Posted on 03/21/2008 8:29:17 AM PDT by mngran2
How can one feel sorry for James Cayne? The potential losses of the chairman and former chief executive of Bear Stearns must rank up there with the biggest in modern history. The value of his stake in Bear Stearns collapsed from about $1 billion a year ago to as little as $14 million at the price JPMorgan Chase offered for the teetering bank on Sunday.
Still, Mr. Cayne was paid some $40 million in cash between 2004 and 2006, the last year on record, as well as stocks and options. In the past few years, he has sold shares worth millions more. There should be financial accountability for the man who led Bear Stearns as it gorged on dubious subprime securities to boost its profits and share price, helping to set up one of the biggest financial collapses since the savings-and-loan crisis in the 1980s. Some might argue that he should have lost it all.
But that’s not how it works. The ongoing bailout of the financial system by the Federal Reserve underscores the extent to which financial barons socialize the costs of private bets gone bad. Not a week goes by that the Fed doesn’t inaugurate a new way to provide liquidity — meaning money — to the financial system. Bear Stearns isn’t enormous. It doesn’t take deposits from the public. Yet the Fed believed that letting it implode could unleash a domino effect among other banks, and the Fed provided a $30 billion guarantee...
...
Certainly, trying to put specific limits on bankers’ salaries is a nonstarter. But until bankers face a real risk of losing their shirts, they will continue blithely ratcheting up the risks to collect the rewards while letting the rest of us carry the bag when their punts go bad.
(Excerpt) Read more at nytimes.com ...
The big picture is that such corporations are insured so that they will take risks. And while on one hand, it can sneeringly be called gambling, without risk their is little or no reward to the economy as a whole.
For instance, how many Americans could afford homes if they had to pay the total cost up front, and in cash? For most people, someone *has* to gamble on them, or almost everybody would have to live in rentals, with little or no chance of ever having equity themselves.
So the government makes the trade-off. If a major player plays by the rules, but still tanks, like Bear, then the government and others have to step in to prevent all the other gamblers from getting cold feet.
Most of the reasons that Americans have sky high prosperity is because of our gamblers. And almost all of the time, their bets win, and everybody prospers.
And the socialization of the problem is always “justified” by the impact on “the women and children” of not doing so. Yet in the end, the negative impact of socialization on “the women and children” (and the men, too) is worse.
Libs never look at the long term consequences of any program.
They only look at how it makes THEM feel now.
Kinda like a 10 yr old girl looks at things - Is it “nice” or “mean”,
not, what are the long term effects of taking this course of action.
“A government handout is a government handout, whether it’s to a welfare mother or a Wall Street banker - it all comes out of your taxes and goes to someone who didn’t earn it.”
You clearly haven’t absorbed your lessons at FR. I’ll try to lay them out more clearly. Execs climb their way to the top, doesn’t matter if it’s by hard work, nepotism, cronism, or just plain dirty tricks. An exec deserves every penny he or she can get.
Remember: No matter how bad it looks, no matter how unethical the actions of the execs, or how many people are hurt by their incompetence, at least they aren’t in a union!
There ends the lesson.
“For instance, how many Americans could afford homes if they had to pay the total cost up front, and in cash? For most people, someone *has* to gamble on them, or almost everybody would have to live in rentals, with little or no chance of ever having equity themselves.”
I disagree. People and economies adapt. If almost no one could afford a home, a couple of things would happen. The price of homes would plummet. And people would take a different approach to life. Family homes would be meaningful, and would be passed down. Familes would band together to buy homes. People would build homes for and with each other.
I think risk takers should take real risks... to themselves as well as with other people’s assets.
Holy guacamole! The poor guy is down to his last 14 mill...
Still, Mr. Cayne was paid some $40 million in cash between 2004 and 2006...
Oh, well, that's OK then. I sure hope he stashed his loose change in his penny jar...
I’m willing to let the New York Slimes go under without any bailout or compensation.
>>whether it’s to a welfare mother or a
>>Wall Street banker - it all comes
>>out of your taxes and goes to someone who didn’t earn it.
Yeah, and the bread I like to eat has gone up nearly a dollar a loaf in less than a year too.
Where’s ~my compensation? Those of us who are on a fixed income are really getting screwed. But why should the spoiled brats on Wall Street care?
My little LCMS Church has had SEVEN funerals in the past two weeks. Unprecedented. All old folks, who are dropping like flies, apparently from the stress of all this. That’s the only thing we can figure that’s happened to explain it.
Socialist Buzzards.
Let them be bought out by a soverign wealth fund. Then their foreign bias will be out in the open.
I think NOT !!! Geez, do you know anything about free market economics ?
The reward a "gambler" gets is their big payoff if they succeed. The ones that don't succeed either learn something and try again or they give up. If you're saying the losses should be socialized then all the gains should be socialized too !
You forget to factor time into the equation. If we were not on the brink of a national recession, few would give a hoot if Bear Stearns folded or not.
But Wall Street is notorious for stampeding. Plus, it should be noted that the FED did not intervene on behalf of BS by itself. JPM had to do that, with the FED just guaranteeing to support JPMs efforts. BS did have to fall, or at least its management, and they are.
Ironically BS is in a unique position, that in about five weeks, its shareholders may *refuse* for the company to be sold to JPM. If that is the case, then those major shareholders would have to elect a whole new board of directors, or JPM would have to raise its offer, if it wanted to.
So the bottom line is that yes, free markets rule, and the imprudent gambler is going to have to pay the price, one way or another. But the entire casino is not going to have to be closed because all the other gamblers refuse to gamble.
Yes, it will not be a perfect settlement, and a lot of people are going to lose some money. But that is a far cry from a deep national recession, something that would have been almost a certainty if there hadn’t been intervention.
I couldn’t disagree more. The pigmen on Wall Street are just playing the “hide the sausage” game to see who is left holding the bag.
The BSC fiasco is a simple matter of Fed-enabled asset-stripping of a fatally wounded player who was also the victim of a lot of rumors on Wednesday and Thursday, many from known short sellers.
The bigger picture is that a fiat currency and fractional reserve banking systems rely on trust and integrity, something that has been missing in the banking industry and the government for quite a while. Only now, the manipulation is becoming very apparent to the average Joe, and the jig will be up soon. Why do you think people are willing to park their money in short term Treasuries for .39% interest over tha last week - because we know we can’t beat the Fed and its cohorts until they run out of sticksaves.
Start with this: http://market-ticker.denninger.net/2008/03/fed-will-do-whatever-it-wants-and-raise.html
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