time for that too eventually).
The blowhard (no pun intended) that is Barney Frank and the blow dried that is Chris Dodd, sometimes embarrass me. At least they’re not Republicans, though.