Sunday, August 28, 2011

A how-to guide for fixing America’s banks - The Washington Post

A how-to guide for fixing America’s banks - The Washington Post:
While I agree with your general assessment of the banks and their failing health, I think that the minute the word "Nationalize" comes into the conversation, half the readership will probably turn off their brains and lose their tempers. Americans have been trained by decades of Pavlovian reinforcement to despise anything that even implies socialist values.

Not to say that concern is entirely unjustified. The government has already interfered plenty in the free market by creating the category of TBTF and I can't imagine that further intervention by the government is going to do anything other than undermine confidence in the free-market system.

From the point of view of an investor, if I look into the financials on a company, determine they are failing, and make plans to profit on that failure, only to have the government bail them out, I lose. That will make me gun-shy on future speculations of that sort AND cripple the faith that the market will proceed in Darwinian fashion.

I'm upset that shareholders haven't instigated civil action against bank leadership. They engaged in poor business practices, violated legal and ethical obligations to their customers and their investors, and through their inept management, infected the entire banking industry with a variety of toxic assets. They created a cultural imperative within their companies to violate the public trust and even under a bankruptcy they are going to walk away with full pockets.

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